It was as if just yesterday that 2008 has passed us by…. Just show how times really fly – we are now almost into the final lap of the first decade of the 21st century. Feelings aside, was there anything of particular interest for the Insurance industry throughout the year 2009? Old stories, tales, disagreements and tussles within brought forward from yesteryears but in different forms…
Let’s stop here for awhile…. Let us wish you, “A Very Happy and Prosperous New Year 2010” 😎 and don’t forget to take your family for a “Happy Holidays”!
Now, where should we start our reviews? We believe Risk-based Capital (RBC) is one old story that never ever gets settled down, therefore justify some special mention here…..and takes first priority on our comment list.
RISK BASED CAPITAL
Guess it is best we revisit the implementation of the Risk-based Capital (RBC). The RBC regime which was worked through on a parallel run with the previous solvency margin framework in 2008 was finally implemented on 1st Jan 2009. I supposed the industry was not so prepared despite having prepared themselves for the last 4 to 5 years! Perhaps also, the actuarial professionals had adopted a different set of assumptions in dealing with the computation of General Insurance Liabilities, result of a “knee-jerk” reaction to the sudden change of the world economic well-being in the last quarter of 2008. Of course, the other reason was also about Kurnia’s decision to prop up its Act related reserves over the last two financial years – just think about the King of Motor waking up one fine day and starting changing the rules of the game! But then, don’t blame Kurnia, the industry had actually under-reserved their Motor Act claims all this while – Perhaps only AIG seems to have pass the acid test in this aspect….. It is also a reminder for claims personnel involves with setting Act claims case reserves that there is no such thing called “Let the sleeping dogs lie….” In this changing time, there is no such a thing as claims having filed that stay dormant would continue to stay dormant past its limitation period!
|Did I mention “AIG” just now? Oop! Chartis should be the correct name now… Unfortunately, in Cantonese, Chartis simply means “got a little worst than before” – What a name to carry over into 2010!|
Poor Claims Case-Reserving Policy. My conclusion was those actuary people were correct, as over the first two quarters of 2009, Central Bank has moved in, scrutinizing insurer’s technical reserving policies and directed most if not all to revamp their reserving practices, especially claims that would require a long period for a full settlement or technically, termed the long-tail element.
The Misunderstood “ICAR” Model. This does not ends here….. Most (re)insurers were not able to grasp the relevant principles and concepts behind the workings of Internal Capital Adequacy Ratio (ICAR), thus computing it is a mammoth task for most. In this regard, we believe the past incessant fronting of risks has now caught up with most when this ICAR is now well understood. Well….the marketplace is now flooded with more risks awaiting fronting nowadays….
RUDE AWAKENING FOR MALAYSIAN MOTOR INSURANCE POOL (MMIP)
In 1999 Kurnia took an aggressive Motor Underwriting approach into the high risk segment, the other more adventurous players followed suit and believing in the Kurnia’s “Mass Underwriting” concept. This had encroached into the territory of MMIP, making the POOL redundant for almost 10 years.
|Their mass-underwriting concept brought the POOL to their knees and robbed them of a good 10-year of statistics?|
RBC, the triggering factor. With the RBC regime full implementation, all the larger Motor underwriters have started to avoid the higher Motor risks categories – Commercial “A”, Taxis, Special-Type Vehicles and Buses. Soon, with a twinkle of an eye, all Third-Party Insurance cover were also placed under the high risk category……
The POS Malaysia Factor. Suddenly MMIP was awakened – from a RM100-odd thousand premium a month, now it has to deal with a couple of millions premium in sales in a month! Although MMIP is jointly owned (in equal shares) by all member companies of PIAM, the appointment of POS Malaysia was made without any consensus with the members, and no consultation either.
|With equal share and share percentage growing among all members of PIAM, the lesser Motor boys are crying foul…. Why should we made to be part of this dumping ground?|
The Equal Share Dilemma. When the volume of transacted business was low, most insurers did not raise issues in respect of their equal sharing of MMIP’s fortunes. I supposed, nobody wanted to be so petty to raise such issue then. But with the sudden surge in business in recent days, I supposed losses would one day find their way back to all the member companies – this is something not avoidable as the rates charged by MMIP are not anywhere remarkable compared to those currently allowed for the industry. Now, if you are a small player and writing limited volume of motor, you would be confronted with those unnecessary losses that the major Motor boys are currently having a hard time dealing with. Any right minded insurer would not want to sacrifice their scarce capital for MMIP’s portfolio of risks. For those moderate but aggressive Motor players too, this is likening to escaping from the burning fire into the red hot furnace! But then, what to do……it is okay to tell your shareholders to lose some capital in discharging our national service lah!
