The General Insurance landscape is changing for sure and expected to be more prominent in 2017, although we don’t see this happening much since the start of the initial detariffication phase on 1st July 2016.
What would be those prominent changes expected?
(1) Premium will be going up come 1st July 2017…. Why? Simply because of the existing tariff premium inclusive of those allowable loading is not enough! More so for insurers whom are currently concentrating more of those older vehicle segments with loading applications that are simply not enough. It is always about adequacy of premium being charged. You don’t charge enough you are going to lose money and even if you think the policyholder is a careful driver you would have given him/her those NCD discounts therefore already lower premium. As a whole you don’t get enough premiums to service the particular risk segments you are going to lose money and you as an underwriter only can hope for more “ONGs” to get the company through….
On the same argument also, you may hope that the more profitable segments will support those losing segments on the argument that the agency network will continue to provide a stronger support to the company since they can continue to write those low value risk segments on existing underwriting terms. Nope…. You are definitely wrong! There are just too many unprofitable segments comparatively. How the hell those slightly more profitable “30% (percentile)” are able to support those “70% (percentile)” losing segments?
By just looking at the ISM’s market pricing guide you should be able to grasp the situation. So expect this…. Don’t go against the tide otherwise you end up with all those losing segments for your company.
“(Motor specifics)….if your company is contemplating not to submit any new pricing structure to BNM for approval but instead merely applying (+/-) 10% to your current) guide then you may get burn within the first 6 months from 1/7/2017. In fact if you managed to secure some form of approval you should have a strategic advantage for price manourver should competition heat up.”
(2) Product innovation will heat up.… so much so our IPREB’s approval will be at snail 🐌 pace. Before this happens it is best underwriters push for more product approval, particularly for those strategic ones (i.e., Packaging in Fire Products is key). By saying “product” it applies for both standalone, packaging, bundling as well add-on….
Remember…. Early bird catches most of the worms! Because of IPREB’s expected sluggishness, we should see barrier to entry….whomever starts first, laugh the loudest (I hope so)….
“….don’t waste time on telematics base underwriting for private cars, the take-up rate is gonna be low or not worth the while. Let others do it first and learn from their mistakes especially see how they struggle to adjust against losses and maintaining their infrastructure. Clear reason…. Malaysian premiums are currently very low to justify any meaningful discount for better driving!”
(3) Insurers would be pushing for a more “canggih” point-of-sale (PoS) system.
Why? PoS whether for B2C or B2B system channel, they are your company’s entry point for your clientele be they policyholders or intermediaries. A very efficient system helps garner more support, even if they are not in form of successful sales, at least they are helping in generating quotations. Quotation is the lifeline of your pricing-to-market essentials…. (you know what I mean?)
“….if your PoS system has no API deliverables (i.e., plug n play) then how can you be friendly with third-party systems that wanted to transact with you? You would have to adopt low level formula for doing so…. Moreover how will you be growing the B2B2C channel where Aggregators are lining up to play the quotation game?”
(4) Pricing-change deliverables.… Why and How? Much that you wish to have a single transactional platform at the PoS but in reality this is far from true. You need to deal with numerous systems, especially those belonging to third-party, i.e., your franchise system, back-end and PoS….
“….you need to change the premium pricing fast but you have a few systems to deal with. The only way is to adopt an automated “a-change-one-change-all” procedure. Making price changing process faster (i.e., immediate) and super efficient in responding to competition.”
(5) Agents to be trained to reinvent, whether offline or over the online space…. at least they could counter the BNM’s calling for buy-direct for simpler policies, like Motor, TPA and HHHO and low-cost premium based products where coverages are at their most basic with premium payment on installment basis.
“Agents must not project themselves as being cheap….and solely on services of getting the cheapest premium rather they should emphasise on explaining how clients could possibly improve on their premium (based on the principal’s pricing methodology and risk factors) and coverage, doing it even before renewal…. And, how they could factor in add-on(s) to improve their coverage at a decent price. Eg., agent can start by explaining why policyholders should extend their motor cover to include those passenger related liability covers.”
“In the detariffed environment we can expect situation where premium for basic cover (i.e., Comprehensive, TPFT and TP) maybe higher for some insurers but when purchased together with proper add-on(s) the overall premium maybe cheaper than the competitors in an apple-to-apple comparison. This is one point agents should be aware of.”
(6) BNM is expected to play a prominent role in disciplining the market and ensure the Phased liberalisation roadmap is always adhered to, as the GI industry marches towards a more open-market against the backdrop of ASEAN cross-border economies.
But then, the industry expects constructive guidance to ensure uniformity in thoughts and implementation, not as currently where we are seeing confusion in the numerous guidelines issued by the regulators to the industry, in particularly those that relate to reclassification of Motor and Fire Products, not to mention the degree of difficulties in understanding the main Policy Document of the Phased liberalisation roadmap.
“Perhaps it is about time the regulators put forth their requirements to the industry for comment and improvement before any decision for implementation. Feedbacks are valuable for such disruptive changes to the industry. I suppose this was the standard procedure in the past that had somehow gone missing….”
It is also timely for PIAM to set up an Underwriting Task force or Technical Committee to deal with the phased transition from tariff to a disapplication environment.
“As the tariff framework is being dismantled some form of PRACTICE NOTES should be put in place to provide guidance to practitioners as well for the regulators to make reference to when articulating certain areas of practices and adoptions for the betterment of the industry.”
Although there is no premium or rating controls but certain best underwriting and technical practices must be written down somewhere for the younger / next generation workforce to make references to….and to this, we think PRACTICE NOTES model works the best.
“Yes…. the Practice Notes model should work fine as the tariff framework is being dismantle. “
Time is up…. I should think the above 6 points are good enough to keep us busy moving into 2017.
May I take this opportunity to wish all readers Happy New Year 2017 before 2016 runs its natural course into our memory relm.
Kook kook kook kook…. !
Kook kook kook kook…. !