Issue 23 Jan-Feb 2014
Features
Focus
Challenges Ahead for De-tariffication
Fact Versus Misconception
INSURANCE
The Malaysian Insurance Institute
Unintended
Governance Challenges for CEOs
KDN PP 15104/05/2012 (029816) Pr ic e : R M 1 5 . 0 0
Membership of MII enhances my professional reputation as someone who has the relevant technical understanding of the market and its products, and credibility in what I do. My FMII accreditation is a testament of my commitment to the highest level of knowledge and skills necessary to succeed in today’s competitive world of insurance and reinsurance
A K Wong, FMII CEO of Asia Capital Reinsurance Malaysia
If you want to set yourself apart from others in the industry, MII is where you belong.
please visit www.insurance.com.my EDUCATIONAL SERVICE PROVIDER OF THE YEAR 2012
PROFESSIONAL SERVICE PROVIDER OF THE YEAR 2007
Editor’s Note
A New Perspective…
I
am happy to bring a fresh perspective to the INSURANCE magazine beginning with this issue. The magazine has evolved since its humble beginnings. It percolates new ideas from the younger generation of professionals while bringing it to a new intellectual trajectory with the wisdom of the senior fraternity.
As part of our endeavour to continuously improve and add value to our members and readers, please allow me to briefly share with you how the publication has evolved since 2009. The MII News was originally a member-based publication that provided members with updates on the Institute’s training programmes, events, activities, membership announcements and occasionally, feature articles. Over time, we felt the need to meet the profession’s career development in an ever changing and challenging financial services environment. So we embarked on transforming the magazine in a way that members will be able to apply the knowledge gleaned from the magazine, the courses and activities that they have attended at the Institute into their lives and careers. This is one of the many means of support that the Institute provides to our members.
Another topic which is a concern to the industry is motor insurance de-tariffication, which was certainly a hot topic during the Third Malaysia Insurance Summit in Kuala Lumpur late last year. Challenges Ahead for De-tariffication talks about what the industry needs to develop in terms of a system that works and the education that is required for both staff and the public to make detariffication a reality. You will also find a potpourri of articles contributed from a variety of sources including articles from our very own MII members. The articles that are contributed by our members are: Fact Versus Misconception by Billy Gumbang CMII, AMII and Networking Tips for Introverts by Hairul Hilmi Ramlee, AMII. We would like to take this opportunity to thank our contributors and loyal members and readers for your continued support. We are open to receiving your thoughts on the refreshed look of the magazine. Feel free to share your comments for improvement or if you wish to contribute an article please contact us through insuranceeditor@mii.org.my. In more ways than one, we hope that the fresh look and design will excite you to look forward to future publications of INSURANCE!
Just to give you a brief highlight on the contents of this issue; the Cover Story deals with the issue of corporate governance which is always a significant topic for financial services institutions. Navin Pasricha in Unintended Governance Challenges For CEOs explains that corporate governance arrangements in listed companies have been improving over the years, and there have been a number of reasons for this, I shall let you discover these reasons for yourself.
Khadijah Abdullah Editor insuranceeditor@mii.org.my
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Contents Issue 23 Jan-Feb 2014
06 12 16 22 27
News 360Âş FEATURES Importance of Retirement Planning: Financial Education for Retirees
30 34
Cover Story Unintended Governance Challenges For CEOs
De-tariffication Challenges Ahead for De-tariffication
Trend Economic Growth, Regulatory Development Create Attractive Market in Malaysia
Knowledge Management Learning & Idea Capture
Insight Analysing Runoff Road Crashes
Editor Khadijah Abdullah The Malaysian Insurance Institute
Š Copyright Reserved
Editorial Team Hairul Hilmi Ramlee Harizam Mahalil Publisher The Malaysian Insurance Institute No. 5, Jalan Sri Semantan Satu Damansara Heights 50490 Kuala Lumpur, Malaysia Tel: +603 2087 8882 Website: www.insurance.com.my Email: insuranceeditor@mii.org.my
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Disclaimer Views expressed are not necessarily those of The Malaysian Insurance Institute (MII). The Institute, consultants and agents take no responsibility for the consequences of any action taken based on any information published in INSURANCE and neither shall they be held liable for any product or service advertised in the same. No part of this publication may be reproduced without the permission of the publisher. Contributions Article contributions are welcomed. INSURANCE reserves the right to edit or decline materials submitted.
