Prudential Wins Lawsuit Against Former Agency Manager

Prudential Assurance Co Singapore won a lawsuit against its former top group agency manager Peter Tan Shou Yi in High Court on Wednesday, over the poaching of more than 220 agents for rival Aviva.

Compensation will be awarded when it has been assessed, but Mr Tan could appeal against the decision. Justice Chua Lee Ming found the 56-year-old liable for breach of his contractual obligation to conduct his insurance business with integrity and honesty. In mid-2016, Mr Tan orchestrated and executed the en masse migration of the agency leaders and agents from Prudential to Aviva Financial Advisers (AFA).

However, the judge held that of the 244 agency leaders and agents who left Prudential, Mr Tan was liable for the profits that the insurer could have earned for only 227 of them. The number comprised 23 leaders and 204 agents who had jumped ship to AFA because of Mr Tan's solicitation.

Justice Chua had directed the expert witness of Prudential to re-compute the insurer's loss of profits arising from the sales that the 227 departed leaders and agents would have made in about 21/2 months. The time frame was calculated based on when Mr Tan started talking to the leaders about moving to Aviva - in May 2016 - and the expiry of the notice period by the last batch of agents who quit.

In contrast, Prudential has sought compensation of between S$103 million and S$2.3 billion as a result of the en masse resignation of 244 agency leaders and agents, with the amount computed based on the duration of the business lost.

The insurer was represented by Rajah & Tann Singapore's Senior Counsel Murali Pillai and Luo Qinghui. The high-stakes case has thrown the spotlight on how competitive the insurance industry is, given that it came to light during the hearing that Mr Tan was dangled a S$15.3 million sign-on bonus by Aviva.

Defended by Senior Counsel Thio Shen Yi, the legally-trained Mr Tan rejected any liability. The judge found that the "non-solicitation" clause did not apply to Mr Tan after he left Prudential, because it was not present in his agency agreement. The court also ruled that he did not owe fiduciary duties to Prudential, as he was not entrusted with the management and control of the agents in his agency.

Mr Thio said his client left AFA and the insurance industry in March 2020, and is now doing business consultancy.

Malaysia Life Insurance Industry Update 2020

Malaysia’s life insurance sector recorded moderate single-digit growth in total in-force business in 2020, despite the challenging business landscape due to the Covid-19 pandemic. 

Life Insurance Association of Malaysia (LIAM) said - total in-force premiums increased 5.3 per cent year-on-year (y-o-y) to RM43.4 billion in 2020 from RM41.2 billion in 2019, while the total sum assured in force grew 4.3 per cent y-o-y to RM1.7 trillion in 2020 from RM1.6 trillion previously.

The total number of policies in force also recorded a marginal growth of 0.9 per cent to RM12.8 million units in 2020 from 12.7 million units in 2019. New business total premiums declined 3.2 per cent y-o-y to RM11.4 billion in 2020 against RM11.7 billion in 2019.

New business sum assured also slipped 7.2 per cent to RM437.2 billion in 2020 versus RM471.3 billion in 2019, and the number of new policies also shrank 7.1 per cent to 1.2 million units from 1.3 million units previously.

Total claims payout in 2020 declined 3.1 per cent y-o-y to RM11.6 billion from RM11.9 billion in 2019. Payment for disability and others recorded an increase of six per cent y-o-y and 13 per cent y-o-y, respectively. Payment for medical claims declined 8.7 per cent y-o-y to RM4.5 billion, accounting for 39 per cent of the total claims’ payout in 2020.

Payment for bonuses, which fell 4.2 per cent to RM3.5 billion, constituted 30 per cent of the total claims’ payout in 2020.

On the outlook for 2021, LIAM said the industry is very positive about its performance in the coming months with the resumption of more economic activities and the recovery path for the people and Malaysian economy following the National Immunisation Programme rollout.

