Friday, August 31, 2012

Agency Leader - No Business Asset

NOT EMPLOYEE
Life insurance agent (Unit Manager and Agency Manager) are representative of life insurer. This is clearly defined in the life insurance agent (and agency) agreement between life insurer and agent (Unit Manager & Agency Manager). Life insurance agents are representative of life insurer (principal).

BUSINESSMAN
Life insurer prefers to classified life insurance agents as businessman. The most common tagline when recriting new agent is, "Businessman - your income is unlimited, flexible time and you are your own Boss". Is life insurance agent a businessman???

OWNER OF HOTEL
I know of an entrepreneur that owns a chain of hotels. As a businessman (owner of hotels) - he have 2 main source of income from hotels. The first main income is from renting hotel rooms to customers. This is business revenue. The second main income is derived from capital appreciation of his hotel buildings and land. Business Assets are much more valuable than Business Revenues.

BUSINESS ASSETS
Buildings and lands purchased over a period of time appreciate significantly in value. A Businessman have the following options on his own business assets
1: Hire CEO (Managers) to manage the chain of hotels
2: Appoint his Children to manage the chain of hotels
3: Sell his chain of hotels

LIFE INSURANCE AGENCY MEMBERS
Life insurance agency members are perceived by life insurers to be "businessman". As a businessman - the first main income are commissions & overridings. Business Assets of the Life insurance agency members would consist of his policyholders, agents, unit managers and agency managers. However, in the event an agency manager  - passed away, suffers total & permanent disability or suffers critical illnesses - he is not able to do the followings:-
1: Hire CEO (Managers) to manage his agency
2: Appoint his Children to manage his agency
3: Sell his agency

CREATING BUSINESS ASSETS IN LIFE INSURANCE AGENCY
Creating Business Assets in Life Insurance Agency is not impossible. Such agency model have long been operating in developed countries like USA and Europe. Even developing countries like India and China offer similar opportunity. Fortunately, there is a growing awareness plus a minority of Malaysian agency members migrating to an alternative agency model that offers them an opportunity to build Business Assets in addition to Business Revenues.

BUSINESS MOTIVATION
Take 2 scenarios. If our Government were to offer Ahmad and Ali a piece of land each. Ahmad is awarded a TOL (Temporary Occupation Land) over 30 years. Ahmad has to return this TOL to the government at the end of the term. Ali is awarded a permanent freehold land.

Ahmad will develop his land based on the presumptions that it is temporary. He will probably invest the minimum ie planting cash crop like water-melon, sugar-cane, banana etc. This is similar to our existing traditional agency model where agency leaders are not able to build up his/her Business Assets thus discouraged him/her from building a long-term permanent business.

Ali will probably invest his resources on a more permanent basis like building, factory etc. Agency Leaders - must evolve to attract talented entrepreneurs to join our business. Offer talented Entrepreneurs the opportunity to develop and own his/her own permanent land - ie Business Assets.

Agent Earn Less Than RM20K A Year

Figures show that 65% of insurance agents earn below RM20,000 per year. “We often think that insurance agents make big money. But their remuneration is below the average wage of a Malaysians which is RM33,000 per year,” said Deputy Finance Minister Datuk Donald Lim Siang Chai, quoting figures from the Life Insurance Association of Malaysia.

Meanwhile, the National Association of Malaysian Life Insurance Fieldforce and Advisers (Namlifa) called on Bank Negara to review outdated cost guidelines regulating life insurance agents.
Sethu said there 83,174 insurance agents in Malaysia.

Its president Sethu Karuppan pointed out commission rates have been capped since 1996. “The Operating Cost Control (OCC) guidelines which were introduced in 1996 for the benefit of policy holders, does not match inflation rates,” he said.

He also called for a review of the replacement of policy (ROP). “When policy holders want to exchange their old policies for new ones, agents will incur a penalty if there are too many requests for ROP. “The reasoning behind this was to prevent bad agents from tricking clients into buying new policies. said Sethu. He said Namlifa wanted the ROP to be reviewed so that agents were not penalised when a client wanted to change to a new policy.

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Most people will avoid this career that does not offer fixed regular income. The existing life insurance agency structure, compensation and distribution philosophy has not changed in tandem with market changes. Higher Commission or ROP will not help improve agent's income.

Agency Members of the life insurance industry must think and act outside the box to improve their income.

A few factors to consider :- 

Market Segmentation
The life insurance penetration for Malaysia is approximately 40%. But Bumiputera (Malay Muslim life insurance penetration is less than 10%). More than 60% of Malaysian are Bumiputera. Statistically, the life insurance penetration for non-Bumiputera is almost 100%.
Bumiputra market - especially young Bumiputera - offers huge potential for life insurance agents.

