Millennials & Selling Them Life Insurance

Millennials are a unique generation with a new approach to life,which includes the way they secure information, collect insights and make purchasing decisions. This is especially true when it comes to benefits and financial products — particularly life insurance.

In this underserved segment, only 16% own individual life insurance and about a third are likely to purchase it. In a market historically driven by the business of an older, wealthier clientele, today's financial advisers have a unique opportunity to provide policies to a generation that tweets, texts, blogs and looks online for key information and purchases to complement their lifestyle.

For decades, insurance companies cut their teeth selling products with lengthy underwriting and application processes, carving out a niche among old guard policy holders. Advisers must find a way to adapt to the shifting marketplace, reaching younger generations through new techniques, products and processes.

BREAKING THROUGH

Millennials are the nation's largest living generation, having surpassed the population of baby boomers. They comprise more than a quarter of the nation's population. Their expectations are driven largely by experiences with other industries and by the way they gather information, with an increasing reliance on mobile and online technology. Their preferences for working with financial institutions are no exception. Fifty-six percent of millennials would rather use an ATM, personal computer, telephone or mail than sit with a financial representative.

Millennials are uprooting the way our world does business, shaking up the status quo and steering the way many companies operate. And like most Americans, they are underinsured. While 41% of millennials agree they should put more money into life insurance, one in two say paying off short-term debt is more important at this stage of life.

New life insurance products and processes are putting advisers in a unique position to reframe their conversation with millennials — helping younger generations understand and appreciate the need for life insurance and how it can help to protect their assets and loved ones.

Today's options are more streamlined, varied and flexible, offering choice to a generation that values technology, simplicity and speed. Advancements in automation, delivery, underwriting and technology are helping advisers reach younger policy owners in a fraction of the time, providing them with an experience more consistent with their expectations. Insurers now are able to turn a policy around in just a few days.

Term products offer a fully electronic and efficient transaction process, from application to policy delivery. Possibilities for lab-free underwriting have also become a reality among an audience seeking a less invasive, faster and more simplified experience. And options with lower face amounts are providing millennials with attainable coverage at a time where they may be facing competing financial priorities.

PROGRESSIVE SUCCESS

The most progressive agents and agencies are getting into the game — turning to technology and alternative forms of communication to reach a younger client base. Those who are successful have shifted their way of thinking — finding value in the size of the market, and not necessarily the size of the sale. For a generation that thinks mostly about life rather than death, life insurance can be a challenging conversation. Agents are moving away from traditional industry terminology and centering their conversations on life, living benefits and value.

Advisers have found a way to tap into this younger audience and spark conversation surrounding a product that is anything but racy and errs on the side of practical. Building a business one case at a time, advisers are helping millennials leverage market innovations to find a policy right for them. With a toolbox at their disposal, success is attainable, and the early adopters stand to win. Automation, digitization, developing an online presence and fostering a multigenerational business are just some of the tools today's life insurance agents have used to find a sweet spot in this marketplace.

To adapt to the changing marketplace and growing presence of younger clientele seeking life insurance policies, today's advisers should resist the current, roll up their sleeves and get out their smart phones. Going down-market to find success can translate into a more lucrative, market-driven business — one that will help today's younger generations prepare for a more secure financial future.

Health & Medical Insurance

Chong Yow Fook wasn’t the only one who suffered when he fell ill and was diagnosed with Stage Three cancer at the age of 54.

As a result of his illness, family members have had to endure a different form of suffering – financial hardship.

Five years on, Chong’s younger sister and her husband are still struggling to find the money to take care of him as well as to foot the never-ending medical bills.

His brother-in-law, Yong Chee Chuan, 60, said the family had used over RM60,000 of whatever little EPF savings Chong had as an odd job worker, borrowed money and asked for donations for his surgery, chemotherapy and nasal pus removal procedures.

“All of it actually cost money we do not have. My wife and I are hawkers and prior to this, we were already struggling to survive.

“With him still needing nasal pus removal procedures and medication, I really have no idea what’s going to happen when the money from well-wishers dries up,” said Yong, noting that not all procedures and medication are provided by government hospitals or clinics.

The family’s situation is sadly, a common scenario in Malaysia. In fact, it is becoming more prevalent as the cost of healthcare continues to rise. It was reported by The Star earlier this month that Malaysians, a majority of whom do not have health or medical insurance, are at risk of financial ruin if nothing is done to address the country’s high rate of out-of-pocket payments for private-healthcare services.