AXA Hit By Ransomware

A subsidiary of French insurance giant Axa has been hit by a ransomware attack affecting operations in several Asian countries, the company said Sunday, confirming a Financial Times report.

Asia Assistance was recently the victim of a targeted ransomware attack which impacted its IT operations in Thailand, Malaysia, Hong Kong, and the Philippines. Certain data processed by Inter Partners Asia (IPA) in Thailand has been accessed, saying it would "notify and support all corporate clients and individuals impacted" but that there was no sign further data was touched.

Ransomware attacks, which use security flaws to encrypt systems and lock their owners out until a ransom is paid, have increased in recent months. One such attack hit US firm Colonial Pipeline last weekend, forcing the shutdown of its network shipping gasoline, diesel and aviation fuel across much of the eastern half of the United States and sparking fuel shortages and long lines at gas stations.

Ireland's government said Sunday its Department of Health had also been hit by a ransomware attack similar to one that struck its health service earlier in the week, which forced the authority to shut down computer systems.

Psychopath Bully In Office

Psychopathy in the general population is around 1 in 100. The chances that your Manager is a psychopath are pretty unlikely. But if you are working for someone who behaves in a bullying, combative, or otherwise toxic way, the impact on you can be devastating. So what can you do about it? Here are some suggestions that can help you cope with a bad boss.

1. Make the decision to stay or go - The first step in dealing with a toxic boss is to make a realistic decision about whether to stay or go. If you feel trapped, realistically evaluate how severely the situation is impacting you emotionally and mentally. If you decide to stay, it’s important to develop some coping mechanisms to limit the effect of their behavior on your mental well-being.

2. Do the work: Don't be a target - If you decide to stay, avoid being a target – or by extension, a victim. You might think that means keeping your head down and staying out of trouble (which can be necessary), but it can also mean just the opposite. Do your work – and do it well. Consider going as far as you can to help your boss succeed (but that doesn't mean you have to suck up to them). It will make you less of a target, and others will notice your professionalism despite poor leadership -and trust me, you won’t be the only one to notice that. Yes, you might help your boss appear better in the eyes of his/her superiors, and maybe they’ll even get promoted as a result. But if they get promoted away from you, that may not be such a bad thing.

3. Don't get drawn in - Toxic people love to pull you into their drama. Don’t fall for it. Stay a safe emotional distance away from them. Be polite, honest, and clear. Maintaining a safe emotional distance means that you are insulating yourself from them by not letting their negative behaviors or actions negatively impact you while you continue to work in a professional and functional way. They may find this frustrating at first, but by keeping things 'strictly professional,' it leaves them with little room to maneuver and get under your skin. Work to treat them as just another aspect of your workplace – no worse than the printer that constantly jams or the terrible coffee from the vending machine.

4. Don't gossip - To help keep your sanity intact, distance yourself from the source. That means seeing the toxic person as separate and distinct from you. You may not like or respect them, but don’t disparage them. Speaking positively of others – or at least resisting the temptation to speak negatively – is a strong demonstration of emotional intelligence. If you do need to vent, do it outside the workplace. If your colleagues are also being negatively affected, you can lend support by offering an understanding ear, but make sure any discussions don’t devolve into negativity or personal attacks. If you feel like there is a legitimate case for bullying, intimidation, or harassment, consider getting HR involved ... which brings us to my next point.

5. Keep detailed records - If you find yourself the target of inappropriate or abusive behavior, keep detailed, accurate records – and don’t embellish. There may come a point when you are asked to corroborate a complaint – either your own or someone else’s. Either way, your ability to make concrete, detailed references to your personal experiences will significantly support your case. Vague references, unsubstantiated anecdotes, hearsay, or third-party opinions do little to move a complaint forward. Proving a pattern of toxic behavior through verifiable documentation will strengthen your case. Without detailed and accurate records, you are unlikely to get very far.