FOCUS
19
MII HIGHLIGHTS
37
Open Column Networking Tips for Introverts
20
Events MII Breakfast Talk 2014: Developing the Positive Self-Belief Within
Open Column
Human Capital Development – Dialogue
Fact Versus Misconception
The MDRT Experience 2014
42
Global Reach New Ideas, Inspirations Highlight Synthesis of AIC Congress
44 46
Recommended Resources CBP Projects
MII Board of Directors Hashim Harun President & CEO Malaysian Reinsurance Bhd (MII Chairman)
Y. Bhg Dato Koh Yaw Hui Chief Executive Officer Great Eastern Life Assurance (Malaysia) Berhad
Vincent Kwo Shih Kang Chief Executive Officer Uni.Asia Life Assurance Berhad (President of LIAM)
Francis Lai Vun Sen Chief Executive Officer Progressive Insurance Berhad
Chua Seck Guan Chief Executive Officer MSIG Insurance (Malaysia) Bhd (Chairman of PIAM) Alex Low Choon Hoong Executive Director Jardine Lloyd Thompson Sdn Bhd (Chairman of MITBA)
Abdul Aziz Mohamed Nor Chief Executive Officer Associated Adjusters Sdn Bhd (Chairman of AMLA) Aznan Abdul Aziz Director Financial Sector Development Department Bank Negara Malaysia
Y. Bhg Dato’ Adrian Loh Heong Chow MII Director Y. Bhg Dato' Haji Syed Moheeb Syed Kamarulzaman MII Director Alex Foong Soo Hah MII Director Md Adnan Md Zain MII Director
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Industry Updates News 360º
Industry Updates REINSURANCE RATES DROP Source: Bloomberg, 30 December 2013
Global prices for reinsurance policies up for renewal on Jan. 1 declined amid an oversupply of capital in the industry, according to a unit of Marsh & McLennan Cos. (MMC), the world’s largest insurance broker. Rates for property-catastrophe reinsurance fell 11 per cent, driven by decreases in the U.S., according to New York-based Marsh & McLennan’s Guy Carpenter division. Prices also fell for most other types of coverage. Reinsurers such as Munich Re and Swiss Re Ltd. help providers of primary coverage such as American International Group Inc. (AIG) and Allianz SE (ALV) shoulder the costliest claims. An influx of capital from investors, strong balance sheets and lower-than-average losses from natural disasters meant that supply often outstripped demand, the Guy Carpenter report said. The industry had about U.S.$322 billion (MYR1,059 billion) in dedicated capital at the end of 2013, a nearrecord level, according to the release. Global insured losses were about U.S.$40 billion (MYR131.5 billion) in 2013, U.S.$20 billion (MYR66.75 billion) less than the 10-year average. U.S.$1.00 = MYR3.29
MOTOR INSURANCE PREMIUMS, SERVICES TOO COSTLY Source: Governance & Compliance Magazine, 19 December 2013
The Competition Commission (CC) has found that motor insurance premiums and services provided by companies are too costly. The CC aims to reduce these costs.
According to CC, the chain of settlement for non-fault claims is complex and increases the cost of replacement cars and repairs, which is passed on to insurers of at-fault motorists, resulting in higher motor insurance premiums for all drivers. CC estimates the extra premium costs are between £150 million (MYR806.67 million) and £200 million (MYR1,076 million) a year. CC also found that following an accident, too many repairs are not completed to standard. Problems were also found with the sale of addon products to consumers, and with the contracts between price comparison websites and insurers. In addition, consumers have limited information about “add-on” insurance products, while insurers have a pointof-sale advantage. So it is difficult for consumers to identify the best-value offers in the market, and add-ons may be priced too high. Also, contracts between price comparison websites and insurers can require that individual insurers’ premiums are not offered more cheaply elsewhere. CC has published a notice of possible remedies outlining measures it could introduce or recommend to improve competition. Any interested party can respond to the provisional findings report by 7 February 2014. £1.00 = MYR5.38
NATURAL CATASTROPHES, MAN-MADE DISASTERS COST INSURERS USD 44 BILLION Source: Swiss RE Press Release, 18 December 2013
