Allianz Innovative Product Bundling

Property giant, IJM Land Bhd has collaborated with Allianz Malaysia Bhd to introduce the first triple insurance protection scheme in Malaysia – HomeTIPS – to provide protection for house buyers. IJM Land Managing Director Edward Chong Sin Kiat said the three-in-one scheme would provide term life, personal accident and involuntary unemployment coverage for buyers of selected properties. 

“The unemployment insurance covered under the scheme is the first of its kind being introduced in Malaysia,” he said. Acknowledging that anxiety over unemployment is one of the major factors for the potential house buyers’ hesitance to commit especially after layoffs the oil and gas industry, IJM Land decided to ease their burden by introducing the scheme, he said. “The selected house buyers who are involuntarily terminated from their employment during the tenure of the policy, will benefit from a timely pay out by the unemployment insurance under the scheme,” he said this after launching HomeTIPS here, today. 

Chong said the term life and personal insurance under the scheme would allow the house buyers to enjoy the financial benefits which would be paid in the unfortunate case of death or total permanent disability. “The benefits are extended to house buyers for 36 months from the date of signing the sale and purchase agreement,” he said. 

He added that the scheme was applicable to selected residential development projects with selling prices ranging from RM300,000 to RM2 million. “For example, those who buy a property valued at RM635,000 will be insured with a sum coverage of RM600,000,” he said. Chong said the premium of the insurance scheme would be borne by the respective housing developers, and the scheme would only apply to properties which are purchased directly from IJM Land from now until December 2016.

Indonesia Life Insurance Agent

The Indonesian Life Insurance Association (AAJI) eyes employing 650,000 licensed life-insurance agents this year in a bid to deepen the insurance market in the most populous country in Southeast Asia.

Until June this year, the industry had 513,000 licensed agents in operation, an increase of 13.7 percent from 2015. In the last three years, the industry recorded a 12.9 percent growth rate per year in its selling agents.

"It has been increasing, but still far from the Financial Service Authority’s [OJK] target of 10 million agents," AAJI chairman Hendrisman Rahim said at the AAJI office in Jakarta on Friday.

According to AAJI data, the life insurance industry recorded total premiums of Rp 34.3 trillion (US$2.6 billion) as of March 2016. Around 43.9 percent of the premium income came from insurance agents.

"We still rely on agents in selling insurance policies," Hendrisman said, adding that the banking channel, namely bancassurance, was the second biggest contributor to sales.

In terms of volume, the industry saw 18 million policies sold in June, an increase of 10.5 percent compared to 2015. Java was still the main growth contributor, while broader financial literacy was needed before seeing insurance sales growth in other regions, Hendrisman said.

Indonesian Life Insurance Update

The Indonesian life insurance business has been one of the most attractive in the world, offering high profits and growth. Management consulting firm McKinsey & Company suggests there are changes coming and lessons to be learned in this market.

McKinsey notes that life insurers in Indonesia have been consistently profitable and predicts that the market will continue to grow by more than 10% a year for the next five years, thanks mostly to the country’s relatively low penetration rates. The study warns, however, that the business environment may become more challenging.

Third-party distribution networks have been more profitable 
The market is becoming more competitive

McKinsey points out that third-party distribution networks have been more profitable for life insurers in Indonesia than in most other markets. "Between 2007 and 2012, adjusted annual growth in surplus from third-party distributors — particularly banks — was 44%, compared with just over 30% for dedicated agents," reads the report.

"This success is due in part to the fact that as banks grew alongside the insurance industry in Indonesia, they were more interested in building relationships with multinationals than in maximizing profits."

Although banks in Indonesia were once once eager to form partnerships with multinational insurers, the report argues that the market is becoming more competitive and forecasts a decline in margins for bancassurance. In this more mature market, McKinsey says Indonesian insurers will require a more sophisticated agency model in order to be successful. In other words, they need a sales force of professional advisors.

"Carriers should move toward hiring and training full-time professional agents to provide more sophisticated advice to affluent consumers and replace under-qualified agents," concludes the study. "They should also adopt digital tools to help lower costs and meet consumer demands for online access and competitive pricing."