The Dumping ground??
|Mandatory Discount of 5% is given to Individual Person only – Next year, after 30 June will be 10%. The number of individuals going for discount is steadily growing in areas of Klang Valley, Kuching and Johore Baru.|
The original concept in regards “Mandatory Rebating” was to provide option to individuals or “naturalized person to buy directly from the insurers. This option was unavoidably opened to the business entities as well, but the rebate would be at the pleasure of the insurer – most would have secretly given the discount anyway!
The PERWAKIM factor. Throughout this fiasco, top question, why did PIAM refused to recognise their existence? We are almost through the first decade of the 21st century but why is our industry still stuck to the fact that an association for agents is a No – No!
GOVERNMENT SERVICE TAX (GST)
PIAM puts us through the GST lessons back in 2008 – I am not sure whether this is going to be in the same sort of modus operandi as those prescribed to us back then, but it is going to be challenging for the industry come 2011. The government said, GST is to widen tax collection, but if you were a member of the workforce, your income would be diluted…. Anything for us workforce besides asking us to collect those taxes? Nevertheless, do remember the following phrase:
|• ON a Taxable Supply|
|• BY a Registered Person|
|• IN the course or furtherance of any business|
|• FOR business carried on in Malaysia|
|• ON imported goods and services|
ISM – ABI? WHAT IS THIS?
|Do they really have a full specification and complete sets of details in regards market values?|
ISM is Insurance Services Malaysia, setup by the member companies forming PIAM, LIAM and Takaful operators. ABI simply stands for Automotive Business Intelligent. ISM – ABI is a system for vehicle identification & recording and Sum Insured benchmarking services. Since ISM –ABI was launch back in 2005; there was nothing fruitful going for them despite ISM relentless selling and proclaiming the system superiority. By the way, the system is only able to deal with passenger vehicles with year of made 2000 and after. For motorcycles – 2005 and after and for Commercial vehicles – this is only applicable for 2003 models and after and with carrying capacity not exceeding 10 tons.
The total costs of integrating with this system and the usage thereof is quite expensive in comparison to another service provider; Red Book.
Looks like a promising system going to waste!
In September, BNM throw them a lifeline in the guise of “Endorsement 113” – It was supposed to be but fate has it again, it is still way short of target again. Endorsement 113 is nothing more than a recommendation where insurers are to encourage their customers to use ISM – ABI market valuation guide to determine the level of Sum Insured for their comprehensive insurance. I must say this endorsement 113 has triggered the concept of “Agreed Value” for Motor Comprehensive insurance. But as it is with other recommendations in the past, recommendation or suggestion remains to be so…..the industry is not in any hurry to use – there is simply no motivation – most stakeholders were not seeing the benefits (both short and long term thereto) of it.
ISM simply lacks the marketing strategies to deal with the ISM – ABI’s market introduction. You have to sell big time, man….and damn, you have to know how to work out appropriate test marketing and so on. But then, how is ISM – ABI going to compete with Red Book? You mean members must support this project despite being inferior to other service providers?
ISM – NO CLAIMS DISCOUNT (NCD)
In 2007, the ISM-NCD system was implemented within both the conventional and takaful industry, replacing the manual system of NCD enquiry and confirmation. After more than a year in operation, the industry is still not getting anywhere near the objectives.
A case of one leg in the system and one leg outside the system
For whatever reasons, the database can never be up todate, so much so, the users started to work things in perspectives outside the system – hopefully, they will find the time to update the system later on! Update later can or not? Fat hopes, I guessed!
A situation likens 10 blind men trying to explain how an elephant should look like
Sirs, Please get it right – a tail is a tail and the trunk is not the tail!