6. Don't derail your career - The last thing you want to do, or allow to be done to you, is to have your career derailed. This means doing your job to the best of your ability, and not giving the toxic leader the means or reason to start making you a target. This might mean you have to bite your tongue. It may also mean you have to do work – or redo work – that you don’t think needs to be done. The secret here is to basically keep your head down, stay out of trouble, and wait the situation out. Speaking out against something like subjective standards of work, or a manager’s "style" of leadership are hard cases to make, and the actions taken against the dysfunctional manager are often minor or non-existent. Some employee come out on the losing end of that situation and end up as persona non grata as a result. In worst cases, promotions blocked and educational opportunities withheld or withdrawn. Take a long-term view here. As discussed in point No. 1, you must make a stay/go decision for yourself, and if you decide to stay, then you may have to put up with some questionable situations.

7. Remember, it's not forever - For many toxic leaders, the lure of more power, prestige, and control means that they move positions frequently, so you may not need to deal with the toxicity for long. While you wait them out, focus on developing your skills and your network so you can find a new position if necessary.

One final note: You're not alone if you're wondering why organizations tolerate toxic people in their leadership ranks. The problem is these types of dysfunctional leaders are often very adept at projecting a successful image upwards in the organization. The can be well-versed in political maneuvering, glossing over or blaming others for past mistakes, and manipulating people’s emotions.

During the hiring process, a charming and engaging candidate can easily pull the wool over the eyes of less than experienced hiring manager. By the time they are safely in the organization and past the probation period, its often too late to easily do anything about their behavior. Hopefully you never have to work for a manager like this, but if you do, hopefully these steps will help.

Covid19 Vaccination Does Not Invalidate Your Coverage

A fake document that was originally spotted by Allianz in Australia, and which has now also been circulated to clients in the UK. The fake policy document says: ‘If you consent to taking a Covid-19 vaccine your consent is ‘self-inflicted’, it was your choice to have the experimental medical procedure and therefore insurance will not cover any damage or death. All injuries for insurance must not be accidental and a treatment by consent is not an accident.’

As far as scams go - it shatters some people’s views of the safety of the Covid-19 jabs and place doubt onto insurance company’s promises that they will pay out. As far as insurance experts and insurers are concerned getting vaccinated by a qualified medical practitioner is not deemed a ‘self-inflicted’ or ‘experimental’ exercise and would still be covered.

The Covid-19 vaccine will not affect your life insurance cover. There has been a huge amount of speculation on social media, spreading the message that life insurance companies will not pay claims if a person dies within one year of receiving a Covid-19 vaccine, and that taking the vaccination will invalidate any life insurance policies.

The Association for Insurers has been clear to point out that having the Covid-19 vaccine won’t affect your cover. Although life insurance providers have started asking about an applicant’s history of coronavirus, none have made steps to exclude it as a claimable event, nor have they raised any issue around having or not having the vaccine.

Life insurers don't ask any questions about Covid-19 vaccinations, either as part of a new application or to their existing customers. Therefore, being vaccinated will not affect a current or new policy in any way. 

If you have had Covid-19 recently, you may find that an insurer asks you to apply after a period of time, in order to receive a decision - typically 30 days. However, this is only for a small number of people, and is usually in association with another underlying condition.

Life insurance policies very rarely include exclusions and there are none that involve non-payouts for pandemics or viruses. In fact, any death is a claimable event, which includes those for Covid-19.

Cash Value Is Not Guaranteed

If you’re shopping for a cash value life insurance policy such as investment-linked life insuranceor whole life insurance (endowment life insurance), buyer beware: The life insurance quote you get might be a lot lower than what you’ll actually have to pay. And what you must pay could dramatically increase over time.

How could this happen? Because life insurance quotes for cash value policies can be based on not only guaranteed projections in policy illustrations but also very optimistic non-guaranteed projections.

As it turns out, many quotes for all forms of universal life and whole life insurance are based on the non-guaranteed portions of policy illustrations (this does not apply to term life insurance, which has no cash value.)