Lesson From Uniglo

One might not naturally associate failure with the founder and chief executive of Asia’s largest clothing retailer. But Tadashi Yanai - who also happens to be Japan’s richest man - assures us that he is well-acquainted with the term.

“I understand failure completely,” said Mr Yanai, whose company Fast Retailing is parent to the Uniqlo brand. “When (Uniqlo was) expanding overseas, we failed in Britain, right? We failed in China. We failed again in America,” he said matter-of-factly, methodically checking off the list of past defeats with his fingers.

The Japanese clothing giant had tried to enter the United Kingdom market in 2001, opening 21 stores within two years. But the company was growing too fast. This, coupled with mismanagement of its UK stores, soon forced Uniqlo to close 16 of them.

“It was a huge loss,” Mr Yanai recalled.But the 67-year-old Japanese, who built up Uniqlo from a humble store in Hiroshima in 1984 into the fourth-largest clothing retailer in the world today, is not daunted by such missteps.

Instead, for the man whose life philosophy is “nine failures, one success”, the business journey is all about aiming for the “gold medal”.

He was born in 1949, the son of a tailor. His father ran a small clothing business making suits for Japanese salarymen. But Mr Yanai had a very different vision about clothes, moving away from formal bespoke suits to casual wear that were able to sell in large volume.

Business magazine Forbes calculates that Mr Yanai is today Japan’s richest man based on his share ownership in Fast Retailing. And he is set to get even wealthier, given his vision of making Fast Retailing the “number one” clothing retailer in the world by 2020.

“We are on track for that… we have the ability to do it, without a doubt,” Mr Yanai said confidently.When asked why he was not satisfied with being second or third, Mr Yanai retorted: “There's no option for us to say that at the Olympics, we're just aiming for the bronze medal. We don’t say that.We want to do our very best to get the gold medal,” he added.

Mr Yanai’s combative spirit is reflected in Uniqlo’s aggressive expansion campaign not just in Asia, but also in European and American markets which have traditionally been dominated by Western competitors such Inditex, the Spain-based company behind Zara, and Swedish H&M.

Each week, a new Uniqlo store opens somewhere in the world. But the sprightly and bespectacled businessman is not worried that Uniqlo is opening too many branches, too soon, again. Citing the UK as an example, Mr Yanai said that the 10 Uniqlo stores in London now have been doing “exceptionally well” and are “all making profits”.

He points to Asia’s economic boom as the greatest stimulator for the company’s growth, adding: “What the Chinese (did) could also happen in Southeast Asia.” Uniqlo is the largest clothing retailer in China.But even with the push to become the world’s “number one” in full swing, Mr Yanai is more preoccupied with another pressing issue: Finding his successor.

Mr Yanai is not only founder and CEO of Fast Retailing, he also assumes the titles of president, chairman and owner – a multi-role he describes as “being almighty”. The self-professed "tough boss" confesses that he has failed many times in his quest to find his protege.

“Right now, I don't need a successor who is like me,” Mr Yanai said. “A job like this can't be done alone. Therefore, ideally, I would want to form a team to split all this work up with a good CEO, and this person will continue to direct operations,” he added. And he is anxious to get them started working as a team. “I want to know if my team of successors can do a good job as soon as possible. I hope they could assume the role of protecting the company's interests.”

Retirement Updates Malaysia

An alarming number of Malaysian workers – well over six million who are self-employed or in the semi-formal sector – are not covered by any retirement scheme due to a lack of a comprehensive social protection system.

Employees Provident Fund (EPF) deputy chief executive officer (Strategy) Tunku Alizakri Alias said 10% of the labour force was covered under the pension scheme and 46% under the EPF because this is mandated by law, but another 44% are left out. While Alizakri expresses his concerns over the 44% persons, it is unfair to say that this group of people needs to upscale themselves as fast as possible. It is not as if every single one of the 44% chose to be a nasi lemak seller, for example, or adamantly wanted to opt for self-employed job.

According to PKR Trade and Investment Bureau Chief Wong Chen, the fact that 44% of workers are working outside the system, is just a reflection of how unsustainable our formal economy is. The grey economy is so large that in time, if we don't formalise the economy we will face tremendous pressure to provide social safety net for those with no pensions.