According to preliminary sigma estimates, insured losses from natural catastrophes and man-made disasters in 2013 were around USD44 billion (MYR144.65 billion), down from USD81 billion (MYR266.29 billion) in 2012. Insured losses from natural catastrophes were at least USD38 billion (MYR124.93 billion), down from USD75 billion (MYR246.75 billion), while man-made disasters generated the remaining USD6 billion (MYR19.73 billion) of insured claims. The overall economic losses from catastrophic events in 2013 reached USD130 billion (MYR427.38 billion), compared with USD196 billion (MYR644.36 billion) in 2012. The total loss of life climbed to around 25,000 in 2013 from 14,000 in 2012. In November 2013, Typhoon Haiyan hit the Philippines and claimed more than 7,000 lives, which is the highest loss of life from a single event in 2013. The flooding that affected large areas of central and Eastern Europe in June 2013 created overall losses of USD18 billion (MYR59.18 billion), with insured losses estimated at USD4 billion (MYR13.15 billion). Also in June, raininduced flooding hit Alberta, Canada,
News 360º Industry Updates
causing insured losses of nearly USD2 billion (MYR6.58 billion), the highest ever recorded in the country for any disaster. There were also heavy rains and floods in Australia, India, China, Indonesia, Southern Africa and Argentina in 2013. USD1.00 = MYR3.29
People MAYBANK AGEAS APPOINTS CEO
TALK ORGANISED TO EDUCATE YOUNG LEADERS Source: The Star, 16 December 2013
The General Insurance Association of Malaysia (PIAM), through its Young Manager’s Think Tank (YMTT), held a breakfast talk themed, “Passion For Success” for 60 young managers from the general insurance industry. The YMTT invited Teach For Malaysia co-founder and managing director Dzameer Dzulkifli to speak. Established in 2010, Teach For Malaysia is an independent, non-profit organisation that aims to end education inequity in Malaysia. Dzameer engaged the young managers by sharing his childhood experiences, which he says contributed to his success as a young leader at Teach For Malaysia. He advised that delaying critical decisions on career paths or passions could possibly reduce one’s true potential. He also emphasised the important values of Teach For Malaysia: the sense of responsibility, excellence, collaboration and integration. In addition, Dzameer emphasised that the most effective way to implement values is to demonstrate it and practice accountability, opposed to merely preaching it to subordinates. He stressed the importance of a legacy of positive values. The talk is one out of various initiatives that address the need to collectively re-brand the general insurance industry as an attractive employer of choice and the need for proper talent management.
Source: Bernama Online, 4 December 2013
Maybank Ageas Holdings Bhd has appointed Kamaludin Ahmad as CEO. Kamaludin, 46, will oversee the entire insurance and Takaful businesses of the Maybank Group that includes Etiqa Insurance Bhd and Etiqa Takaful Bhd. Kamaludin, who has served as acting CEO of both Etiqa entities since March 2013, now helms 2,200 employees and is set to lead the growth and expansion of Etiqa, locally and internationally. The 20-year veteran in the financial industry joined the Maybank Group in June 2012 as CEO of Etiqa Insurance and Head of General Business.
PIDM REPS APPOINTED TO KEY POSITIONS Source: Perbadanan Insurans Deposit Malaysia Press Release, 17 December 2013
Perbadanan Insurans Deposit Malaysia (PIDM) has appointed senior officials to key positions in the International Association of Deposit Insurers (IADI) and the International Forum of Insurance Guarantee Schemes (IFIGS). Encik Rafiz Azuan Abdullah, GM of Insurance, Risk Assessment and Monitoring, was appointed as chairman of the Islamic Deposit Insurance Group (IDIG) of IADI. IDIG conducts research on Islamic deposit insurance and issues guidance and core principles to help policy makers develop effective Islamic deposit insurance systems. Ms. Lee Yee Ming, GM of Policy and International, was appointed as chair of the IADI Data and Survey Standing Committee for a three-year term. She has also been an elected member of IADI’s executive council, the governing body of IADI, since 2011. IADI, which was founded in 2002, is a forum for deposit insurers from around the globe to gather and share knowledge and expertise. Ms Lee has also been appointed as executive committee member of the International Forum of Insurance Guarantee Schemes (IFIGS). The Executive Committee directs the activities of IFIGS.
Dzameer Dzulkifli
PIDM administers the national Deposit Insurance System (DIS) and the Takaful and Insurance Benefits Protection System (TIPS) in Malaysia.
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Industry Updates News 360º
REP ADVISES YOUTHS TO TAKE UP INSURANCE
to cover these risks, based predominantly on the Standardised Approach.
Source: The Borneo Post, 12 December 2013
Both IFSB-14 and IFSB-15 are available on the IFSB website, www.ifsb.org.