Product Differentiation
Life insurance agents must now diversifiy to offer life insurance products that meet the needs of Malay Muslim - namely takaful products and young Bumiputra needs. Sales methodology need to be modified to suit Malay Muslim culture and philosophy.

Distribution
We must recruit and develop Malay Muslim Distributor to distribute Takaful products to Malay Muslim market. Our distribution must be designed to compliment Malay Muslim's natural strength in networking and teamworking. In addition, our distribution channel must have the width and breath to penetrate deep inside the Malay heartland.

Compensation
Our Distribution Channel Structure and Compensation need to reward group effort (as compared to individual effort in the current traditional agency structure). In addition, our distribution structure must offer our Malay Distributor the opportunity to build permanent Business Asset (as compared to existing compensation formula focussing exclusively on revenue - commission & overridings).

Business Expansion
Our Malay Muslim entrepreneur have the talent and potential to expand this distribution business aggressively. Distribution system must be transformed - breaking down processes to simple and manageable step-by-step actions. We can then offer Business Franchise to potential entrepreneurs plus expand our business (logistically). 

Old actions will continue to get old results. Life insurance agents must change its business paradigm, structure, compensation and distribution to forge ahead. We can then subsequently attract (not recruit) the best and talented entrepreneurs to join our business / industry. Failing which, we will continue to scrap the bottom of the barrel and recruit rejects.

MicroTakaful

There has been a very clear recognition over the last decade that microinsurance, including microtakaful, is an important tool in supporting sustainable poverty alleviation in the poorer areas of the world. The growth of this sector has resulted in almost 500 million people now having some form of insurance cover today where previously they would not.

Microtakaful essentially has the same technical apparatus as Takaful insurance but it focusing on providing people at the base of the economic pyramid. Islamic microfinance and microtakaful exist to empower people to find a way out of poverty and give them a real hope of being financially self-sufficient.

The Potential for MicroTakaful – Levels of poverty in Muslim communities
On a global level, it should be noted that of the 41 lowest human development countries, 20 have a majority Muslim population and a further nine have a Muslim population over 20%. Of the one billion people living in the low developing countries, 54% are Muslims.

Microtakaful in practice
There are a few pioneering takaful operators that have entered into the low-income microtakaful market. Most notable are those providers in countries where almost all the population is Muslim, poverty is rife and the takaful sector is already established.

Prime Islamic Life of Bangladesh recently launched a group microtakaful product in addition to its existing three individual savings linked products. The product is unique in that it offers double the sum assured on death, contributes towards funeral costs and provides a monthly income to a nominee.

In Sudan, Shiekan Insurance and Reinsurance Co Ltd is working with the Central Bank of Sudan and the United Nations Development Plan (UNDP) to provide low-income farmers with affordable insurance coverage.

Amana Takaful of Sri Lanka has a partnership with Muslim Aid’s microfinance programme to provide affordable coverage for credit life, hospitalisation and medical charges. This is in addition to the companies’ death and disability cover for low-income earners with premiums as low as 0.20 USD per month.

15% Rebate From Takaful Malaysia

 

takaful
 
SYARIKAT Takaful Malaysia Bhd has continued to fulfill its unique promise of a “No Claim Rebate” payment with its latest amounting at RM350,990 to Lembaga Tabung Haji.

Takaful Malaysia is the only takaful operator in the country offering such unique benefit, where 15% of the premiums paid to all of the company’s general takaful products are refunded — provided no claims were made within the period of coverage. Takaful Malaysia has been steadily paying out an average of 15% “No Claim Rebate” since the late 1980s.

On average, RM20 million cash rebates are paid every year and have benefitted not only individuals but also more than 5,000 multinational corporations and small and medium enterprises.

Tabung Haji has been a loyal corporate participant with Takaful Malaysia since 1987 and as such, has been enjoying this benefit since the beginning, she added. The cash rebate to Tabung Haji was for three product coverages namely fire and allied perils, group term family and private car fleet.

Takaful - In Pakistan

Takaful Rules, 2012 would make Pakistan the second country after Indonesia to officially allow takaful windows, which enable firms to offer Shariah-compliant and conventional products side by side, provided client money is segregated
 
After a long spell of public silence over the recently introduced rules for Islamic insurance, or Takaful, in Pakistan, one of the five Takaful companies has finally gone public in its criticism of the policy revision that will allow conventional insurance companies to set up parallel windows for Islamic insurance operations.
 
In an interview with The Express Tribune, Pak-Qatar Family and General Takaful Senior Manager Syed Adnan Hasan said that the establishment of Islamic insurance windows by conventional insurance companies will ‘crush’ the business of existing Takaful operators.