“These challenges are symptoms of poor economic planning and a regime of very low wages,” says Wong. He adds that one needs a minimum of RM3,000 a month of RM36,000 a year to retire with consideration to medical expenses. “If we expect to live for another 10 years post retirement, a person will need a minimum of RM360,000. “If we factor in inflation over ten years the time value money figure at retirement is closer to RM420,000,” he adds.

Unlike developed countries, people have the choice to rely on self-directed investment accounts such as Individual Retirement Accounts offered by banks or 401k for their retirement income. A 401(k) is a retirement savings plan sponsored by an employer. It lets workers save and invest a piece of their paycheck before taxes are taken out. Taxes are not paid until the money is withdrawn from the account.

According to a study by students in Universiti Teknologi Mara, Kedah, in the US, half of its total retirement assets are held in accounts such IRAs and 401k.“Some workers seek financial experts to allocate their savings in retirement accounts but most will decide on their own as where they should save their money for retirement. “Majority of the workers has no financial management and face losing their savings on non-performing financial instruments.“Because of this, some of them are pessimistic about their own ability to make a good investment decision.

“On the same issue, in Malaysia, current government policy makes it compulsory for all its working population to set a minimum amount of their salary into the Employee Provident Fund (EPF),” says the report. However, options such as IRAs and 401k are not applicable here and the government lacks involvement in educating new employees who enter into the working world on the importance and existence of the EPF.

It is not about forcing people to contribute to their future wellbeing, as said by EPF chief executive officer Datuk Shahril Ridza Ridzuan, the question is more of whether the 44% have enough to even think about contributing to the EPF. Just as how EPF announced the option for employees to reduce their EPF deduction recently this year, the reason for doing so was to aid employees who did not have sufficient monthly disposable income.

If even for formal sectors such a measure was taken to increase disposable income, what more the semi-formal sectors?
To be able to contribute to EPF could be deemed as “luxury”, not so much about whether they are aware that they need to save up for rainy days.

Unemployment rate is also increasing in Malaysia and has not improved. To say that the trend of young people who are increasingly uninterested in traditional jobs may not be the best judgement. It is not about interest, it is the lack of guidance, good education and grooming of graduates prior to entering into the working world.

Zurich Malaysia - Health Insurance

Zurich Insurance Malaysia Bhd (ZIMB) yesterday launched a medical insurance plan, Omni Health, the first in the market which offers cash back on premiums paid under its no claim bonus (NCB) benefits to give customers more reason to stay fit.

Chief executive officer Philip Smith said the ten per cent cashback on premiums excluded the Goods and Services Tax which would be refunded to the policy holder as a bonus in the following policy year, he said. Malaysia has been rated the highest among Asian countries for obesity with 44 per cent of women and 44 per cent of men found to be obese.

“Obesity and high cholesterol are one of the top two reasons of extra loading of medical premiums in Malaysia as it leads to a lot of health problems and high medical cost,” he said after launching the product yesterday.

Meanwhile, ZIMB general manager, Life Insurance Division, Mukesh Dhawan said Malaysians were becoming more health conscious and this was reflected by the growth of wellness establishments like gymnasiums, weight management centres and organic food and beverage operators.

He said Omni Health was introduced to encourage customers to observe healthier lifestyles by adopting preventive measure. “Omni Health also featured Wellness Reward Programme for customers with health setbacks at the point of purchase where they will be placed under a wellness programme with professional advice and guidance for healthy living.

“Should their conditions improve at the end of the programme, their insurance premium would be automatically reduced,” he added. ZIMB is part of Zurich Insurance group headquartered in Kuala Lumpur and formerly known as Malaysian Assurance Alliance with a nationwide presence of 43 branches.

It offers a vast range of general insurance and life insurance solutions to cater for insurance, savings and investment needs of Malaysian through 5,000 tied life insurance agents and 3,000 multi-tied general insurance agents.

Insurance Industry Updates - Malaysia

Insurance companies in the country are aware of the need to adapt their product positioning and distribution strategies as they re-evaluate their overall propositions and offerings. Insurers in Malaysia can play a much bigger role within the country’s wealth management sector if they are able to embed advice into product distribution and offer more protection. 

To do this, however, means that agents need to provide customers with more insights and guidance, given that risk cannot be assessed or addressed without looking holistically at an individual’s financial situation.