So the IT personnel, underwriters, marketers, ISM personnel, PIAM Motor Sub-committee, Senior management of insurer / takaful, Board members of ISM, Claims personnel, ISM’s IT vendor, and PIAM Management committee….. – All working very hard but cannot get to the real problem(s). It is a case of somebody thinking they know but in reality not…..and it is also the case of many were still having a blur / blurring view of the whole working concepts.
Taking our Point-of-Sales (PoS) into full integration with ISM – NCD
|Jangan Potong! Kita belum Sambung lagi!|
Are you sure? Are we capable of making it through full integration come 1st July 2010 bearing in mind many takaful operators are still struggling with the basic set-up and MMIP is a totally new babe here? Do we know how to get this done effectively or we are still thinking we are in the know all the time? No doubt we already have the roadmap in place but have we drawn up some process maps to get all those “blind men” see the whole picture? Would 2010 be a nightmare for all and 2011 a hangover………… Help! No…..
Don’t you think we need a miracle here, here and here?
INTERNET MARKETING (IM) AND HOW IS THE INDUSTRY COPING WITH it….
IM is about the customer dealing directly with the service provider in the Cyberspace. It is common to term it as Business-to-Customer (B2C). We are now convinced that most insurers and takaful operators are not able to handle the ever expansive eCommerce environment. Most were not able to figure out how agents have taken the lead in this new B2C transacting environment. Most still feel that rewriting stringent guidelines are a must to instill necessary discipline….. We are sure the industry is capable of doing better than this, correct?
It was truly a scary experience for all especially when the nation gets more than 70-odds deaths emanating directly or indirectly from AH1N1. But this should not be anything new after having gone through the SARs attack in 2001. LIAM’s members were committed to covering such deaths; however, PIAM was never able to do likewise and leave it to individual to commit on their own.
|What assets? Aren’t those assets more of Liabilities rather than Capital? Beh tahan!|
TAHAN IS TO BE SOLD!
Central Bank has assumed control of Tahan Insurance in May 2009 and after about 7 months of direct management; plans are now aloft to have their business sold…but minus the shareholding part. Anyone interested? Do you know the difference between buying the assets and buying their shares? Well, you would pay a lot lesser if it is merely buying the assets. Did I mention “assets” or “liabilities”? For being creative, let’s go for the opened tender in the first week of January 2010 – tender USD1 – Well…. Tony Fernandez also did the same when he tendered for his Air Asia!
I HATE THOSE ISM OLAPs!
I remembered attending the ISM – KMS Motor OLAP training class back in 2007 – never thought this Business Intelligence (BI) system only works half-time…. most of the time you cannot find the statistics in this Knowledge Management System (KMS) OLAP, probably migrated somewhere when their internal staff needs to do some dicing works! In January 2009, ISM came out with the Fire OLAP… Did you enjoy the training? Did you managed to use the OLAP modules as much as your company was being charged?
Friend! Psst! Try the side window…..the door is unreliable!
What is OLAP? Just think of it as some Rubik cube!
DO WE ACTUALLY NEED VTREC?
VTREC simply means “Vehicle Theft Reduction Council of Malaysia Berhad” – probably some magical formula in getting the theft rate down in limbo rock! Would it be more strategic and less costly if we consider working with Community Policing projects and sponsoring targeted community?
STRICTER GUIDELINES FOR “BER” VEHICLES
Don’t know what is BER vehicle? Beyond Economic Repair vehicle – Anyone who buys a BER vehicle must repair it and obtain PUSPAKOM certification before the insurers and takaful operators can release the registration card to them….. Meaning nobody will buy lah! Previously repairers buy such vehicles and then cannibalise them for parts, and with the registration card, they would buy a ‘cut-up’ vehicle from some overseas sellers and joint them back after coming onto Malaysian shore. Stricter guidelines are to eliminate incidences of vehicle theft – Is this TRUE or FALSE?
FURNITURE MANUFACTURERS AND TRUCKER & HAULIER OPERATORS – All VERY UNHAPPY PEOPLES
Furniture manufacturers with risk code 2015 were unhappy because it has become difficult for them to find insurance cover for their assets. The truckers are dissatisfied over their loss of NCD for their trailers. I wonder what’s in store in 2010 and for which sector…..