Sarawak National Youth Organisation (Saberkas) Deputy Secretary-general Dennis Ngau Jok said that it would be a loss if people did not take up insurance policies when they are still young. “Having an insurance policy will bring great benefits to every level of society, especially youths,” he said during the opening ceremony of an insurance seminar for Saberkas members conducted by Takaful Ikhlas Sdn Bhd in December. He lamented that many young people perceived insurance schemes as only for elderly people, which should be changed since current statistics show deteriorating health among young people. “I’m worried, as there are cases of chronic disease at young age, as early as the 20s, before they even reach their 30s,” he added. He said having an insurance policy would greatly relieve the policyholder during times of emergency. “Insurance would at least cover the medical cost,” he said. Also present at the event was Takaful Ikhlas (East Malaysia) Vice President Shamsul Bahrin Sugimin.
STABLE INSURANCE SECTOR IN MALAYSIA Source: The Star, 11 December 2013
TWO NEW STANDARDS ADOPTED FOR ISLAMIC FINANCIAL SERVICES INDUSTRY Source: Islamic Financial Services Board Press Release, 11 December 2013
The Council of the Islamic Financial Services Board (IFSB) resolved to approve the adoption of two new Standards in its 23rd Meeting in Doha, Qatar. The two documents are: • IFSB-14 aims to provide guidance to the industry in understanding the types of risks that the Takāful industry is exposed to. The current global market conditions necessitate the relevant regulatory and supervisory authorities to continue strengthening the industry. With the best practices set forth by this standard, it provides a Sharī`ah-compliant mechanism in the development of a risk management framework for Takāful undertakings. • IFSB-15 is a revised and enhanced version of two previous IFSB Standards on capital adequacy, namely IFSB-2: Capital Adequacy Standard for IIFS (published in 2005) and IFSB-7: Capital Adequacy Requirements for Sukūk, Securitisations and Real Estate Investments (published in 2009). IFSB-15 also adopts key Basel III proposals on capital components and macro prudential tools for the IIFS. This Standard aims to assist the implementation of a capital adequacy framework that will ensure effective coverage of risk exposures of the IIFS and allocation of appropriate capital
Fitch Ratings, while expecting further consolidation in the local insurance market, says the sector and rating outlooks for Malaysia’s life insurance, general insurance and Takaful sectors remain stable for next year. In its latest report, the rating agency said market growth, sound operating margins and adequate capital buffers would continue to reinforce the credit profile of insurers or Takaful operators, and that further consolidation was likely due to the enactment of new insurance regulations and a Takaful capital regime. Demand for insurance products is likely to continue to grow in the near term because of steadily rising disposal income and private consumption, the report added. Fitch said the growth in the family Takaful sector would remain strong, as Takaful operators further expanded their product reach and offerings. Less volatile equity markets and a low interest rate environment would sustain the demand for investmentlinked policies, it noted. The ratings agency said the introduction of a risk-based capital regime for the Takaful sector and the requirement for composite insurers to segregate their operations into separately licensed life and general insurance units could initiate another round of market consolidation, especially in the Takaful sector.
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Company Corner News 360º
Company Corner BUSINESS PARTNERSHIP Source: The Borneo Post, 20 December 2013
K&N Kenanga Holdings Bhd’s (Kenanga) Wealth Management Department announced that it has finalised its partnership with Tokio Marine Life Insurance Malaysia Bhd (Tokio Marine) to distribute its life insurance products. Kenanga Chairman Tengku Dato Paduka Noor Zakiah Binti Tengku Ismail and Tokio Marine Chairman Tan Sri Dato Dr Yahya Bin Awang exchanged documents during the signing ceremony. Also present are Tokio Marine CEO Toi See Jong, Kenanga Group Managing Director Chay Wai Leong, Tokio Marine Deputy CEO Akira Yoshikawa and Kenanga Senior Adviser Bruce Kho.
