Sun Life Indonesia and CIMB Niaga

Sun Life Indonesia and CIMB Niaga have signed a new agreement expanding their current bancassurance partnership for an additional term of 15 years, starting January 2025.

The new agreement will also enable Sun Life to provide insurance solutions through all channels, combining Sun Life’s comprehensive range of policies with CIMB Niaga’s extensive distribution network of 427 branches across Indonesia. At present, Sun Life’s policies are offered through digital and out-of-branch channels.

This partnership will see Sun Life able to accelerate its long-term strategy for distribution growth through bancassurance. CIMB Niaga, meanwhile, will be able to enhance its value position by providing insurance solutions and addressing customer needs.

Life Insurance Corporation Of India - Lost Market Share

Life Insurance Corporation of India (LIC), which is getting set for its initial public offering (IPO), continues to lose its market share to private insurers such as SBI Life, HDFC Life, ICICI Prudential and Max Life.

The life insurance market in India is highly concentrated with the top five insurers accounting for 87% share in 2020. Although LIC continues to be the leading insurer, its market share has declined from 71.8% in 2016 to 64.2% in 2020. SBI life moved up from being third-largest insurer in 2016 to becoming the second-largest insurer in 2020. Similarly, HDFC Life became the third-largest insurer in 2020, moving up from the fourth position in 2016.

Except for LIC, all the top four life insurers have registered double-digit growth during 2016-20. The gross written premium of LIC grew at a CAGR of 7.6% during 2016-20, whereas SBI Life registered a growth of 24.4% followed by HDFC Life with 18.7%.

Distribution channels - LIC's sales growth has slowed down during the last few years due to its high dependence on the traditional agency-led distribution model. Whereas private insurers have a more diversified distribution network. In 2020, over 94% of LIC’s first-year premiums were generated through agents and insurance advisors, with banking and alternative channels such as corporate agents, brokers and insurance marketing firms (IMF) accounting for 3.4% and direct marketing at 2.2% share.

Bancassurance - However, private insurers that are mostly backed by banks have increasingly adopted the bancassurance channel, which has allowed them to increase sales by leveraging their existing customers. SBI Life generated 56% of its new business from the bancassurance channel followed by agencies with 17% share and other channels at 27%. Similarly, HDFC Life generated 61% share of new business from bancassurance followed by 19% from direct marketing, 13% from agencies, and 7% from brokers and others.

Digital - Additionally, digital initiatives of private insurers to enhance customer service have also provided them an edge over LIC. This includes the ease of onboarding customers and agents through digital solutions, real-time tracking of claims as well as virtual meetings with customers to resolve their queries.

LIC’s market share is expected to continue to decline due to its high dependence on traditional distribution channels and low technology investments as compared to private insurers.

E-Kasih Family Insurance Scheme

The government has agreed to prepare the Malaysian Family Insurance Scheme to provide social protection to the 268,000 families in the poor and hardcore poor categories. Heads of households registered in the eKasih system would get the insurance coverage, with a premium of RM50 a year, and involved a cost of RM13.4 million.

eKasih - In the event the head of household dies, the family will get RM10,000, permanent disability (RM10,000) and death due to accident (RM20,000). Pru-Takaful BSN, through its corporate social responsibility (CSR) since 2018, has provided free insurance coverage of RM30,000 for heads of households registered through eKasih.

Ping An Insurance Profit Fall 2021

Ping An Insurance Group Co of China Ltd., the country’s largest insurer, reported its biggest annual profit fall since 2008 as the country’s property market soured, but said it expected such investment losses to ease in future.

Ping An said net profit fell 29% to 101.6 billion yuan ($16 billion) in 2021, down from 143.1 billion yuan the previous year, as it recorded impairment losses totaling 43.2 billion yuan linked to investments in troubled China Fortune Land Development.

Property - The insurance group has been shaken in recent quarters by growing concerns about its investments in the highly indebted property sector, which has been hit by a string of developer defaults, credit rating downgrades and slump in shares and bonds.

Ping An’s property investments, as of end December, stood at 216 billion yuan, or 5.5% of its total insurance investment assets.

Ping An said it had a total exposure of 54 billion yuan to China Fortune last year. Some analysts cautioned that the total property exposure of Ping An is much higher and still underestimated by the market.

Premium income - from life insurance fell 4.1% year-on-year to 490.3 billion yuan, while property and casualty insurance premium income fell 5.5% to 270 billion yuan.

Ping An said in a filing that, besides the pandemic, another factor for drop in premium income was a fall in the number of Ping An sales agents, which also resulted in new business value of life and health insurance falling 23.6% to 37.9 billion yuan. 

Its army of insurance agents, once the jewel in Ping An’s crown, is set to shrink further, putting more pressure on sales.

Malaysia Life Insurance - 2021

Malaysia Life Insurance recorded an overall stronger performance with a double-digit growth of 12.4 per cent in its new business total premiums in 2021 compared to 2020. For the financial year ended December 2021 (FY21), the industry recorded RM12.8 billion in new business total premiums from RM11.4 billion in 2020. The stronger performance reflected the increase in awareness among the consumers on the importance of life insurance protection amid the Covid-19 pandemic.

