Malaysia Takaful Insurance Gaining Traction

Malaysia’s takaful industry is likely to continue its steady growth in 2021 amid government initiatives and a supportive Islamic finance ecosystem, further propped up strong economic growth (forcasted at 6.7% in 2021), increased digitalisation, higher awareness and a low life-insurance penetration rate.

Malaysia’s vibrant Islamic finance ecosystem includes Islamic banks, sharia-compliant corporates, Islamic fund managers and halal industries that seek takaful products. Bancasssurance is one of the main distribution channels of takaful products. Takaful demand also arises from sukuk issuance, which makes up more than 60% of outstanding domestic issues and is often linked to projects and insuring the underlying assets. Takaful firms can also invest their liquidity in diverse sukuk and other Islamic options.

Takaful penetration is forfasted to keep rising, supported by government initiatives to provide financial assistance for the bottom 40% of income earners to purchase insurance and takaful coverage under the ‘Perlindungan Tenang’ scheme. Malaysian takaful continued to gain ground in the insurance market during the 2020 pandemic; it accounted for 38% of the domestic life insurance market in 1H20 (2019: 34%). General takaful accounts were stable at 16% of the overall general insurance market.

The takaful industry faced low top-line growth in 2020 due to a fall in new contributions under pandemic-related movement restrictions. Consequently, the contribution of family takaful to overall growth dwindled to 2% in 1H20, against 25% in 2019, while general takaful contributions rose by only 0.6%, from 20%. Nonetheless, takaful growth remained steady compared with general and life insurance contributions, which shrank by 3.6% and 12.6%, respectively.

Family takaful funds recorded a 28% drop in profitability in 1H20 due to unrealised losses from equity investments and lower new contributions. However, this was a smaller fall than for life insurance funds, whose profitability declined by 79%. The takaful sector’s capital adequacy ratio reached 240%, above the insurance sector’s 226%.

Murder Scam For Insurance Claim

Five fraudsters have been arrested in Nalgonda district on charges of being involved in fraudulent life insurance claims by killing people and projecting the deaths as due to road accidents, police sources said on Tuesday. The gang used to deliver forceful blows on the chest of the victims to kill them and later used different vehicles to run over their bodies, the sources said.

The fraudsters in connivance with family members of the deceased and others claimed insurance amounts from different private insurers to the tune of more than ₹1.59 crore after making road accident claims aggregating over ₹3.39 crore, Nalgonda district superintendent of police A V Ranganath said. The prime accused, who earlier worked in a finance firm, conspired with other accused and during 2013-2017 committed at least five offences--four murders and portrayed one natural death as accidental deaths.

They used to select sick people and those addicted to liquor and convinced their family members and also bought term insurance policies by paying a premium on their behalf. After killing such insurance policyholders, the accused used to portray it as accidental deaths to claim double insurance amounts from the insurance companies. After getting the insurance claim they later shared the claim amount with their family members and others.

However, the modus operandi came to light after police got information that on February 24 this year, a man was killed but it was projected that he died in a road accident. Police took up investigations and the medical and post-mortem reports revealed the cause of death of the man due to homicidal injury.

During the course of the investigation and after questioning the man's family members, the five were arrested. Police said they were also probing the role of others including insurance company inquiry officers, agents, a bank official and some village elders in the fraud.

Pos Life Care - Pos Malaysia & Allianz

POS Malaysia Bhd and Allianz Life Insurance Malaysia Bhd have together introduced Pos LifeCare, an affordable and accessible life insurance plan that provides death, and total and permanent disability (TPD) coverage.

The Pos LifeCare plan also offers additional benefits for accidental death or TPD, death due to dengue and Covid-19 infection, and hospital cash benefit in the event policyholders are admitted to the hospital for dengue fever - offering a premium from as low as RM0.14 per day.

Pos Malaysia has been connecting people and businesses for over 200 years. It has the largest delivery and touchpoint network in the country, which would widen the reach for life insurance.

Pos LifeCare is a basic plan which will be offered to all Malaysians aged 18 to 70 years old who walk into Pos Malaysia branches. The yearly renewable non-participating group term life insurance product under the Master Policy of Pos Malaysia is available now at all Pos Malaysia post offices nationwide.

In 2019, Malaysia recorded the highest number of dengue cases in four years at 130,101, compared to the previous historic high of 120,836 cases in 2015.

Separating Life Insurance From Banking

A group representing the life insurance industry says a decision by the Saskatchewan Court of Appeal will support consumer protection rules that separate banking from insurance.

The Canadian Life and Health Insurance Association says the court found a 2018 regulation prevents life insurance companies from accepting deposits and amounts unrelated to insurance coverage, marking a win in the insurance industry's fight with investment firms.