According to Health Minister Datuk Seri Dr S. Subramaniam, Malaysians spend a total of RM45bil annually on healthcare expenditures, of which nearly RM36bil is paid with their own money or savings instead of some form of medical insurance.

Based on the estimates of international health organisations, any country with an out-of-pocket payment rate exceeding 15% to 20% has a higher risk of facing financial catastrophe.

Until the government figures out a solution to the problem, Yong said Malaysians only have two choices — to seek medical care at government healthcare facilities or get themselves insured. Because we could not afford private medical care, my brother-in-law had no choice but to wait for his turn to undergo surgery at a government hospital.

“Thank goodness, he was able to wait the six months but if he had medical insurance, then he wouldn’t have had to wait and we wouldn’t be in this situation right now,” he said. I think those who are at an eligible age and can afford it should not waste time in getting themselves insured.

“I’ve never been able to afford insurance coverage for myself or my children but after my brother-in-law’s case, I realize it’s only a small sacrifice to have to pay a hundred plus ringgit each month as compared to tens of thousands, sometimes hundreds of thousands, in medical bills when one becomes ill.

“I’ve advised my two children who are already working to get themselves insured. I also got one of my younger children a medical card but that’s all I can afford right now. As for myself, I just have to take care of myself and make sure I don’t get sick,” he added.

Security systems consultant Mohd Salman Ismail, 39, feels that most people will say they can always seek treatment at government hospitals if they cannot afford private healthcare. But when a life-threatening situation presents itself or if it involves our parents or children, we will most definitely head straight to a private facility because we want our loved ones to get treated fast. We don’t want them to feel discomfort or risk anything going wrong due to delay,” he said.

Mohd Salman added that he personally witnessed his friends getting into financial difficulty as a result of having to settle their own medical bills or for family members.I think while the old are unable to buy any insurance, most young and middle aged people probably believe they are not susceptible to major illnesses.

With that believe, many don’t feel the need to have insurance coverage. I was one of them until a close friend my age suffered a heart attack and required a bypass at the age of 36. His medical bill at a semi-private hospital came up to RM65,000 excluding follow up treatment and medication. And just recently, another friend of mine, two years my junior, was diagnosed with hypertension.

“Lucky for him, he is covered by insurance and he is working with a company that is generous enough to foot his high medicals bills.It’s fine if you are with a company like that but what if you’re stuck with a company that will kick you out any chance it gets because you’re critically ill and have become more of a burden than an asset,” said Mohd Salman.

With medical coverage from her employer as well as her husband’s company, 55-year-old Karen Goh feels she can delay in getting medical insurance to save money.

“My plan was to get myself a medical card a year prior to my retirement but then I had diabetes at the age of 46 and no insurance company will sell you a medical card after that. It’s a big regret because who knows what other illnesses I will get later on,” said Goh. Having opted for early retirement due to poor health, Goh now seeks treatment at government hospitals. 

“I think the outpatient care provided by our government clinics and hospitals is still quite satisfactory but it’s a long wait if one needs surgery, unless it’s an emergency,” Goh said. In hindsight, I’ve come to realize there are no guarantees that one will stay on with the same company until retirement. Also, not all companies pay for their employee’s hospitalization,” she added.

CIMB Sompo Tie-Up

CIMB Group Holdings Bhd will reap a revenue of RM1bil in the first five years of its 15-year tie-up with one of Japan’s largest bancassurance insurers, Sompo Japan Nipponkoa Holdings Inc.

Group chief executive Tengku Datuk Seri Zafrul Aziz said beyond the initial five years, the bank would share the “economic upside” of the partnership besides obtaining the regular commissions generated from the joint business. For the first five years, the uplift (revenue) to us is RM1bil ... Sompo will manufacture and use our branches to sell exclusively.

The revenue, which includes fees for the distribution network as well as sales, will start to be reflected in CIMB’s financial year ending Dec 31, 2017 results. Under the 15-year profit-sharing deal sealed early this month, CIMB will sell and distribute Sompo’s non-life insurance products across the markets of Malaysia, Indonesia, Thailand and Singapore. The banking group has more than 1,000 retail branches across the region.