METLIFE FORMS PARTNERS WITH MALAYSIA’S AMMB SET TO MAKE ACQUISITIONS Source: MetLife, Inc. Press Release, 19 December 2013
MetLife Inc. has reached an agreement with Malaysia’s AMMB Holdings Bhd (AMMB) to seek regulatory approval of a proposed strategic partnership involving AmLife Insurance Berhad (AmLife) and AmFamily Takaful Berhad (AmTakaful). Upon receipt of regulatory approvals and satisfaction of certain other conditions, the proposed transaction will result in MetLife owning a 50 per cent plus one share in AmLife, with the remaining shares owned by AMMB, and AMMB owning a 50 per cent plus one share in AmTakaful, with the remaining shares owned by
MetLife. In addition, the proposed transaction will result in AmLife and AmTakaful entering into exclusive 20year banc assurance and banc Takaful agreements for the distribution of life insurance and family Takaful products through the distribution network of AMMB’s banking subsidiaries, AmBank (M) Berhad and AmIslamic Bank Berhad, in Malaysia. The total consideration for the proposed transaction payable by MetLife is RM 812 million (equivalent to U.S. $249 million) upon completion, subject to customary adjustments. The proposed transaction follows recent announcements from MetLife of the formation of a joint venture with Bank for Investment and Development of Vietnam and opening of a representative office in Myanmar.
People the Allianz Agency Franchise,” said Ong Pin Hean, Chief Sales Officer of Allianz Life Insurance Malaysia Berhad.
ALLIANZ LIFE AGENTS AT ALL-TIME HIGH Source: Allianz Malaysia Berhad Press Release, 28 November 2013
Allianz Life Insurance Malaysia Berhad (Allianz Life) welcomed its 7,000th life insurance agent in December 2013. The increase in agents will further aid customers and the public alike in providing insurance solutions. “When we began operations in Malaysia 11 years ago, we started off with only about 600 life insurance agents and now, we have 7,000 life insurance agents. This is aligned with the growth of Allianz in Malaysia, where our customers are also growing and we want to provide results for our customers especially through one of our main distribution channels;
Ong Pin Hean Chief Sales Officer, Allianz Life Insurance Malaysia Berhad
Allianz Life’s agents provide services to 300,000 policyholders who now contribute more than RM1 billion in gross written premiums. These agents focus on helping Malaysians with their needs on protection, retirement, long-term saving and education. Besides this, Allianz Life’s agency leaders and agents themselves are well known to have devoted their time and effort in philanthropy. They are dedicated entrepreneurs who are close to their community not only to provide insurance advice, but are also active in various Corporate Social Responsibility (CSR) activities.
News 360º Company Corner
AIA TO SELL CITIGROUP INSURANCE IN ASIA-PACIFIC Source: Bloomberg, 19 December 2013
Citigroup Inc. chose AIA Group Ltd. to sell life insurance through its branch network in 11 Asia Pacific countries, as the U.S. bank slashes the number of insurers it partners with in the region. The exclusive 15-year agreement allows AIA, the Asia Pacific region’s third-biggest insurer by market value, to sell products to the U.S. bank’s customers in 11 countries from China to Australia, according to statements from Citigroup and AIA. The partnerships will be set up in each territory in 2014. The deal gives AIA access to holders of more than 34 million individual accounts, as New York-based Citigroup replaces about 150 separate agreements across the region. While no financial details were disclosed, a person familiar with the sale told Bloomberg last month that the agreement could generate as much as U.S.$20 billion (MYR 65.63 billion) in revenue, including commissions and upfront fees. The accord lets the companies tap a region that has a lower rate of insurance penetration than others. Some 2.6 per cent of people in the Asia Pacific region have life insurance, compared with 3.65 per cent in the U.S. and 8.44 per cent in the U.K., according to Swiss Re AG research cited in the Citigroup statement. U.S$1.00 = MYR3.28
NKSJ HOLDINGS BROADENS INTERNATIONAL FOOTPRINT WITH ACQUISITION OF LLOYD’S INSURER, CANOPIUS GROUP Source: Joint Press Release by NKSJ Holdings and Canopius Group Limited, 18 December 2013
NKSJ Holdings (NKSJ), a top three Japanese insurer, has signed an agreement, through its insurance subsidiary Sompo Japan Insurance Inc. (Sompo Japan), to purchase 100 per cent of the shares of Canopius Group Limited (Canopius), a leading specialist (re)insurer predominantly operating in the Lloyd’s market. The agreement was signed with funds managed by private equity firm Bregal Capital LLC (Bregal), Canopius’s majority shareholder, and with minority shareholders, comprising Canopius’s senior management team. Sompo Japan will pay £594m (approx. MYR3.2 bil), which represents a 1.5x multiple based on Canopius’s unaudited tangible net asset value (TNAV) at 30 June 2013. This price will be adjusted to reflect Canopius’s audited TNAV at 31 December 2013. The acquisition will be sourced from existing funds. Subject to regulatory approval, the transaction is expected to close in the second quarter of 2014. Canopius will form the foundation of NKSJ Group’s specialty insurance business and will increase the profile of NKSJ Group’s international business. On completion, Canopius will be managed as a separate specialty insurer as part of NKSJ’s core group insurer, Sompo Japan. Canopius will retain its established and globally respected brand, and the incumbent management team will remain in place. £1.00 = MYR5.37