In line with this, the transition from insurance agents to IFAs might be an important step to support efforts in strengthening the distribution force to create a point of differentiation.

And, being well-resourced, insurance companies can invest in building the competency levels of advisers in offering healthcare and insurance plans, for example.

Ensuring greater penetration of insurance is essential in Malaysia – if the industry is committed to achieving the target of 5% insured by 2020.

“The [growth] aspiration will come more from non-agency based channels like online, bancassurance and IFAs,” saysRaymond Lew, chief distribution and marketing officer atSun Life Malaysia.

Completing the wealth management jigsaw

Having large agency forces to date has enabled insurance companies in Malaysia to make healthy profits, even without the need to offer so-called advice. But the situation will not stay the same forever, especially as competition grows from other types of distributors – including the banks. 

Industry practitioners agree that products sold without some level of guidance for customers no longer work.

“Products dispensed without proper advice, and without proper interpretation and knowledge, can actually backfire in terms of the needs of the clients,” saysK R Raju, founder and adviser for Blueprint Group of Companies.

As a result, rather than waiting and potentially seeing their market share get diluted, insurance companies need to act quickly by positioning their offerings in terms of providing protection, suggests Lew.

This also necessitates a transition from relying on agents to more emphasis on IFAs as a key distribution channel.

“There are situations where, when we look at the overall financial plan of an individual there can be implications on cash flow, and in view of those challenges, we may have to look at [insurance] products which are cheaper but provide the desired coverage,” explains Raju.

At the same time, Lew predicts that agency forces will continue to dominate because they are aggressive, driven and proactive. “They go out there and try to educate customers.” 

 

Distribution differentiation

Distribution power is also important if insurance companies want to make the most of the opportunity in wealth management in Malaysia; differentiation is no longer at the service or product levels.

“At the moment, the challenge for insurance companies is distribution power,” saysPhilip Smith, chief executive officer of Zurich Insurance in Malaysia. 

“The biggest and most successful [insurers] are the biggest and most successful not because they have the product or better service, or because they have straight-through processing, but they have the distribution power.”

Capitalising on the right channels can also help providers to reach a wider and larger segment of the population.

For instance, many potential customers have low levels of financial literacy level and are likely to be either un-insured or under-insured. Insurance companies must therefore provide them with information to help them understand the products, not push any products, adds Smith.

In particular, industry players such as Raju believe that healthcare protection offers a lot of potential, given the rising costs combined with increased life expectancy over recent years.

Among the many products already available in the market, most have high margins for agents but limited value to customers. Instead, insurance companies need to offer more competitive health products.

To do this, however, means that agents need to provide customers with more insights and guidance, given that risk cannot be assessed or addressed without looking holistically at an individual’s financial situation.

In line with this, the transition from insurance agents to IFAs might be an important step to support efforts in strengthening the distribution force to create a point of differentiation. And, being well-resourced, insurance companies can invest in building the competency levels of advisers in offering healthcare and insurance plans, for example.

Ensuring greater penetration of insurance is essential in Malaysia – if the industry is committed to achieving the target of 5% insured by 2020.

The [growth] aspiration will come more from non-agency based channels like online, bancassurance and IFAs. Having large agency forces to date has enabled insurance companies in Malaysia to make healthy profits, even without the need to offer so-called advice. But the situation will not stay the same forever, especially as competition grows from other types of distributors – including the banks.

Industry practitioners agree that products sold without some level of guidance for customers no longer work. Products dispensed without proper advice, and without proper interpretation and knowledge, can actually backfire in terms of the needs of the clients. 

As a result, rather than waiting and potentially seeing their market share get diluted, insurance companies need to act quickly by positioning their offerings in terms of providing protection. 

This also necessitates a transition from relying on agents to more emphasis on IFAs as a key distribution channel. There are situations where, when we look at the overall financial plan of an individual there can be implications on cash flow, and in view of those challenges, we may have to look at [insurance] products which are cheaper but provide the desired coverage.

At the same time, Lew predicts that agency forces will continue to dominate because they are aggressive, driven and proactive. “They go out there and try to educate customers.”  Distribution differentiation

Distribution power is also important if insurance companies want to make the most of the opportunity in wealth management in Malaysia; differentiation is no longer at the service or product levels.