In the lawsuit, Mosten Investment LP had argued that Manufacturers Life Insurance Co.'s universal life insurance policy allowed for unlimited deposits and a guaranteed return. The case caught the attention of prominent short-seller Muddy Waters, which argued in 2018 that a ruling in Mosten's favour could lead to billions of dollars of losses.

But Manulife says it was successful in arguing that policyholders cannot make unlimited deposits into universal life insurance contracts and that deposits must relate to amounts required to pay the life insurance premium.

Mosten, says the firm is reviewing the decision, and is disappointed the court would permit governmental interference into a contract that was issued decades before the new regulations were passed.

Manulife says the legal matter did not have any material impact on the company's business, and shares of Manulife's stock rose more than one per cent on Wednesday.

Life Insurance & Loan Collateral

If you need to borrow money, using your life insurance as collateral could be a useful tool to help you secure funding. There are many different types of loans to choose from when large expenses arise, but they generally fall into two categories: secured and unsecured loans. While secured loans may carry advantages like better rates and a higher chance of getting approved, they come with one major stipulation: you will need to provide collateral. You could choose to use your vehicle or even your home as collateral, but doing so comes with a risk: if you cannot make the loan repayments, you could lose your car or house.

Life insurance may be a good choice for collateral, if your lender will accept it.

What is collateral assignment of life insurance - A collateral assignment of life insurance is a method of securing a loan by using a life insurance policy as collateral. If you pass away before the loan is repaid, the lender can collect the outstanding loan balance from the death benefit of your life insurance policy. Any remaining funds from the death benefit would then go to the policy’s designated beneficiary.

Why use life insurance as collateral - There are a few reasons why you might want to use life insurance as collateral for a loan. Here are just a few:

a: It can be affordable. Depending on your age, health, the type of policy and the value of the policy, life insurance costs vary. However, life insurance premiums may be less than what you would pay for an unsecured loan with higher interest rates.

b: Your personal property is safer. By using life insurance as collateral, you might be able to take out a secured loan without putting your home or vehicle at risk. If you pass away before the loan is repaid, the lender will use your life insurance policy’s death benefit to pay off the loan.

c: It may be attractive to lenders. Many lenders view life insurance as a good option for collateral, knowing that they will very likely have the money to pay off your loan in the event of your death.

Of course, there are also some situations in which a collateral assignment of life insurance is not the best option. Some people are unable to obtain affordable life insurance due to age or health complications. It can also be difficult to use an existing life insurance policy as collateral for a loan; a lender may require you to take out a new policy, specifically for the purpose of the collateral assignment.

Alternatives to life insurance as collateral - If you are considering a collateral assignment of life insurance, there are a few alternative funding options that might be worth exploring. Since many factors go into each option, working with a financial advisor may be the best way to find the ideal solution for your situation.

Unsecured loan - Depending on your situation, an unsecured loan may be more affordable than a secured loan with life insurance as collateral. This is more likely to be the case if you have good enough credit to qualify for a low interest rate without having to offer any type of collateral. There are many different types of unsecured loans, including credit cards and personal loans.

Cash value life insurance - Some life insurance policies accumulate cash value over time that you can use in different ways. If you have such a policy, you may be able to partially withdraw the cash value or take a loan against your cash value. There are implications to using the cash value in your life insurance policy, so be sure to discuss this solution with a life insurance agent before making a decision.

Home equity line of credit (HELOC) - A home equity line of credit, or HELOC, is a more flexible way to access funds than a standard secured loan. While HELOCs carry the downside of risking your home as collateral, you retain more control over the amount you borrow. Instead of receiving one lump sum, you will have access to a line of credit that you can withdraw from as needed. You will only have to pay interest on the actual amount borrowed.

Frequently asked questions - How do I take out a loan using a collateral assignment of life insurance? If you would like to take out a loan using life insurance as collateral, you should first first a lender willing to issue this type of loan. Once you have confirmed the lender’s requirements, you will have to decide whether you will use an existing life insurance policy (if the lender will allow it) or take out a new one.

If you take out a new policy, the application process is the same as applying for any other type of life insurance. After you have the policy, you will need to ask the insurance company for a collateral assignment form and fill out the paperwork noting your lender as an assignee. Generally, a lender will not be listed as a beneficiary. The beneficiary will be the person you would like to receive any leftover benefits not claimed by the lender.

What types of life insurance can I use as collateral for a loan - Any type of life insurance policy can be used to secure a loan. However, each lender will likely have different requirements. Make sure to discuss these requirements with your lender before purchasing life insurance with the intention to use it as collateral. If more than one option is available, you may want to compare the cost of premiums for each type of policy.

FWD - Stake In Asuransi BRI

FWD Group has completed its acquisition of a significant minority stake in PT Asuransi BRI Life, the insurance arm of Bank Rakyat Indonesia (BRI). Following the investment, BRI Life has entered into a long-term life insurance distribution agreement with BRI.

