STEPS TO ENHANCE LIFE INSURANCE

Breaking News : submit your article and journals to us if you wish to join as journalist! Contact us @ klsetechanalyst@gmail.com for detail information

Bank Negara Malaysia’s (BNM) release of its life insurance concept paper to promote a diversified delivery channel, such as online and walk-in has been seen as something new, but it has to be pointed out that two local insurance firms already offer life insurance products online. Hong Leong Assurance (HLA) launched hlatouch.my, an online insurance platform to buy life insurance. This was the first online life insurance portal in Malaysia allowing customers to read and understand the benefits of the plan. Besides, AXA Affin Life Insurance launched the AXA 100 Cancer Care project, in collaboration with the National Cancer Society Malaysia. This marks the first and only online portal in Malaysia that allows people to sign up for a plan aiming to provide support and care for critical illness patients, especially patients diagnosed with cancer.

Aimed at giving insurance and takaful operators greater operational flexibility, the concept paper proposes the removal of limits on agents’ commissions, which are currently regulated by Bank Negara. Industry experts commend this, saying that the move would propel the industry forward, as sophisticated products should come with higher commissions instead of standardised rates. While it is just a concept paper that hasn’t been finalised, Bank Negara aims to promote greater development and innovation in the industry by allowing players to have more flexibility in structuring and marketing their products. This will stir up competition, as each operator will be able to determine its own commission structure, depending on its business strategy and cost overheads.” The concept paper also suggests a change in the minimum allocation rate, whereby a percentage of the policyholder’s or takaful participant’s contribution is apportioned to his or her unit fund before charges are deducted for operating expenses.

According to the concept note, this is “for the benefit of empowering consumers who prefer to manage their insurance needs on their own, life insurers and family takaful operators must make available similar pure protection products via direct channel and are commission-free, before the limits on commission for these products can be removed”. So, is whether insurance or takaful operators will charge lower or higher agent commission rates if the limits are removed and a minimum allocation rate is implemented? This will depend on the insurance operators, as they will have the flexibility to structure the pricing in whatever way they want. “This means that if you pay [the operator] a premium of RM1,000 in your first year, they must give you back RM700 for your investment account. How they split the remaining RM300, between paying their agents and covering management expenses, is up to them. If they want to pay [agents] more, it will be at their expense, but at least the consumer’s portion is protected.

BNM had laid out several initiatives with the aim of achieving a higher insurance and takaful penetration rate of 75%, against 54% in 2012, based on the target set under the Economic Transformation Programme while also ensuring consumers continue to receive proper advice. In one of its initiatives for diversified distribution channels to widen outreach, BNM stated that this will enhance options available to consumers to access their life insurance and family takaful needs in a way most convenient to them and promote healthy competition in the market. An online product aggregator can serve as a convenient reference point for consumers. It would be run by a third party with a financial adviser’s licence, so consumers can compare and buy products online. This will help consumers make comparisons and a more informed decision. Buying from a bancassurance channel is also different, as they are a bank-backed panel that gets paid for distribution rights. Financial advisers aren’t tied to anyone. This will be a win-win situation for insurance or takaful operators and financial advisers, because operators won’t have to spend as much on their agency force any more. If the adviser doesn’t do a good job, consumers can complain and the financial adviser can have his licence suspended. Bank Negara has wanted to professionalise the agency channel for many years now, but that has been tough. At least with financial advisers, they are regulated by the central bank