Loan Against Insurance Policy

Loan is needed during the times of financial emergency. At such a time people think of a personal loan. But these days, one can take a loan against a number things such gold, credit card, fixed deposit (FD), insurance policies, public provident fund (PPF), National savings certificates (NSC), etc. Among these, loan against insurance policies is also gaining popularity.

But, should you opt for a loan against insurance policy? Given below are some advantages and disadvantages of the same.

1. The disadvantage of this type of loan is that people believe that the loan can be taken against the sum assured of the policy. But this is not true. The loan gets sanctioned against the policy's surrender value only. Another thing to be noted here is that the loan that the policyholder can take against the policy can be limited in the initial years of the policy.

2. Another disadvantage of this type of loan is that one can take a loan against traditional life insurance policies (such as endowment policies, money-back plans, whole life etc) only and not against a term plan.

3. One can not take a loan against insurance policy as soon as they buy it. There is a waiting period of around three years on them. The lender checks if you have paid the premium or have defaulted during that three-year waiting period.
 
4. If you have taken a loan against the insurance policy, then it may be noted that the amount of the loan varies from one insurance company to another. Usually, policyholders get loan equal to 80 to 90 per cent of the surrender value of the policy. The amount you get when you terminate your insurance plan voluntarily is surrender value.

5. The advantage is that a loan against an insurance policy gets approved instantly and the interest rate on these loans are lower compared to the interest rate on personal loans. Unlike gold loans, the collateral value of the policy remains constant throughout the loan period.

6. The policyholder can avail a loan by pledging it. This type of loan is issued by the insurance company itself or any bank. The interest rate charged on loans against an insurance policy is dependent on the premium amount and the number of premiums paid.

7. If the policyholder dies during the loan term, then the loan outstanding can be recovered from the sum assured at the time of claim filed by the nominee and the remaining amount will be paid to the nominee.  

EPF Investment Income - Down

Employees Provident Fund (EPF) reported total investment income of RM12.32 billion for the second quarter of the year, ending on June 30, 2019. There was drop of RM70 million compared to the earnings of the corresponding quarter last year.

Datuk Mohamad Nasir Ab Latif, EPF deputy chief executive officer (investment), cited the poor performance of the Malaysian stock market as the reason for the quarter’s lower investment income. He said that the earning went down to -1.1 per cent in Q2 2019, compared to Q2 2018. It also affected the EPF’s domestic equity portfolio, which recorded an income of RM1.51 billion.

Mohamad Nasir said in a statement, “The benefit of having a diversified portfolio is that the investment income from overseas assets helped to cushion the decline in income from the domestic equity portfolio.

“For us at the EPF, the short-term volatility gave us a chance to buy good assets to strengthen the portfolio for the long term.”

He gave a heads up that the market condition would remain volatile and unstable for the rest of the year, since the tumbling markets were strongly impacted by international forces. Global uncertainties triggered by Brexit conundrum, the on and off US-China trade talks, and increasing protectionism in nations such as Japan and South Korea, would keep the output low.

Mohamad Nasir said, “We are also keeping a close eye on the possibility of an economic slowdown and the rising risk of recession in major economies, which may have a knock-on effect on global growth.

He added, “Market conditions in Malaysia remain challenging over the short term, but provide good buying opportunities for long-term funds such as ours. Heading into the end of the year, we believe it will be very difficult for us to maintain the first half momentum as we are seeing worrying trends emerging in many global indicators. “Despite this outlook, we remain firmly confident in our ability to deliver above-inflation returns, meeting our objective of preserving and enhancing the value of our members’ savings over the long term.”

Who Is Galleon Rajaratnam

Raj Rajaratnam (pic), the mastermind of what prosecutors said was one of the largest hedge-fund insider- trading rings in US history, is out of prison – almost two years early.

Rajaratnam, whose Galleon Group LLC once managed more than US$7bil, is back with his family on a quiet block of Manhattan’s East Side, where he’s mostly confined to his apartment for the remainder of his sentence.

He’s free to work outside his home during the day. Sentenced to 11 years behind bars after his 2011 conviction, he served his time at the Federal Medical Center Devens, a prison outside Boston. Rajaratnam, 62, is a beneficiary of the 2018 First Step Act, which allows some federal inmates who are over 60 years old, or who face terminal illnesses, to serve the end of their sentences at home.