Essentially, it’s a bait and switch: You think your life insurance quotes reflect what you’ll pay as long as you own the policy, but years later you could be hit with a need for unexpected, extra premiums. It does not make any sense to buy a policy with a low premium initially and have to pay more later?

What Is Cash Value Life Insurance - Life insurance typically is meant to provide protection for those who count on you financially. However cash value life insurance is also marketed by some agents as a retirement planning tool.

Permanent life insurance policies such as whole life, endowment and investment-linked policy have a cash value feature. When you pay premiums for permanent policy, your premium first goes toward the actual cost of insuring you, the insurer’s fees and operating expenses. Anything left over goes toward the cash value component of your policy.

The cash value typically earns interest and it grows tax-deferred. What makes cash value policies appealing for retirement planning purposes is that they can be a source of income in retirement if you take a withdrawal or loan from the cash value.

Agent Sales Pitch - In the hands of a savvy insurance agent, a cash value life insurance policy—particularly an investment-linked policy—can be made to look quite appealing. In a typical sales pitch, the agent might say it’s a great financial product to accumulate money for retirement and that it can participate in the upside of equities and never go down. The agent will point out the investment return on the cash value is guaranteed to never drop below 0%.

The advanced pitch, will involve arranging for a bank to lend you money to buy an even bigger policy (known as premium financing). The agent promises that the big policy will essentially pay for itself. The proposal relies on very optimistic assumptions that show the policy accumulating enough value to pay back the loan to the bank and still have hundreds of thousands of dollars available in your policy to take out tax-free in retirement. Using this sales strategy, policyowner supposedly won’t have to pay anything out of pocket for the policy.

How Cash Value Life Insurance Quotes Are Calculated - The premium you’ll pay for a cash value life insurance is a function of these three factors:
a: The cost of insurance
b: Expenses (policy fees, underwriting, administrative costs and agent's remunerations)
c: Interest, or rate of return on the cash value

Typically, 85% of the premium you pay goes toward the cost of insurance, with 15% going toward expenses. Interest earned on the cash value can offset those costs and reduce the premium you would have to pay. So the premium formula would look like this: Premium = cost of insurance plus expenses minus interest. The higher the interest rate, the lower the premium will be.

How the Quotes Can be Misleading - Most insurance laws allow agents to provide life insurance policy illustrations that show non-guaranteed elements as long as the corresponding guaranteed values of those elements are shown first. 

A policy illustration uses text and graphics to provide consumers with an example, based on certain assumptions, of how a policy’s costs and benefits may develop over time. These illustrated values must meet certain tests to ensure they are reasonable and supportable.

It’s common for agents to show projected returns on the cash value as high as allowable. That will make the premium supposedly needed to cover the cost of insurance and expenses look lower. This practice is most egregious with investment-linked life policies. Consumers are pitched a product that will supposedly earn a high interest rate and have a low premium. But when the high interest rate on the cash value fails to materialize, policyholders may have to shovel more premium into the policy in order to keep it in force—especially if they’ve already taken a loan or withdrawal that depleted the cash value.

To be clear, insurers must disclose any potential for increased premiums in the illustration. By showing the values based on guaranteed maximum charges and minimum credited interest rates for universal iife or based on $0 dividends for whole life, the risk of additional premiums down the road are disclosed since these values are the worst-case scenarios for the policyholder.

But if consumers don’t pay attention to guaranteed elements of the policy, meaning the worst-case scenario—and the policy doesn’t perform as well as they hoped—they’ll be in for a surprise when they get a notice from the insurance company that the interest rate that was calculated at the time of sale is now lower. “If it doesn’t work out, the client has to pay more. Often, it’s dramatically more, he says.