People ALLIANZ GENERAL’S RISK ENGINEERS PROVIDE SOLUTIONS
Syed Zain Syed Noh Head of Risk Management, Allianz General Source: Allianz Malaysia Berhad Press Release, 30 December 2013
As an insurer, Allianz General Insurance Company (Malaysia) Berhad (Allianz General) understands the importance of risk management and mitigation. The company has a group of experienced and skilled risk engineers that assess and provide best possible risk solutions to customers in the various different industries throughout the country. “Managing risks is the core of our business as a property and casualty insurer. At Allianz, we strongly believe in the practices of risk reduction and mitigation. Hence, we prefer prevention rather than cure, simply for the sake of our customers’ safety, security and most importantly, the continuity of their operations and businesses. In this regard, we give risk mitigation advice to customers,” said Syed Zain Syed Noh, Allianz General’s head of risk management. Qualified employees with science and engineering backgrounds provide risk analysis consultation. They conduct property, engineering and project risk analysis on site for customers. The main objective is to understand and appreciate the customer’s operations and most importantly to assist or provide advice to customers on any shortfalls identified, as far as foreseeable risks hazard exposures are concerned.
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Feature
Importance of Retirement Planning:
Financial Education for Retirees Text Dato’ Steve Ong | CEO of Private Pension Administrator | The Central Administrator for Private Retirement Scheme (PRS)
ASK ANYONE ABOUT THE IMPORTANCE OF PLANNING FOR HIS OR HER RETIREMENT AND THE ANSWER IS A RESOUNDING, “YES, IT IS IMPORTANT.” YET, NO MATTER HOW CRUCIAL RETIREMENT PLANNING IS, MOST PEOPLE DO NOT SEEM TO HAVE THE URGENCY TO EQUIP THEMSELVES WITH A PROPER RETIREMENT PLAN THAT WILL SEE THEM THROUGH A FINANCIALLY SECURED RETIREMENT. THERE IS A RELUCTANCE TO PLAN FOR THE FUTURE, AS RETIREMENT OFTEN SEEMS TO BE FAR AWAY, BUT THE REALITY IS THAT IT WILL COME SOONER THAN WE THINK.
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T
he adage that “people don’t plan to fail but fail to plan” is a good reminder that our retirement future needs to be addressed now with a proper retirement plan and action in order to ensure that the future does not come as a “surprise,” and that we have the ability to influence it now.
wonder of compounding are your best friends when it comes to retirement saving.
In trying to understand the mindset of Malaysians on the subject of retirement and why they lack interest in taking control of their financial future, the Private Pension Administrator Malaysia (PPA) has found five common excuses, which are based on unfounded assumptions or myths on how people plan for their retirement. This, together with a lack of urgency, often leads them to procrastinate in taking action now to secure their retirement plans.
Finally, Myth #5 – People have the impression that they can cut back on their expenses when they retire. But in reality, if someone is already used to a certain lifestyle, it is not easy to adjust. In addition, we live in an environment with rising inflation and increasing medical cost. It is imperative to plan your finances adequately for your retirement.
THE 5 RETIREMENT MYTHS
“ Financial illiteracy may stunt people’s ability to save and invest for retirement, undermining their well being in old age.
Myth#1 – Malaysians have the mindset that their EPF savings will be enough to take care of them through their retirement years. The common assumption made is that their EPF contributions will be adequate for them to replace their earned income when they retire. However, people should take note that their EPF contributions may or may not be sufficient to replace earned income. EPF 2011 statistics showed that a whopping 72 per cent of EPF members who are at the pre-retirement age of 54 have savings of just RM50,000 and less. Coupled with that, 50 per cent of retirees spend their entire EPF savings within five years. Myth #2 – Many people make the assumption that their children can take care of them during their old age; however, due to the escalating cost of living, some children find it difficult to even provide for their own families, much less than for their own old folks. Myth #3 – There’s plenty of time. It all has to do with timing. Some people reckon it is too early for them to start saving for retirement, while others think they can’t do much because it is already too late for them to start. No matter when you start saving, time and the
Myth #4 – I can still work. This deals with working after retirement. Choosing to work after retirement is one thing, but being compelled to work just to survive is another.