According to a statement by FWD, the investment and partnership will bring insurance to more customers in the highly underpenetrated, rapidly growing market of Indonesia. BRI Life will be able to leverage FWD’s digital infrastructure and expertise and help boost wider financial inclusion.

FWD also announced that BRI Life’s brand will remain unchanged and all existing customers’ policies will not be affected.

“This strategic investment is a clear signal of our confidence in, and commitment to, the Indonesian market where we see huge growth potential as one of Asia’s fastest-growing economies,” said Huynh Thanh Phong (pictured), FWD Group CEO. “We look forward to partnering with both BRI and BRI Life to deliver unique products and customer experiences that will change the way people feel about insurance in Indonesia.”

Established in 1895, BRI is a leading micro and consumer bank in Indonesia, leading the market in terms of total assets, loans, deposits and net profit. As of December 2020, it had more than 120 million customers.

Distributing Life Insurance Post Covid19

The COVID-19 pandemic is profoundly affecting how people engage with one another across industriexes and geographies. Physical distancing and other quarantine measures have shifted activities once considered critical to have in person to digital and remote channels. This change will affect insurance distribution—both in the near term, as physical distancing measures continue, and in the longer term. Indeed, society’s relationship with technology and remote interactions is continuously evolving and accelerating as we move toward the next normal. 

Many insurance companies have likely already taken steps to address short-term or immediate impacts of COVID-19—moving employees to a remote setup and expanding online customer service channels. Now, insurers are focused on the next set of challenges, including how to reimagine distribution in a more remote world. About half of the agents saw a more than 40 percent decrease in new business. 50 percent of agents cited remotely building new customer relationships as the biggest challenge during COVID-19.2 Online insurance aggregators and direct channels reported similar results. 

To address these challenges, insurers will need to rethink their distribution model across three dimensions: customers, sales force, and enablers (such as investment in data and digital tools). Doing so will empower them to prepare for the unpredictable.

How distribution is changing - Physical sales forces and intermediaries are responsible for the majority of insurance distribution across geographies and lines of business. While the share of business conducted via these channels has been shifting during the past decade as some customers migrate online, they remain the primary channels across life, commercial, and personal lines property and casualty. But continued physical distancing is having dramatic and immediate impacts on insurance distribution.

Shifting to digital tools - Agents accustomed to in-person interactions are rapidly recalibrating to provide uninterrupted service to clients who may be facing severe health or economic challenges. These agents are also rethinking how they build relationships with prospective clients as most rely on in-person meetings. About 90 percent of life insurance agents’ sales conversations and nearly 70 percent of their ongoing client conversations were conducted in person. During the pandemic - less than 5 percent of agents had any in-person conversations. Some 89 percent of respondents expect significant acceleration in digitization, and most also anticipate further shift in channel mix. The COVID-19 pandemic has increased customers’, agents’, and insurers’ desire for comfort around digital- and remote-interaction models and tools.

Moving toward self-service -  Client demand for self-service in the current environment has only accelerated the importance of digital. Digital access in insurance has increased since the pandemic began. But the level of customer satisfaction with digital delivery in insurance was the lowest compared with all other sectors. The number one reason for dissatisfaction was “hard-to-use tools.” Insurers will need to invest in expanding and improving self-service tools to better support customer and agent satisfaction. 

Transitioning offline processes online - Agents are currently navigating legacy products that sometimes require offline execution, such as physical signatures and medical underwriting. Most agents were dissatisfied with the level and function of signature capabilities at their primary carrier. Many customers, meanwhile, currently do not want to engage in a physical medical-underwriting process for fear of contagion. Insurers must then rapidly find ways of digitally underwriting the business—such as making better use of external data, relying on statements of good health, and adjusting fluidless thresholds to expand the number of customers who can forgo a physical medical exam—or risk losing it.

Changing distribution strategy in the near term - By now most insurance companies are thinking about how they should prepare during the near term to be ready for the next normal; many of these steps toward digital distribution are unprecedented. Their focus is mostly on digitally enabling sales forces and enhancing the use of data and analytics—especially for lead generation—to support customers.

Insurers can differentiate themselves in the evolving distribution landscape during the next several months by moving quickly to pilot, test, and learn rather than focus on multimonth strategy efforts; getting started is better than waiting for perfection. The goal is to return the business to scale fast, especially as knock-on effects of the virus become clear. Insurers should focus actions across three areas: customers, sales force, and enablers.