“At the moment, the challenge for insurance companies is distribution power. The biggest and most successful [insurers] are the biggest and most successful not because they have the product or better service, or because they have straight-through processing, but they have the distribution power.

Capitalising on the right channels can also help providers to reach a wider and larger segment of the population. For instance, many potential customers have low levels of financial literacy level and are likely to be either un-insured or under-insured. Insurance companies must therefore provide them with information to help them understand the products, not push any products. 

In particular, healthcare protection offers a lot of potential, given the rising costs combined with increased life expectancy over recent years. Among the many products already available in the market, most have high margins for agents but limited value to customers. Instead, insurance companies need to offer more competitive health products.

Financial Updates - Malaysia

Hubbis’ 6th annual event in Kuala Lumpur for the Malaysian wealth management community, came at a time when the industry is facing one of its toughest-ever years. Markets are clearly tough for everyone, and challenges are mounting across all aspects of the service and product offering. 

Finding the right balance in terms of the fee model and incentive structure to drive this represents a key component. As is the education and retraining of sales staff, to get them thinking and acting in a way where they sell solutions, not products.

The industry must ensure it can evolve in these and other ways to avoid missing out on the opportunity to manage more wealth onshore, rather than the continued flood offshore. This also requires diversifying the distribution channels for insurance products.

There is little doubt that the dynamics, regulatory intent and demographics are all on Malaysia’s side when it comes to developing a healthy and sustainable wealth management market. The question-mark is over the pace it is moving.

For example, a lot of assets still flow into Singapore, which is in part because private banking in Malaysia has not developed quickly enough with sufficient investment options. In line with this, the lack of a deeper capital market in the country makes it difficult to compete head-to-head with Singapore and Hong Kong.

These were some of the views of leading market practitioners across private banking, retail banking, insurance, independent firms and asset management.

Spurring market development

There are several key ways in which Malaysian wealth management can move to the next level of development.

First, there is a need to embrace change, given the inevitable emergence of fintech, the next generation of investors, new competitors and regulatory reform, among various changes underway.

Secondly, players must focus on building the right culture; this needs to come via innovation and human capital. But this is not just about product innovation; rather, new ways to engage consumers and leverage relationships. 

Thirdly, it must be easier for clients to do business, by giving them multiple points of contact through greater collaboration. Tied to this is the need for clearer and more targeted communication for clients.

Fourthly, there should be more investor education and awareness generally, with all industry stakeholders required to play a role in ensuring this.

Evolving offerings

For banks to grow their wealth management capabilities in Malaysia, the focus is more likely to be in local currency and Islamic products. 

Yet the relatively higher interest in MYR makes it more compelling for these institutions to offer non-MYR products, which also address customers’ need for building their investment portfolio.

Asset managers, meanwhile, need to extend their global offering to the local market, providing professional money management in non-retail structures.

Solution-based versus product-based offerings will also enable stronger manufacturer-gatekeeper relationships.

For Islamic wealth management, in particular, there is an opportunity for the Islamic banks to also focus on HNW business in addition to the retail market.

More specifically, there needs to be more choice of products and services in the traditional asset class; when it comes to alternatives, more are needed, and more quickly. Track record also needs to improve, along with AUM, as well as to ensure cost efficiency. 

This is more likely to happen if there is greater awareness of Islamic options among intermediaries. Further, the merit of investing into Shariah-compliant products also needs to be clear to non-Muslims, beyond just performance.

In the insurance space in Malaysia, providers can play a much bigger role within the country’s wealth management sector if they are able to embed advice into product distribution and offer more protection. 

Some of the biggest opportunities for these companies include: the low life insurance penetration rate; the insurance protection gap; the potential for Malaysians to save more; rising healthcare costs coupled with increased life expectancy; and banks and IFAs as leverage to strengthen the distribution force.

On the flipside, challenges exist in various forms, for example: a general disinterest by banks in promoting life products; the EPF scheme as the preferred option to protection vs the private retirement scheme; competition between family Takaful products versus conventional insurance; saturation within the potential pool of buyers of life insurance; and changing business operations to keep up with new technological advances and customer demands.