While Sompo has a partnership with Berjaya Group Bhd to offer general insurance in Malaysia, the tie-up with CIMB was at the Sompo group level. CIMB is the first bank in the region to do this kind of partnership, where we try to sell non-life insurance in four countries at one go.

CIMB has started selling in Singapore already and will start in Indonesia by the end of the year. In Malaysia, it currently has an agreement with Allianz Malaysia Bhd that expires in 2017 after which CIMB will distribute Sompo products, while in Thailand the banking group will start selling Sompo in 2018. 

The income upside from the partnership comes with no incremental capital needs or charge and is in line with CIMB’s Target 2018 or T18 strategy, where the focus is on enhancing profitability whilst being conscious of capital deployment. 

CIMB has also boosted its capital base through its recent Sun Life Financial Inc deal, whereby it has agreed to sell its 51% stake in the Indonesian life-insurance venture for RM169mil. The bank will reap some RM140mil in net proceeds from this deal alone, allowing the country’s second-largest bank by asset size to bring forward its common equity Tier-1 or CET1 capital ratio target of 11% to this year instead of 2018.

Sompo, which has total assets of US$89.7bil and net written premiums of US$22.5bil, has identified bancassurance as one of its primary sales channels in the region. It was previously reported that besides Sompo, Munich-based Allianz SE and France’s Axa SA had also made bids for the bancassurance agreement.

MyEg - Fined For Unfair Competition

The Malaysia Competition Commission (MyCC) has fined MY E.G. Services Bhd (MyEG) RM2.272mil for abusing its dominant position in how it manages online foreign workers permit (PLKS) renewals.

In a statement on Friday, MyCC said by virtue of their shareholdings & directorships, MyEG and MY E.G. Commerce Sdn Bhd (MyEG Commerce) were a single economic unit as defined under the Competition Act 2010. (MyEG Commerce is 100% owned by MyEG.)

MyCC said it found that MyEG, together with MyEG Commerce, had infringed the Act by “abusing its dominant position in harming competition in the downstream market in which MyEG Commerce is participating as an insurance agent for online PLKS renewal applications.”

The competition authority said different conditions were imposed to equivalent transactions with its competitors to the extent that it had harmed competition in the downstream market for the sale of mandatory insurances.

The RM2.272mil financial penalty imposed on MyEG comprises a fine of RM307,200 for the infringement periods of Jan 5, 2015, to Jan 22, 2015, and May 2, 2015, to Oct 6, 2015, as well as a daily penalty of RM7,500 from Oct 7, 2015, to the date of MyCC’s decision (June 24).

The Commission also imposes several remedial actions on MyEG, for which non-compliance may lead to a higher daily penalty for the subsequent period of non-compliance.

These remedial actions include asking MyEG to cease and desist immediately from imposing different conditions to equivalent transactions in the processing of mandatory insurances for online PLKS renewal applications.

MyEG must also provide an efficient gateway for all its competitors in the market of sale of the mandatory insurances and allows the other competitors to compete at the same level within 60 days.

The company must also provide an undertaking in the form and manner acceptable to the Commission, to be fully compliant with the rules and regulations of General Insurance Association of Malaysia within 60 days.

400,000 Graduates Unemployed

The number of unemployed people who graduate from local public universities is set to rise further, an academician warned today. Not only would the unemployed figure from this group rise higher than the present 400,000, about 80 per cent of the jobless would be Bumiputera, according to Prof Ghauth Jasmon.

He estimated the figure at 600,000 in the next few years, if nothing was done to improve university education. The former Universiti Malaya vice-chancellor said the reality was that the private sector preferred hiring graduates from private universities and colleges.

The private sector needs graduates who speak and write English. Many public university graduates are hired by the Government and join the civil service. But the Government cannot hire everyone.

Every year about 200,000 graduate from institutions of higher learning in the country.He said despite the Government spending billions of ringgit on public universities, the demand for graduates from these universities remained low.

Ghauth, who was UM vice-chancellor from 2008 to 2013, said he had faced a lot of resistance from lecturers and students when he wanted to improve students’ soft skills, such as having extra English classes. The backlash to that was bad. There were demonstrations, encouraged by lecturers. They accused me of making Malay language as the second language. For the next one year, I had to continuously write to newspapers on the reasons for my move.

Bancassurance

Among all financial products, bancassurance perhaps comes closest to fitting Einstein's theory of insanity: Insurers have been conducting the same sorry experiment again and again, expecting different results.