All Takaful companies had boycotted the ceremony held in July where the Securities and Exchange Commission of Pakistan (SECP) Chairman Muhammad Ali officially announced the promulgation of the Takaful Rules, 2012.

While Takaful companies refused to speak to the media on this issue, they went to court against the revised rules which, they claimed, would distort the Takaful businesses in Pakistan by letting conventional insurance companies conduct it in a manner “against the principles of Shariah.” Subsequently, on August 2, the Sindh High Court restrained the SECP from implementing the new rules.

“Insurance companies, by using their existing corporate structure and branch network for Takaful windows, will actually crush current Takaful operators,” Hasan said. He added that the prospective new entrants will take undue advantage of the low cost of entry in the wake of the new laws by setting up Takaful windows. “It is like letting somebody join a race just a few steps away from the finishing line.”

The Takaful Rules, 2005, which governed the Islamic insurance sector in Pakistan before the promulgation of the new rules, did not allow conventional insurance companies to sell Takaful products. Currently, there are two family Takaful and three general Takaful companies in Pakistan. As for the conventional insurance sector, seven life insurance and 30 non-life insurance companies are operating in Pakistan.

Takaful operators collected Rs3.3 billion in gross premiums in 2011, which is equal to 2.8% of the gross premiums of Rs119.7 billion that conventional insurance firms received in the same period.
“The growth rate of Takaful is good. However, we still have a long way to go. In a country with the insurance penetration of 0.4% of the gross domestic product (GDP) after 65 years of its birth, a lot still remains to be done. We have little tendency to save,” he said.

Premiums of Takaful companies grew at an average of 91.6% year-on year between 2006 and 2011. In contrast, the average annual growth rate of conventional insurance companies over the same period was a modest 16.5%.

“Conventional insurers must set up full-fledge Takaful entities (as subsidiaries) while satisfying the minimum paid-up capital requirement to be decided by the SECP,” Hasan said. He added that all the other requirements that existing Takaful players had to meet must be satisfied by any new player entering the Takaful segment. “No shortcuts should be allowed.”

In an interview with The Express Tribune last month, State Life Insurance Corporation of Pakistan Chairman Shahid Aziz Siddiqi had indicated that his company – which is the largest player in life insurance in the country with over Rs293 billion in total assets by the end of 2011 – was likely to launch Islamic insurance products by setting up a Takaful window within a year.

“Those who are called ‘giants’ may be so, but in their own industry, which is conventional insurance. Only time will tell who the giant in the Takaful segment is,” Hasan said in an apparent reference to State Life’s plans to enter the Islamic insurance segment.

“Their commitment will simply be with those products/businesses which seem profitable, irrespective of whether they are Shariah-complaint or not,” he said

Takaful - Small In Scale To Indonesia

Zurich Financial Group Ltd (Zurich), Switzerland’s biggest insurer, has not ruled out venturing into the takaful business in Malaysia. However, it is rather unlikely to expect Bank Negara Malaysia to issue new takaful licence after giving out new licences to four new players in 2009.  There maybe opportunities when the takaful industry adopts the Risk Based Capital framework in 2014. By then, takaful operators that do not meet the minimum capital requirement would either have to inject more capital or consolidate.

Malaysia’s contribution to the global takaful industry is expected to increase to US$2.4 billion (RM7.4 billion) this year from US$1.4 billion (RM4.3 billion) in 2011, according to Ernst and Young. Takaful business in Malaysia is still small in terms of scales compared with Indonesia.

Malaysia’s contribution to the global takaful industry is expected to increase to US$2.4 billion this year from US$1.4 billion in 2011. Although Malaysia’s takaful market is growing at 20-25 per cent annually, it still has plenty of room to grow as the penetration rate is still low, at about 11 per cent.

Sunday, August 26, 2012

I Think, I Want & I Get

Get 20 people in a room to write out their five goals in life, and you can be guaranteed somewhere on each and every list would be health, wealth and happiness. A few might add a slim figure, a date with Jennifer Lopez and a lifetime’s supply of money most of us crave personal success and security. All it takes is the right mindset and these goals are achievable.

Let’s think about what we mean by the term ‘right mindset’ for a moment. By this I suppose we mean the right way of thinking, i.e. positive thinking. But don’t you just hate it when people blab on about positive thinking this, positive thinking that, like all you have to do is whistle a happy tune, imagine you’re 10kgs lighter and…..think positively !

If it was that easy we’d all walk around with perpetual smiles on our face, wondering how we’re going to spend that two million dollars in our Swiss bank account (and that’s US dollar by the way, not Malaysian ringgit) now that we’ve just been promoted to managing director of Apple.