When indexed universal life purchases involve bank loans to buy big policies, the policy illustrations can look even brighter because of the leverage between the projected high rate of the policy accumulation and the lower bank loan rate. The fallout for consumers if those projections don’t pan out can be worse for consumers who took out loans to purchase their policies. They not only might lose the policy but also other collateral they pledged as part of the bank loan.

The return on the cash value might not be enough to cover the payments on the bank loan that’s being used to make premium payments. Without the necessary premium, the policy could lapse, and policy owners who borrowed against the cash value of their policy to make payments on their bank loans will end up with a potentially big tax bill—and a big bank loan to pay off.

How To Protect Yourself When Buying Life Insurance - To be clear, life insurance is a good product for protecting your family. Consumers just need to understand what it is they actually are buying with a cash value life insurance policy versus what they are being sold through potentially misleading illustrations.

The problem of life insurance quotes that are tied to non-guaranteed portions of policy illustrations does not apply to term life insurance, which does not have any cash value. And be especially cautious if your agent suggests you buy a larger policy by getting a bank loan to pay for it.

If you’re shopping for investment-linked life insurance, insist on getting the detailed expense pages. These pages, also called policy accounting pages, will show year by year what the insurance company will charge for the policy. Don’t compare hypothetical premiums. Focus on compare what company says it will charge. Rarely do companies charge less than what they say they will charge.

If you’re shopping for whole life insurance, ask for the “dividend interest crediting rate” used to calculate non-guaranteed values. Premiums are calculated based on the cost of insurance, expenses and the dividend interest rate credited to the policy.

There are companies that are calculating premiums based on 5% to 7% or so rate of return. This makes premiums appear lower than what they will actually be because a return that high is questionable. Whole life policies are required by regulation to invest cash values predominantly in high-grade bonds and government-backed mortgages that have historically earned only 5%, and that was before the current and persistent low-interest-rate environment, Flagg says. So question any projected interest rates that are higher than that.

Ask the life insurance agent for the worst-case scenario policy illustration—what would the premium be and what would happen if only the guaranteed rate of return is achieved rather than non-guaranteed rate. Understand what the downside is. It’s very easy to focus on the possible upside when you’re buying a policy.

Most importantly, keep in mind that, unless otherwise stated, a policy illustration is not a guarantee of future performance. It is meant to be a guide for consumers to help them find a policy that fits their unique needs. Consumers should read and thoroughly understand all material they receive about a policy before signing the policy contract.

So if you don’t understand what you’re being sold, ask questions. If you still don’t understand, you probably shouldn’t buy the policy. If you already own a cash value life insurance policy, you can ask your insurer for an in-force policy illustration. This will show you how your policy is actually performing.

Medical Premium Hike - FOMCA

The Federation of Malaysian Consumers Association (Fomca) has called on people with medical insurance policies to report any price hike in their premiums. Fomca president Datuk Dr Marimuthu Nadason urged consumers who have not been notified of price increases in their medical insurance to contact their agents and enquire if there is indeed any increase in their premiums.

"Fomca has been recently receiving many complaints from medical insurance policy holders of indiscriminate increases in the price of their premiums. We are concerned of how extensive this issue is and how many consumers have been affected by the price increase. Currently, with conditional lockdowns, many consumers have been severely affected, either through loss of jobs or reduction in incomes. This is certainly not the time to increase insurance premiums," he said in a statement today.

Marimuthu stressed that it was wrong and unacceptable for insurance companies to raise premiums to make excessive profits at a time when consumers were suffering. If many consumers come forward with similar complaints, he said, Fomca would launch a national campaign to urge Bank Negara Malaysia to stem the increase in medical premiums.

"As a responsible regulator, Bank Negara should have already pre-emptively directed insurance companies not to increase premiums at this point to protect consumers. Please provide the feedback to Fomca to enable us to know if you have been affected by the price increase of your medical insurance premium. We need the name of the insurance company, current annual insurance premium and new annual insurance premium."

The details can be emailed to insurance@fomca.org.my or via this online form.