The native of Sri Lanka applied for home detention and was released this summer, according to a person familiar with the matter who asked not to be named.

Rajaratnam reported to Devens in December 2011, becoming inmate number 62785-054. Rajaratnam became a billionaire after co-founding Galleon and was perhaps the highest-profile figure ensnared in a years- long crackdown on insider trading at hedge funds. Arrested in an early-morning FBI raid in October 2009, he was in the first wave of defendants charged by federal prosecutors in New York, with dozens of other traders, executives and company insiders accused in the years that followed.

The move from prison wasn’t announced by the US Bureau of Prisons or by Rajaratnam’s legal team, and only became apparent after his location on the bureau’s public website was changed from Devens to “New York RRM, ” an administrative unit that oversees inmates in halfway houses and on home detention. Rajaratnam was due to be released on July 4,2021, according to the BOP website.

More than 240 applications for home confinement for “elderly offenders” have been granted under the First Step Act, according to the bureau. Rajaratnam isn’t required to wear an electronic-monitoring device to keep tabs on his location.

After 12 days of deliberations, a jury in New York found Rajaratnam guilty of 14 counts stemming from a seven-year plot to trade on inside information from corporate executives, bankers, consultants, traders and other insiders. Among his tipsters was Rajat Gupta, then a board member at Goldman Sachs Group Inc, who later went to prison for leaking secrets to Rajaratnam. Prosecutors said Rajaratnam earned more than US$72mil from the illicit tips.

Rajaratnam was defended by John Dowd, a Washington lawyer who went on to represent President Donald Trump during part of Special Counsel Robert Mueller’s inquiry into Russian meddling in the 2016 election.

Galleon was among the world’s 10 biggest hedge funds in the early 2000s. Rajaratnam’s net worth of US$1.3bil made him the 559th richest person in the world, Forbes Magazine said in 2009.

The prosecution was one of the first insider-trading cases built on wiretapped telephone conversations, a tactic that until then was associated with organised-crime investigations. Jurors heard more than 40 recordings of Rajaratnam, in some of which he could be heard gathering secrets from his sources

At Devens, Rajaratnam was one of 1,055 inmates in a facility surrounded by razor-wire fencing, with a perimeter patrolled by armed officers.The prison’s focus is on men who need specialised or long-term medical or mental health care, according to the BOP.

In court papers filed before he was sentenced, Rajaratnam said he had health problems including diabetes.

Indonesia Kembalikan Plastic Waste

Indonesia has sent hundreds of garbage-filled shipping containers back to their countries of origin, according to the customs agency, as the South-East Asian nation pushes back against becoming a dumping ground for foreign trash.

About 250 containers seized across the archipelago in recent months have already been returned and authorities are inspecting more than 1,000 others, a customs official said.

Among them, 49 containers of waste seized on Batam Island near Singapore have been shipped back to the United States, Germany, France, Hong Kong and Australia, said agency spokesperson Deni Surjantoro.

The shipments were loaded with a combination of garbage, plastic waste and hazardous materials in violation of import rules.

“Imports can’t be contaminated with toxic or dangerous materials,” he said.

Nearly 200 containers have also been shipped out of Surabaya, Indonesia’s second-biggest city, to the United States, Britain and Germany, according to customs data.

Meanwhile, authorities near Jakarta are gearing up to send back about 150 containers while inspecting more than 1,000 others that could contain banned materials, Surjantoro said.

Indonesia has been tightening its surveillance of foreign trash in response to soaring imports.

Huge quantities of waste have been redirected to South-East Asian nations after China – which used to receive the bulk of scrap plastic from around the world – closed its doors to foreign refuse last year in a bid to clean up its environment.

Australia has pledged to stop exporting recyclable waste amid global concerns about plastic polluting the oceans and increasing pushback from Asian nations against accepting trash.

Around 300 million tonnes of plastic are produced every year, according to the conservation organisation WWF, with much of it ending up in landfills or polluting the seas, in what has become a growing international crisis.

A particular environmental concern are microplastics – tiny pieces of degraded waste that absorb harmful chemicals and accumulate inside fish, birds and other animals.

Indonesia Doubling Universal Health Premium

The government has planned to double the premiums for its universal healthcare scheme to address a ballooning deficit incurred during the first five years of its operation that taxpayers now have to pay. It will be an unpopular decision, but bold measures are needed to sustain healthcare services for all.