Delegate, speaker and sponsor summary

• 30 high-profile speakers

• 290 senior individuals attended

• Delegates included CEOs, senior management, product gatekeepers and business unit heads from the leading Private Banks, Retail Banks, IFAs, Insurance Companies and local Asset Management Firms

• Sponsors:Allocated Bullion Solutions,Intellect Design Arena,Henley & Partners,Heritage Trust Group,IRESS,Sun Life Malaysia, Vermillion Software,Franklin Templeton Investments, Mercer,Morningstar,Rosemont, Swiss Asia,Temenos,The Iyer Practice,Thomson Reuters

Key topics and themes 

• Is wealth management in Malaysia progressing too slowly? Will the opportunity pass us by?

• When will we stop being obsessed with short-term revenue - and start focusing on generating long-term value?

• Driving Malaysia’s Islamic wealth management industry forward

• What’s the role for insurance companies in Malaysian wealth management?

• Product manufacturers and fund gatekeepers - a slow, slow dance, and a small shuffle towards advice

• Everyone is worried - what should I do with my money?

Finding the right balance in terms of the fee model and incentive structure to drive this represents a key component. As is the education and retraining of sales staff, to get them thinking and acting in a way where they sell solutions, not products.

The industry must ensure it can evolve in these and other ways to avoid missing out on the opportunity to manage more wealth onshore, rather than the continued flood offshore. This also requires diversifying the distribution channels for insurance products.

There is little doubt that the dynamics, regulatory intent and demographics are all on Malaysia’s side when it comes to developing a healthy and sustainable wealth management market. The question-mark is over the pace it is moving.

For example, a lot of assets still flow into Singapore, which is in part because private banking in Malaysia has not developed quickly enough with sufficient investment options. In line with this, the lack of a deeper capital market in the country makes it difficult to compete head-to-head with Singapore and Hong Kong.

These were some of the views of leading market practitioners across private banking, retail banking, insurance, independent firms and asset management.

Spurring market development - There are several key ways in which Malaysian wealth management can move to the next level of development.

First, there is a need to embrace change, given the inevitable emergence of fintech, the next generation of investors, new competitors and regulatory reform, among various changes underway.

Secondly, players must focus on building the right culture; this needs to come via innovation and human capital. But this is not just about product innovation; rather, new ways to engage consumers and leverage relationships. 

Thirdly, it must be easier for clients to do business, by giving them multiple points of contact through greater collaboration. Tied to this is the need for clearer and more targeted communication for clients.

Fourthly, there should be more investor education and awareness generally, with all industry stakeholders required to play a role in ensuring this.
Evolving offerings

For banks to grow their wealth management capabilities in Malaysia, the focus is more likely to be in local currency and Islamic products. 

Yet the relatively higher interest in MYR makes it more compelling for these institutions to offer non-MYR products, which also address customers’ need for building their investment portfolio.

Asset managers, meanwhile, need to extend their global offering to the local market, providing professional money management in non-retail structures.

Solution-based versus product-based offerings will also enable stronger manufacturer-gatekeeper relationships.

For Islamic wealth management, in particular, there is an opportunity for the Islamic banks to also focus on HNW business in addition to the retail market.

More specifically, there needs to be more choice of products and services in the traditional asset class; when it comes to alternatives, more are needed, and more quickly. Track record also needs to improve, along with AUM, as well as to ensure cost efficiency. 

This is more likely to happen if there is greater awareness of Islamic options among intermediaries. Further, the merit of investing into Shariah-compliant products also needs to be clear to non-Muslims, beyond just performance.

In the insurance space in Malaysia, providers can play a much bigger role within the country’s wealth management sector if they are able to embed advice into product distribution and offer more protection. 

Some of the biggest opportunities for these companies include: the low life insurance penetration rate; the insurance protection gap; the potential for Malaysians to save more; rising healthcare costs coupled with increased life expectancy; and banks and IFAs as leverage to strengthen the distribution force.

On the flipside, challenges exist in various forms, for example: a general disinterest by banks in promoting life products; the EPF scheme as the preferred option to protection vs the private retirement scheme; competition between family Takaful products versus conventional insurance; saturation within the potential pool of buyers of life insurance; and changing business operations to keep up with new technological advances and customer demands.