Are you a supporter of insurance regulation breaches or you are already reaping some rewards from supporting those breaches?
Some insurance practitioners are so ever willing to breach established regulations just to gain a slice of any premium segment deemed strategic – prior to 2009 insurers were very combative with the motor insurance sectors with much monetary enticements being thrown to the markets but this had stopped since the implementation of the Risk-based Capital (RBC) framework. However in recent times, insurers are targeting the foreign workers insurance segment, i.e., foreign workers compensation scheme (FWCS), foreign workers insurance guarantee (FWIG) and foreign workers hospitalisation & surgery insurance scheme (FWH&SIS or what is more commonly known, SKHPPA….). These sectors or segments are viewed as the more profitable one, so intense competition naturally began….
So what are those breaches all about?
In short, these are usually in form of enticements (i.e., incentive trips, gifts or even cash or maybe even stock & shares) aimed at intermediaries to motivate them towards channeling those targeted classes of business to insurer. Usually payment is made once the intermediaries successfully meet the premium target(s) within a specified period…. How these enticement-related payments were made…. we leave this to your good imagination and judgement.
If you are an agent are you already profiting from those acts of breach?
PIAM has acted again to remind members to refrain from overly pushing their marketing imagination….
|Recent Members’ Circular issued by PIAM: PIAM Members’ Circular no. 19 of 2012 dated 13 February 2012|
Foreign Workers Compensation Insurance Scheme and Foreign Workers Hospitalisation & Surgical Insurance Scheme
It has been brought to the attention of the Non-Tariff Subcommittee of unhealthy practices in the market, which appear to be in breach of the Guidelines to Control Operating Costs of General Insurance Business (OCC Guidelines) and non-compliance of the Stamp Duty Act, as follows:-
i) offering of additional payments to agents ranging from RM2 to RM5 per insured worker in excess of the commission of 10% for insurance cover issued under the Foreign Workers Compensation Insurance Scheme and the Foreign Workers Hospitalisation & Surgical Insurance Scheme;
ii) paying agents extra payments of RM2 to RM5 per certificate for issuance of certificates to each insured foreign worker on top of reimbursement of RM5 per policy for policy printing;
iii) issuing of a master policy to agents (to cover many separate customers) who in turn only issue certificates to insured employers thereby attempting to circumvent the payment of stamp duties.
The Association would advise member companies who are involved in such practices to stop these unhealthy developments immediately and to comply with the provisions of OCC Guidelines and the Stamp Duty Act.
BY ORDER OF THE MANAGEMENT COMMITTEE
It is also good if we revisit one of the Bank Negara’s circular, JPI/DG 7/2006 dated 27 April 2006 where the Central Bank sent out a stern warning in respect of those excesses that insurers were willingly coughing out to the intermediaries for the purpose of gaining competitive advantages. Whilst there were some relaxation of rules along the way but the emphasis was clear, “You can’t pay beyond what is allowed….”This guideline while was issued back in 2006, it remained to be effective and in-force. In the guide, one of the most important pointers is for the CEO to represent to the board that any form of payment to the agents are in compliant with the Operating Costs Control guidelines.
But sorry…. I can’t give you the said PIAM members’ circular as this is not for the public viewing, nonetheless you may opt in through the OPT IN BOX below if you are serious about get a copy.
Do you have any comment on this thought? Do you think this is fair for the industry especially if your company is a late starter (for whatever reasons) in this foreign workers insurance segment?
We would love hearing from you….