Meeting The Demand For Professional Advice - The Edge Financial Daily

THE INSURANCE - industry may have grown tremendously over the years, but there is still room for improvement in a number of areas, says Gibraltar BSN Life Bhd CEO Vincent Kwo.

One of these areas is the quality of professional advice given by intermediaries, such as insurance agents, notes the industry veteran of 31 years. “There is still not enough professional advice given in Malaysia. There are a lot of agents selling products, but few are giving proper advice and providing needs-based selling,” he says. 

“Rather than serving customers off-the-shelf, ‘one-size-fits-all’ insurance products, [they should] provide tailored coverage that suits the individual needs of the customer. [Consumers want] someone who will sit down and talk about their wealth protection, who can structure particular products with them and who can go on that journey with them. 

“[Owing to the gap in supply and demand,] many high net worth individuals (HNWIs) tend to engage the services of financial advisers in Singapore.” 

The demand for more holistic advice stems in part from the growth of the middle-class population over the past few decades, which has resulted in a larger pool of educated consumers. This includes the younger generation, who are more aware about insurance as a bedrock for wealth protection.

“Nowadays, people are more knowledgeable about insurance. Even those in their twenties talk about paying insurance premiums on top of their car instalments and rent. This awareness used to exist only among those in their thirties and forties,” says Kwo.

According to Life Insurance Association of Malaysia’s (LIAM) statistics, the market penetration rate has also increased in the last 30 years, he adds. “The market penetration rate 30 years ago was about 25%. Now, it is 54%. The industry’s target is to reach 75% [under the government’s Economic Transformation Programme by 2020].”

Despite the progress made by the insurance industry to increase awareness among the public, there is still much to be done, as a large segment of the population remains uninsured. According to a study conducted by LIAM and Universiti Kebangsaan Malaysia, which was released in February last year, the average protection gap for families whose breadwinner is covered by life and medical insurance is RM553,000 per family. But the average insurance coverage taken up by Malaysians is only RM50,000, Kwo points out. 

“What people need is to cover 5 to 10 times their income per year, minus whatever savings they have, so that their family is protected if anything unfortunate happens. This huge protection gap is something the industry needs to address so that more Malaysians will have better financial security and protection for their future.”

Over the years, access to insurance products have been made easier with the increase in distribution channels. In addition to the traditional agency force, products are offered via the bancassurance and digital channels. 

However, according to a global study by management consulting firm Bain & Co, released on July 21, almost half the insurers surveyed said they didn’t have an achievable plan for the transition to the digital channel, while 60% said some key elements for the journey, such as a clear vision or compliance and risk processes, were missing. 

Nevertheless, both customers and insurers expect to see a major shift toward online channels in the next few years. The survey also found that digitally active customers made up a sizeable share of insurers’ business, ranging from 35% to 70%. Meanwhile, 79% of the insurers said they would use the digital channel for insurance interactions in the next few years. 

While every insurance company is tapping into the digital channel, some things still require face-to-face interactions, says Kwo. “There are times when a personal approach is still needed, particularly when the aim is to provide an in-depth and detailed professional analysis of the customer’s financial protection needs. Nonetheless, digital channels do help to complement and support this process.

“Insurance companies have caught up with the digital trend. Now, many customers can check their coverage or change some of their personal details online. For example, the insurance specialists at Bank Simpanan Nasional (BSN) branches provide advice on bancassurance using iPads.” 

Kwo foresees that insurance players will eventually offer simple life protection products on digital platforms. “Some players are already offering these products, such as term insurance with high coverage or hospital income. But some products still require a lot of underwriting.”

TO MEET the company’s objectives, Kwo aims to develop a full-time agency system by implementing structured processes that have proven successful in other countries, such as Japan. 

“We find that when it comes to advice, people prefer to deal with full-time agents, [rather than part-timers] who sell you the product but you don’t see two years later. We want to get the right people,” he says.

The company is in the midst of a two-year process to phase out many of its part-time agents. “In the past, the market recruited lots of people and then filtered them out. Now, we [want to] select the right people first, then train them by giving them the knowledge, tools and guidance step by step,” says Kwo.

“What we really want is for people to commit to the industry on a full-time basis [as they are in the business of] offering long-term solutions to customers. The Malaysian market has reached a stage where more consumers want full-time advice from those who provide the products and services they really need.”

Kwo acknowledges that in order to sustain its full-time agency system, there is a need to change the culture of the company. “We don’t want to make a profit at the expense of the customer. This retraining will require a large investment, but it will be beneficial to the company over the long term.”

The issue of misselling products is one that has dogged the insurance industry over the years. Kwo hopes to eliminate the problem by implementing this process.

“Our agents and insurance specialists are not allowed to push products first. No products are suggested or offered until these agents study and perform an in-depth analysis of their customer’s needs, financial standing and protection gap, taking into account both short- and long-term views.”

Over the past year, Gibraltar BSN has phased out a lot the legacy products of Uni.Asia. Moving forward, the company will focus on protection-based products that provide benefits in the event of death, disability or illness. 

“We are trying to look at our customers’ needs and to fit our products accordingly, rather than deciding on the products and giving them to the channels for distribution. Our products in the bancassurance channel are all new because we designed them from scratch,” says Kwo.

One area the company wants to focus on is insurance for all Malaysians, regardless of their wealth status. To that end, the insurer will target BSN’s customers as well as through post offices across the country. 

“BSN has more than 8.6 million customers nationwide, so we will look at marketing [our products] through our insurance specialists,” Kwo says. 

“Pos Assurance is available exclusively at all Pos Malaysia branches. Our Pos Assurance products are extremely affordable, providing low-income consumers with basic life insurance protection,” he adds.

“We want all Malaysians to have the opportunity to buy insurance. [In fact,] PFI began its business marketing to poor miners who could only afford three US cents to buy protection-based products.” 

Pos Assurance products require little underwriting. One such product is Pos Hayat, a term life product, to which the insurer recently added a dengue protection benefit that provides hospitalisation income and a payout in the event of death.

“We offer this product through post offices, but anyone can buy it. Dengue protection has become more important, and the majority of dengue cases happens in Selangor. This product is specifically for Malaysia,” says Kwo. 

PFI is principally known for its guaranteed income products in the US. This is something Gibraltar BSN is looking at over the long term (the next five years). At the moment, it is focusing on protection products in the conventional space. “The company has not made any plans yet to introduce takaful products to the Malaysian market,” says Kwo.

As part of its efforts to personalise its services, the company recently launched its Love Note initiative, where life insurance policyholders get to write and leave personal messages for their beneficiaries.

“We keep these Love Notes in a secure storage space until the claim on the policy is made. That is when we deliver the note to the beneficiary. Simple as it may sound, the impact these notes may have is beyond words. For many, having the chance to read a ‘final goodbye’ from their loved one is priceless,” says Kwo.