The Health Care and Social Security Agency (BPJS Kesehatan) argues that the premiums have been “underpriced” for too many risks and benefits, starting at Rp 25,500 (US$1.80) per month for Class III policyholders, and they have not changed since the program began in 2014. The government is proposing to increase the premiums for the lowest class category to Rp 42,000 per month. Class II and Class III premiums, meanwhile, will jump to Rp 110,000 and Rp 160,000 per month, respectively, from Rp 51,000 and Rp 80,000.

Indonesia’s universal healthcare scheme is one of the most generous and biggest in many ways, covering dental care, medicine, physiotherapy and chronic care. It has covered more than 223 million people and has the goal of serving 90 percent of the country’s population of 270 million. While the scheme has successfully provided more people with healthcare services, the facilities and funding to support it are deteriorating.

BPJS Kesehatan is expected to book a deficit of Rp 28.5 trillion this year, up from Rp 19.4 trillion in 2018, Rp 13.8 trillion in 2017, Rp 6.7 trillion in 2016, Rp 9.4 trillion in 2015 and Rp 1.9 trillion in 2014, its first year of its operations. Taxpayers’ money was used to support BPJS Kesehatan with a bailout of Rp 10.3 trillion last year. This practice has sickened BPJS Kesehatan and the state budget, which already has to subsidize for healthcare coverage for the poor.

Presidential Regulation No. 82/2018 allows for the premiums for the insurance scheme to be adjusted every two years. Still, the plan to increase them, which has been agreed by various government players ranging from the Finance Ministry to Vice President Jusuf Kalla, has sparked criticism, particularly from politicians who insist that premium hikes must run in parallel with improved quality of healthcare services.

Quality is one thing, but the management of the insurance scheme is another pressing issue to be addressed to ensure more effective and sustainable universal health care. According to a comprehensive audit by the Development Finance Comptroller, hospitals have been overstating their class category so they can charge higher premiums, while companies are under-reporting the numbers and salaries of their employees so they can pay lower premiums.

Addressing these two issues alone would dramatically improve BPJS Kesehatan’s finances, as would raising awareness of nonwage participants who have laid a heavy burden on the agency by only registering when they are ill and do not pay premiums when they are healthy.

Nothing is ever easy when it comes to price increases, but the accountability is clear. BPJS Kesehatan needs more income to provide Indonesian citizens with the healthcare services they very much deserve. Having said that, BPJS Kesehatan needs to strengthen surveillance and enforcement to make its operations more effective and efficient for a healthier and more productive Indonesia.

Volkswagon Insurance

Volkswagen Passenger Cars Malaysia (VPCM) has introduced a new insurance programme called the Volkswagen Insurance Plan or VIP. Said to be tailor-made to enhance your VW ownership experience, VIP offers comprehensive coverage with minimal hassle.

As a VIP policy holder, benefits include prioritised claim approval, roadside assistance with 24-hour emergency towing service, and assurance that repair work is conducted at authorised Volkswagen body and paint centres, in accordance to the carmaker’s repair standards with only genuine parts used.

Additionally, there are no excess fees, no betterment cost and an agreed value of up to 10 years. It is open to all Volkswagen models regardless of vehicle age.

VIP can be purchased at any Volkswagen authorised dealership, when registering a new car or during road tax renewal. Allianz General Insurance and Etiqa General Takaful are partner panel insurers. The former offers conventional insurance while the latter offers both conventional and takaful insurance.

“With VIP, all Volkswagen owners regardless of model, can enjoy quality services and roadside assistance at the best value under a comprehensive plan catered exclusively just for them. Our owners are at the core of everything we do and providing this added service to them at our dealerships also ensures that the entire process is streamlined and more convenient, making our Volkswagen dealerships a one-stop centre for customer convenience and peace of mind,” said VPCM MD Erik Winter.

Separately, VPCM recently launched Das WeltAuto in Malaysia, Volkswagen’s global used car programme that offers certified used cars from a trusted source. Think BMW Premium Selection and Mercedes-Benz Certified. 

ETIQA Expanding In Asia

ETIQA, the insurance and takaful arm of Malayan Banking Bhd (Maybank), is strengthening its regional foothold by expanding its product offerings in Indonesia, the Philippines and Cambodia. These three countries will be key growth markets for Etiqa in the coming years, says its chief strategy officer Chris Eng Poh Yoon.