THE BIG RETIREMENT PROBLEM Research has shown that the reason people around the world do not plan adequately for their retirement and arrive at their retirement with little or no wealth is mainly due to the lack of financial literacy and being woefully underinformed about basic financial concepts. Financial illiteracy may stunt people’s ability to save and invest for retirement, undermining their well being in old age. Experts often point to poor financial decision-making as a cause of the retirement security crisis and render retirees the most vulnerable to economic hardship in retirement. The problem becomes more critical as retirees move away from professionally managed pension toward do-it-yourself financial planning. This is telling, as statistics show that more than half of retirees in Malaysia spend their entire EPF savings within five years. It is easy to fall into the trap of depleting your retirement savings if one treats the savings as a windfall and not keeping it invested to garner passive income. Whilst the above retirement issues have been commonly raised, the lack of interest and urgency for people to take planning for their retirement seriously suggests that there is a need to bring retirement issues to a personal level, whereby individuals can find out for
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themselves what they need to focus on to properly plan for their retirement. PPA has come out to help individuals plan for their retirement by focusing their attention on three main issues that must be addressed now; otherwise they may contribute towards making retirement a big problem later.
THE CURRENT AVERAGE LIFE EXPECTANCY OF A MALAYSIAN
75
THIS NUMBER IS EXPECTED TO INCREASE TO BEYOND 80 IN A FEW YEARS TO COME
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Leaving one’s retirement to chance may put you in financial jeopardy, resulting in old age dependency and poverty.
First, people need to ask whether they have adequately planned for their retirement income to replace their earned income, so as to continue to enjoy their current standards of living. The rule of thumb is 2/3 replacement income ratio of the last drawn salary, i.e. if a person earns RM6,000 before he retires, he will need RM4,000 as his monthly retirement income to continue to enjoy relatively the same standard of living he has become accustomed to. How much a person needs for their retirement – whether it is RM800 or RM8,000 – really depends on their pre-retirement lifestyle, health situation and family dependents. Without sufficiently replacing their earned income when they retired, retirees will have to cut back on their living standards or fall into the dependency of others to take care of them, especially if they are no longer fit to work to earn their own income. Second, people need to ensure that their income can sustain them for the whole duration of their retirement years. The key issue here is outliving your retirement funds, which would otherwise leave people very vulnerable and out of income to support when they are older. Malaysians are living longer and longer. The current average life expectancy of a Malaysian is about 75 years, and this number is expected to increase to beyond 80 in a few years to come if medical marvels continue to keep us healthy. This means, Malaysians on average would have to allocate enough savings to sustain 20 to 30 years of their retirement life so they do not have to outlive their savings, with the current retirement age at 60.
Finally, there is a need to have retirement income inflation adjusted. Inflation has a subtle and quiet way of increasing the cost of living and eroding purchasing power. While RM1 million seems a lot today, it may not buy a lot 10 years down the road. As such, we need to make sure our money works hard for us by ensuring the growth rate of our retirement savings and investments is higher than that of inflation; otherwise inflation will erode the standard and quality of our retirement life over time. If the concerns of adequacy, sustainability and inflationary are not addressed now with proper planning for retirement, people will be leaving it to “chance that things will turn out alright” for them when they retire. Leaving one’s retirement to chance may put you in financial jeopardy, resulting in old age dependency and poverty. It is with this in mind, that the PPA is addressing the issues of inadequacy of savings among the elderly, longer life expectancy, inadequate savings due to shorter periods of savings and longer periods of spending by promoting awareness and education to empower the public to take control of their retirement lives. For these reasons, the Private Retirement Scheme (PRS) was launched to promote saving and investing adequately to the public. Malaysians now have two pillars for their retirement, namely the mandatory EPF scheme and the voluntary PRS scheme. In the future, every working Malaysian ought to have two retirement schemes that will provide financial security for their retirement.
HOW TO PLAN FOR YOUR RETIREMENT?