The industry recorded a healthier performance, driven by the strong rebound of investment-linked policies which rose 31.2 per cent to reach RM6.6 billion in 2021, despite the challenging business environment due to the pandemic.

Group policies recorded a moderate growth of 7.7 per cent in new business total premiums to RM4.1 billion in 2021. Traditional policies charted a decline of 17.3 per cent during the year.

Overall new business sum assured increased to RM461.1 billion, registering a modest growth of 5.4 per cent from RM437.2 billion in 2020.

New business sum assured of investment- linked policies recorded a strong increase of 14.4 per cent from RM107.7 billion to RM123.2 billion in 2021, while group policies recorded an increase of 2.8 per cent and traditional policies, a slight dip of one per cent.

New policies issued in 2021 - recorded a strong growth of 53.5 per cent from 1.2 million policies in 2020 to 1.9 million policies in 2021. This was mainly due to traditional policies which charted a huge increase of 99.7 per cent to reach 1.2 million policies in 2021.

AJB Bumiputera Liquidity

The Ministry of Finance has highlighted the need for insurance supervisors and relevant stakeholders to take quick steps to resolve long-standing liquidity problems at the life insurance mutual, AJB Bumiputera 1912 (AJBB). If solutions cannot be found soon, the insurer's assets and the rights of policyholders will potentially be further eroded and the new funding for the insurer will be hampered.

Demutualization - AJBB's capital problem could be settled through demutualization. However, the demutualization option creates new issues, including the potential for low share ownership and a fall in the value of protection benefits for policyholders.

Demutualization option is challenging considering the stages and requirements that need to be met and whether there are still investors who will enter and inject capital. In addition, it is also necessary to ascertain whether the impact on the dilution of ownership and benefits to post-demutualization policyholders can be accepted by all parties.

Alternative solutions - Other options for the insurance mutual to improve its solvency level, include generating premium income from new policies, distributing losses to policyholders and existing members, improving reinsurance arrangements, or issuing surplus notes.

However, for AJBB, the first two options are considered quite difficult to adopt because of the insurer's financial condition and performance which continue to decline. Meanwhile, another option is to issue surplus notes. However, this is not easy to carry out, considering that it is relatively new and there is no related regulatory framework in Indonesia yet.

AJBB, with more than 6m policyholders most of whom are government employees, has been restructuring under the stewardship of Indonesia’s Financial Services Authority (OJK) since 2013. The insurer has also attempted to find a strategic investor, a move which is also unsuccessful so far.

Insurable Interest

Life insurance can provide valuable financial protection for your loved ones. But not just anyone can buy a life insurance policy on someone else. One important concept you’ll encounter when buying life insurance is “insurable interest.” 

What Is an Insurable Interest?
An insurable interest is an important and required component when someone is buying a life insurance policy. It means that a person would encounter financial hardship if the insured died. Without an insurable interest, a person cannot purchase a life insurance policy on another person. Additionally, you must have consent from someone before you purchase life insurance on them, even if you clearly have an insurable interest.

Immediate family members such as a spouse, children or even aging parents would usually automatically qualify since they may rely on you financially. However, someone outside of your family, such as a business partner, would need to show additional documentation and obtain your consent before purchasing a policy on you.

Examples of Insurable Interest
Two scenarios in which insurable interest can be established.

1. You and your spouse have young children and own a home. If either of you were to die, it could create financial hardship for the surviving spouse and children. Therefore, you both have an insurable interest in each other and can purchase life insurance for the other person.

2. You are a partner in a small business. Each business partner can purchase life insurance on the other so that they can fund the ongoing operation of the business if one partner dies.

Why Is Insurable Interest Important?
One of the main benefits of life insurance is to provide financial protection for survivors who may suffer if the insured dies. Insurance companies use insurable interest as their protection to prevent fraud and intentional illegal acts.

If this feature didn’t exist in an insurance policy, anyone could purchase a policy on someone else with ill intent. So, for example, a doctor could purchase insurance on a patient with a serious illness and be less inclined to treat them properly since they’d receive a large sum of money if they died.

How Insurers Prevent Insurable Interest from Being Abused
Insurance is designed to cover losses, not enrich beyond the actual loss itself. This is the principle behind the concept of indemnification, or compensation for harm or loss. It’s a fundamental difference between insurance and gambling.

That’s why rules dictate that a person can’t take out a life insurance policy on an acquaintance or stranger, as there is no financial impact from the insured’s death. If that were not the case, buying life insurance would be more like gambling and encourage fraud.

Life insurance companies have specific rules built into their policies that define insurable interest. Typically, the parties involved fill out a form and make an attestation that the facts are true. For large policies, there may need to be a notary or other legal representation verifying the information.

The general rule is that for certain insurable interests, the person being insured is required to provide consent and sign the insurance authorization form and provide identification. If there’s questionable insurable interest, the life insurance company will ask more questions and require additional documentation to determine the relationship. If the responses to the questions are not satisfactory to the insurance company, it will deny the policy.