“The strong success we have seen over the last two years has been in the Philippines, and to some degree in Indonesia, where we have consolidated our position. We are also looking to start operations in Cambodia. We are still in the process of getting our licence in Cambodia, which we hope to secure in the next couple of months."

The group’s foray into Cambodia’s insurance market will make it the second Malaysian insurer to do so after Lonpac Insurance Bhd, the wholly-owned insurance subsidiary of LPI Capital Bhd.

“We believe that when we secure our licence in Cambodia, we will be able to scale up quite quickly, leveraging Maybank, which has already established itself as one of the top banking groups there. Maybank has been in Cambodia for 25 years, with 21 branches in the country.”

The Cambodian insurance industry saw a nearly 30% increase in total gross premium last year, up from US$151.6 million in 2017, to US$196.4 million, according to data from the Insurance Association of Cambodia. The growth was driven by a 15% rise in total gross premium for general insurance and a 50.6% increase in total gross premium for life insurance. There were 12 general insurance companies and eight life insurance companies operating in the country last year.

“Insurance penetration in Cambodia is still low, but most of the country’s wealthy are concentrated in its capital Phnom Penh, which will be our target market. At the same time, we want to be among the first to provide online insurance [products] there.”

Life insurance penetration is also low in Indonesia and the Philippines. The Jakarta Post reported that only 1.7% of Indonesia’s 265 million population have some form of insurance. In the Philippines, the penetration rate stood at 1.67% as at end-2018, compared with 1.64% in 2017, according to data from the Philippines Insurance Commission.

“I think the general insurance market is competitive in Indonesia, but life penetration is still low. Our focus in Indonesia is growing our online [general insurance] business, while in the Philippines and Cambodia, we are focused on the bancassurance angle (selling life assurance and other insurance products and services through the banks) whereby we leverage Maybank. Subsequent to that, we will look into online insurance in these two countries,” says Eng.

Etiqa also has a presence in Singapore where it has been seeing double-digit growth in its life insurance business. The group is looking to maintain this, given that the insurance market in the city state is at a mature stage.

“From the general insurance side of things, we have been in Singapore for many years, but around four years ago, we decided to venture into the life insurance space, where we have seen double-digit growth [year on year]. We are currently ranked eighth in Singapore for life insurance, while we are ranked No 21 in the general insurance space due to stiff competition. Our target there is to be among the leading foreign bancassurance providers,” says Eng.

On which other countries Etiqa could be looking at to expand, Eng says, “We would be interested to explore Myanmar as it is a sizeable market of 50 million people, but probably in another two to three years, once we have grown our presence in Indonesia, the Philippines and Cambodia,” he says.

Nevertheless, a regional expansion strategy comes with its own set of challenges.

“In Indonesia, for example, there is a lot more emphasis on having local ownership, so foreign participation is capped at a maximum of 80% for foreign insurers. There is also a need to have local commissioners on the board, and there is strong encouragement to appoint a local CEO. But this is understandable... just like in Malaysia in the past, foreign shareholding of insurance companies was capped at 70%,” Eng explains.

“In the Philippines, there is a strong emphasis on branding, thus, we need to spend a bit of marketing dollars to grow our presence there. In Cambodia, the challenge is staffing as there is a shortage of experienced personnel. It is also a dollarised economy, so staff costs are not cheap.”

Etiqa derives 90% of its revenue from Malaysia. Even so, Eng believes there is still room for its Malaysian business to grow.

“Fire insurance is still fairly underpenetrated in Malaysia, as well as life and family takaful. Unfavourable market conditions have also resulted in a slowdown in sales of investment-linked products.

“However, in terms of traditional protection and savings products, those are still doing well in Malaysia, so there are still opportunities for growth here,” he says.

Etiqa is the largest online insurer in Malaysia, accounting for 6 out of 10 insurance policies sold online, primarily general insurance products such as motor insurance, travel insurance and fire insurance.

Last year, there were reports that Maybank could potentially spin off and list Etiqa on Bursa Malaysia. On this, Eng says, “We are always open to various options that can add value to the company, and the shareholders will deliberate and evaluate these options.”

For its financial year ended Dec 31, 2018, gross premium increased after the insurer’s life insurance and family takaful business grew 16% to RM4.3 billion while the general insurance and takaful segment expanded 17% to RM2.9 billion.