Right now, it's Asia's turn to be gripped by madness as firms scramble to tie up multiyear contracts worth billions of dollars with the region's big banks. The lenders, as is only to be expected, are charging high fees for distributing insurance products, and pocketing huge upfront payments for exclusive arrangements.

That rent is often large enough to make paying insurance agents' commissions a cheaper proposition. Besides, banks take a hit in the long run when they're unable to resolve the conflict between a long-term business like insurance and the here-and-now focus of lending and deposit taking. The cautionary tale of ING, which was forced to split the two businesses in Europe in exchange for a 2009 taxpayer-funded bailout, should have damped enthusiasm.But who exactly benefits? Bancassurance isn't a big source of "value creation" for insurers themselves because, as McKinsey director Vivek Agrawal notes, apart from selling lower-margin products through this channel, "the banks own the customer relationship and claim a big share of economic rent."

There aren't any banking-plus-insurance empires of similar heft in Asia, but the partnership obsession hasn't moderated.

If anything, the craze for deals is starting to resemble a frenzy. Earlier this month, Japanese insurer Sompo agreed to sell its non-life products in Southeast Asia via Malaysia's CIMB Group, and Canada's Fairfax Financial Holdings is close to buying control of PT Paninvest's non-life unit. Standard Chartered is also said to be planning a second insurance tie-up in addition to its agreement with Prudential.

These transactions don't come cheap. Manulife's 15-year contract struck with DBS in April last year cost $1.2 billion, while Prudential is paying Standard Chartered $1.25 billion to distribute its insurance offering.

As to why banks in Asia are salivating over extra income, look no further than the steady erosion in their net margins from core lending. The longer global interest rates stay low, the more other sources of revenue, like bancassurance, look increasingly attractive.

In Europe, about 55 percent of insurance is sold through banks, according to Bernstein. Bancassurance has a similar market share in Hong Kong, the logic being that tying up with a lender gives scale that would otherwise take years to build. And in Asia, insurance penetration is so low that having access to a bank's ready customer base is a double plus.

In China, bancassurance accounts for about 30 percent of all new policies sold, according

to Bloomberg Intelligence's Steven Lam, but instead of offering longer-term, protection-focused

plans that have higher margins, banks are typically selling low-cost, savings-type policies. Products

sold through lenders in the nation represented just 10 percent of insurers' new business by value

last year, an indication of future profits.

It's curious, then, that bancassurance, which never took off in the U.S., is so popular in Asia. Siam Commercial Bank is looking to offload a stake in its life-insurance unit -- and might throw in rights to sell products via its bank branches -- in a deal Bloomberg News said could value the business at $3 billion. Reuters has reported that both AIA and Prudential may be interested. That amount is equivalent to 4.5 times book value, according to Bernstein, hefty even for Thailand where the growth potential is large.

But like Einstein's lunatic, bancassurance has always had irrationality stamped all over it.

Binary Business Scam

A scam is a dishonest representation, meant to trick someone. What makes binary options a scam is that it presents itself as an investment method, while it is nothing short of gambling with bad odds.

The simplicity of binary options is part of its attraction. Binary means “two” and refers to the fact that you only have to make a single decision about one of two outcomes. You decide on whether you think a certain asset will rise or fall in the future. 

The size of the movement does not matter. If you are wrong, you lose the money you have “invested”. If you are right, you will get a pay out of between 65%-85% of the “invested amount”. Note this is already unfair as you stand to lose 100%, but you can never win 100%. Some brokers will give you a small percentage – 5% to 15% – back, in case you lose, but they compensate this by giving you less when you win.

It is easy to see how all the human weaknesses – greed, jealousy, overconfidence in your own trading ability and knowledge plus the underestimation of risk – come into play when you see the unwanted ads for binary options pop up on your screen. 

They scream at you: “no knowledge required!”, “Make money from your own home”, “Start earning thousands of ringgits in a few hours”. Then, the fake testimonies from paid actors start to play. It’s the latest ‘get rich quick’ scheme. It’s too good to be true, literally.

You don’t need to be Einstein to realise this is a scam. If it would work as advertised, everybody would do it. Regrettably, it is always the financially illiterate people that end up being the victim and become even poorer as a result, while the brokers are the only ones who profit.