SHOUTING…. “Unjust Enrichment” FOR THIRD PARTY BODILY INJURY CLAIMANTS!
Courts over the last few years had been awarding interest of 8% for general damages and 4% on special damages, when finance interest rate is a mere 2% to 3% per annum. Can we start a protest somewhere for 2010?
SCHEME, SCHEME, SCHEME AND MORE SCHEMES….
The New Motor Insurance Scheme to take over the ACT portion of the usual Motor Insurance premiums. They say the ACT losses are giving the industry a nightmare so it is best the government takes over this portion of the loss…..
Mandatory Basic Travel Insurance Protection Scheme is what the Ministry of Tourism intends to introduce…. No, to enforce! Coverage is quite impressive though and premium is probably not more than RM50 per life. MATTA members all wanted to be distributors and of course get commission from the participating insurers, but they do not want to register as agent – Common, respect lah kita sikit!
FOREIGN OWNERSHIP, MERGER & ACQUISITION (M&A)
CIMB Assurance and Panglobal Insurance had officially moved on and disappeared from the insurance scene. Jerneh Insurance is looking for buyer and HSBC Insurance is a sure bet to take over. The path for more foreign equity participation in the insurance industry has now been made easier…..
SOMETHING ON LIFE INSURANCE
Looks like our brother in Life is going to be a RM3.2 billion industry Wow! But we are already more than RM11 billion. Of course not as profitable as them – they can afford to pay for A H1N1 dead or alive.
Surprising the traditional Life is enjoying some 31% growth but the investment-linked Life is suffering a 7% decline which was mainly caused by the substantial decline in sales of single premium deposit-like products.
So they wanted to go into this micro insurance and annuity Life products because those Life buggers are thinking of taking advantage of the tax relief – something to do with the additional RM1,000 tax relief granted for annuity premiums…..
LET’S TAKE A REST AND LISTEN TO SOME ABBA SONG – DAMN, IT IS GOOD – HAPPY NEW YEAR…..
FINANCIAL REPORTING STANDARDS 4 (FRS 4) – Insurance Contracts
FINANCIAL REPORTING STANDARDS 139 (FRS 139) – Financial Instruments: Recognition and Measurement
FRS 4 or IFRS 4 and FRS 139 have been issued for adoption by the Malaysian Accounting Standards Board. This will take effect for insurance companies in Malaysia on Jan 1, 2010. If this thing looked and sounded strange to you, do not worry – probably the Finance and Accounting people are also finding it weird as well. From our operational perspectives, try to envisage paragraph 20 (a) of FRS 4 and paragraph 58 of FRS 139 without the need to actually read and understanding them, just TRUST us – If you are the Underwriting workforce, get those policies and endorsements issued into your computer database as fast as possible (good guide < 20 days), if you are the marketing workforce, please work harder to secure all cover notes and supporting documents back to the Underwriting office within 14 days from the date of issuance of cover note by the agency force – This would add up to 34 days. Give another 7 days for delivery of policy documents to the agents, 12 days to secure payment from the Insureds and thereafter 7 days to remit the premiums to the insurer. All these timeframes should add up to 60 days, which is equivalent to “Premium Warranty” period…. Then you would still have another 30 days to work on those recalcitrant agents / brokers who actually refuse to pay but continue to dispute just about anything…. If you failed to make the full collection within this 90-day, those uncollected premiums would have deemed impaired, thus insurance company would have to make provisions for bad debts. Remember….Your Bonus and Increment would have gone out the window for good!
Yeah! All of us are now getting tired and too close to 2010 – We shall spare you from the need to continue reading our STUPIDITY….. But, do spare us a couple of seconds with this story:
A well know Geomancer, as quoted in China Press, said, the year ahead does not look too good for Malaysia – it was predicted that a prominent politician would died of a heart attack in May or June, and we should be facing issues concerning the sale of water to Singapore.
…if this blog has affected you, or the contents may not be true – treat this as a mere walk through by an old brain! Once again, thank you for reading…
Happy New Year 2010!
May GOD Bless you, you great readers…..I also need to SALUTE those old guards who have retired in 2009 – May you rediscover your next carreer – Well! Washing your wife bra and underwear should be okay….. At least you are not alone! Joking lah!