Positive thinking ain’t easy! Especially when the husband wants a divorce, you just bought shares in Swissair and your nice little house has just been repossessed. And even if you aren’t that misfortunate it’s still a tall order to think positively.

There are too many barriers, distractions, woes and worries. So how do we get thinking positively?
The trick is to manipulate the mind. The mind must be conquered because it is the mind that dominates all aspects of your life. It is the mind that convinces you of what you can and can’t do.

Change begins in the mind – not through advertising, not through nagging, not through peer pressure, not through physical exercise but in the mind.

To understand how change can come about we need to understand how the mind works – both consciously and subconsciously. The conscious mind is your communication centre. It thinks, calculates, plans and directs all the actions of your body and everything you do that you are consciously aware of - what you say, what you choose to eat, whether you support Manchester United or Classic Wanderers (who?) and yes, the decision to read this article is controlled by your conscious mind. These are actions that you are consciously controlling.

The subconscious mind on the other hand doesn’t think, plan or calculate. It just takes in everything we learn and experience in our lifetime. It soaks up information and experiences like a wet sponge.
It stores and recalls every piece of information put into it. It doesn’t make choices; it accepts everything – it doesn’t sift through what’s good and what’s bad. It doesn’t make judgments or decisions. It doesn’t work in a rational or logical way. It does, however, begins forming beliefs based on what we have learnt and experienced – and these beliefs determine how we react to everything in our life.

Responsiveness to ideasThe conscious mind takes up approximately 10% of your total mind, while the subconscious mind makes up the other 90%. What this means is that when you make a decision (a task that is done by the conscious mind) to make changes in your life, that decision is being made by only 10% of the total mind.

The subconscious mind is unaware that a new behaviour is being introduced and lacks the capacity to support it. In some cases, the subconscious mind may not have access to the information that would support the new behaviour. For instance, all smokers were once non-smokers. However, just like a computer may retrieve only certain files or may find some files outdated, the subconscious mind may have access to the information that promotes smoking behaviours and may find the non-smoking behaviors “out-of-date.” Our mindset is formed.

The bottom line is that if we are unhappy with something in our lives, we must do something that will change the beliefs in our subconscious mind. Hypnosis is probably the most effective way of reprogramming your subconscious mind.

I’m simply talking about an increased responsiveness to ideas and suggestions. In fact hypnosis is a natural state for all humans. You’ve been in a trance state many times. You have entered hypnosis whilst day-dreaming, whilst driving (especially true of some Malaysian drivers!) or when watching TV. We’ve all said ‘sorry, I was not focusing on what you said’ – and indeed you were. Your conscious mind was temporarily shut down.

There are many misconceptions about hypnosis, all of them wrong. Contrary to what you may have heard it is absolutely safe, you do remain in complete control, you will never be persuaded to do anything against your will, you can still hear and feel the world around you – and you can come out of it at any time you want to.

You’re not in a coma, you don’t become paralyzed – you are simply in a state of hyper-relaxation and suggestibility.

So how can it help and who does it? Hypnosis has the power to speak directly to your subconscious mind. Through suggestions new and positive data and information can be planted into your subconscious mind.

With time hypnosis overrides negative beliefs stored up over the years. It can change the way you feel about yourself, transform your habits and behaviour, reduce stress, control pain, eliminate fear and convince you of the need to lose weight. This way, as your conscious mind chooses to make the change, your subconscious mind will now be supporting it and so the change becomes more achievable.

A form of therapyAnd just who is going to make these suggestions? The answer is you, either with a little help from a hypnotherapist or on your own through self – hypnosis.

Every day, without realizing it, you give yourself suggestions. Some may be negative ones. “Oh, what’s the point I’ll never pass the test“ As easily as our mind believes the negative suggestions, it will also fall for the positive ones. “I just love going to the gym“

Induce a relaxed enough state and you can convince yourself of almost anything. The hypnotherapist can help induce this relaxed state either in therapy or by teaching you self-hypnosis.

He or she can also help you get to the root cause of the problem. Once under hypnosis the root cause can be eliminated and behaviour changed through guided imagery, positive mental images and direct suggestions.

Here’s one – picture a slim, healthy, non-smoking, confidence oozing, spider loving you. Now I suggest you hunt out Julian Leicester the hypnotherapist.

Hypnosis is an effective form of therapy. It does not use drugs or pills and is direct and swift and therefore cost effective.

It has been widely practiced in the US and Europe for many years and today is a highly sought after therapy by many Malaysians.

Julian is a London trained subconscious specialist with Hypno-Station. He is Malaysia’s most renowned clinical hypnotherapist, media personality, columnist, event host and book author.