Take care of your customers - To understand how customer preferences have changed, insurers can use zero-based design to rethink existing processes, experiences, and products to be more appropriate for the next normal. This may mean simplifying products for remote sales; for example, traditional insurance products are too complex for digital sales (even with instructions). More broadly, understanding how to re-create the effectiveness of an in-person, advice-based relationship between successful agents and their customers in a virtual environment will be key. Insurers can look to advances in telemedicine—which have seen a dramatic uptick in recent weeks—with roughly half of their customers intending to continue using the service after the crisis subsides. Telemedicine tools (such as video for conducting appointments and photo- or screen-sharing) can help re-create complex, advice-based conversations virtually while also protecting consumer privacy and security.

Take care of your sales force - To prepare the sales force for the next phase, insurers can focus on three imperatives.

1: Launch a remote-only distribution force. Interest in remote distribution forces has increased in recent years and is even more relevant now. Remote sales forces have economic advantages from an insurance perspective: they generally allow agents to serve significantly more customers than traditional agents, resulting in lower commission costs per sale. Further, remote forces also allow insurance companies to own their sales messages more directly, enhancing their ability to respond cohesively in a crisis. Indeed, insurers can quickly update relevant scripts and talking points and more closely manage performance to ensure compliance. Insurance companies that have effective hybrid distribution forces may not need to worry about investing in a stand-alone remote sales force in the long term. By using internal sales desks and hybrid agents (that use both in-person and digital channels) or wholesalers, insurers that do not yet have remote or hybrid sales forces can transition remote capabilities to their skilled field sales teams that are likely more experienced in closing deals and building relationships.

2: Emphasize joining a team. While there is much discussion about teaming between insurers and agents, many agents have never worked with any team, despite evidence that agents in teams are significantly more productive. COVID-19 has showed the value of some system redundancy (that is, multiple agents able to access information on one client) to ensure continued operations should agents become sick. Furthermore, teaming brings together agents with different product expertise, which helps sales forces better serve diverse customer needs.

Insurance companies should ensure their commission system supports teaming by allowing split-commission payment or other incentives for joint work. Insurers also need to make sure different agents can access the same customer data and collaborate through customer-information-sharing tools. Finally, investing in virtual training on teaming best practices, sharing the findings with agents, or asking top agents who already work in teams to share their insights with others in their network can also help support this endeavor.

3: Expand distribution partnerships. As the current environment places an even greater pressure on making sales, now could be a good time to think about insurance marketing organizations or affinity relationships. Expanding distribution partnerships could help the sales force provide products to more customers in need while maintaining sales volume in a time of crisis. This approach becomes increasingly important as a virtual-agent model increases the pressure on agents to add value.

Invest in enablers - Investing in digital distribution now will have several important benefits for insurers, including increasing resilience through a potentially prolonged or multiwave crisis, responding quickly to current and future customer and agent demand, and increasing agent productivity. Agent appetite for digital tools has never been greater; Agents rated either agent digital tools or customer tools as the number one capability insurers can invest in to support them right now. Insurance companies can support agents in this area.

Another important enabler in distribution is data. Insurance companies typically have massive amounts of data locked in legacy systems or cabinets. Insurers should build capabilities to mine data so that they can identify and respond to customer trends, the more resilient their distribution mechanism will become. The value of data-driven lead generation has become increasingly clear in recent weeks as the typical in-person lead generation approaches (including in-person networking events and community events) of many agents are no longer an option. To tap into the value of their data, insurers can build advanced analytics models to identify lifetime value-based customer segments within their current portfolio. They can then build additional models for each segment to identify customers at risk of churning or lapsing as well as customers who might be candidates for cross-selling or upselling opportunities. The data can then be integrated into call lists to help agents (local or remote) focus their attention on the highest value leads. Insurers should also build a feedback mechanism to further refine the model building via qualitative input from agents as well as conversion data.

Agents said their biggest challenge right now was lead generation, but most agents unwilling to pay a percent of their gross income for quality leads. 

Planning for the longer term - Decide on the optimal go-forward channel mix. In-person agent forces will remain an important part of the distribution landscape in the years to come, especially in life and large commercial. But insurance companies need a setup that includes digital- and remote-sales-force options to serve customers who prefer digital or remote interactions. Having this flexible workforce increases resilience in the face of an unknown future. Setting up a remote agency can be done quickly through a pilot-test-and-learn approach, getting remote agents to interact with customers, and refining process based on feedback.

Be ready to make strategic M&A decisions to augment distribution - Fintechs and insurtechs are likely to be more open to conversations with insurers with large balance sheets because of the financial impact of the crisis. Insurance companies should proactively identify gaps in their distribution ecosystem as well as potential partnerships and acquisitions that could offer avenues to new customer types (such as digital natives), new product types (such as broader protection products), or new geographies.

Changing the distribution operating model will take time to implement, since it not only means employing new tools and assets but also requires substantial capability building that affects other parts of the value chain, such as products and claims. The distribution leaders that will lead in the next normal will be the ones beginning work on the longer-term imperatives today.