Save – Accumulating funds for retirement needs to be a disciplined and regular activity to achieve the desired retirement nest egg. Smart retirement planning suggests that we set aside an additional 10 per cent of our take-home pay for retirement. We
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...there is a need to have retirement income inflation adjusted. Inflation has a subtle and quiet way of increasing the cost of living and eroding purchasing power
retirement accumulation, capital growth or retirement income generation. In addition, people will need to customize their retirement investment plan according to their age, lifestyle and financial circumstances. Before making an investment decision, people should consider the different type of risks that may affect them and learn to manage risks by way of diversification, managing the performance of investments and knowing the choices that are available.
Retire – Retirement is not a destination but a long journey.
also need to be very clear on the purpose, that it is for retirement only and not for other purposes. At PPA, we strongly encourage members to do regular monthly contributions for PRS to inculcate the habit of saving for retirement, whether you are starting young in your 20s or later in your 50s. The longer the time horizon one saves for your retirement, the more savings one will attain to replace your income at retirement. Regular contributions will help to “dollar cost average” your savings, a technique designed to reduce market risk through the systematic regular contributions at pre-determined intervals and set amounts.
Invest – While saving is setting aside money, investing it provides compounding growth. Money that is saved and invested has a potential to enjoy compound growth and potentially higher return than money parked in bank deposits to at least beat inflation. When investing, people need to ask what their retirement objective is – for pre-
During the 30 to 35 years pre-retirement phase, it is a crucial time for a person to accumulate adequate funds for retirement. But it does not stop there. Retirement also means, during the golden years (also known as decumulation phase), one is able to manage his or her retirement savings in order to stretch a good 20 years. The best way to do so is to keep your savings invested and make a monthly withdrawal of a set amount, enough to use as expenditures, as passive income. This is to ensure that your money continues to work hard for you and for you to spend it on only necessary things post-retirement.
Enjoy – Retirement should be the most exciting phase in our lives, but it requires us to have the income and financial security to make our retirement years golden ones. The end objective of retirement planning is to ensure that we enjoy the golden years with adequate, sustainable and inflation adjusted income. For all the accumulating years, which seem to mean sacrificing our immediate for our future consumption, it is the only sure way to provide enjoyment for our retirement years. Malaysians can now take control of their retirement by following PPA’s simple formula for successful retirement – S.I.R.E (Save. Invest. Retire. Enjoy). i
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Trend Feature
Economic Growth, Regulatory Development Create Attractive Market in Malaysia Text Contributed by A.M. Best Asia-Pacific Ltd.
THE MALAYSIAN INSURANCE INDUSTRY IS AMONG THE FASTEST EMERGING MARKETS OF THE GLOBAL INSURANCE INDUSTRY; ITS STABLE ECONOMIC GROWTH AND WELL-DEVELOPED REGULATORY FRAMEWORK HAVE DRAWN THE ATTENTION OF INTERNATIONAL INSURERS. WITH THE PROPOSED FINANCIAL SERVICES ACT 2013 AND ISLAMIC FINANCIAL SERVICES ACT 2013 EFFECTIVE THIS PAST JUNE, THE IMPLEMENTATION OF THE INTERNAL CAPITAL ADEQUACY ASSESSMENT PROCESS (ICAAP) AND THE LIBERALIZATION OF THE INSURANCE SECTOR, MALAYSIA PROVIDES A COMPETITIVE OPERATING ENVIRONMENT WITH FINANCIAL STABILITY AND A WELL-FRAMED REGULATORY SYSTEM FOR THE FINANCE AND INSURANCE SECTORS.
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alaysia’s economy has recovered strongly since 2009, with real gross domestic product (GDP) expanding by 5.6 percent in 2012 after growing 5.1 percent in 2011. Domestic demand, consumption and investment are expected to remain strong, and growth was forecasted to be 4.4 percent for 2013. Compared with other South East Asian countries, Malaysia has a relatively higher limit on foreign ownership, which allows foreign investors to buy as much as 70 percent of domestic insurers. The regulator, Bank Negara Malaysia (BNM), has encouraged mergers and acquisitions in this fragmented industry, leading to a decline in the number of conventional insurers to 35 in 2012 from 44 in 2002. The opportunity for growth in Malaysia has attracted regional insurers to local businesses. Notable recent mergers and acquisitions include AIA Group Ltd.’s purchase of ING’s Malaysian insurance business and the acquisition of MUI Continental Insurance Bhd by Tokio Marine Holdings Inc. The major lines of business in the general or non-life insurance sector for both conventional and Takaful insurance remain motor, fire, personal accident and medical. In 2012, motor represented 47 percent of the gross premium written (GPW) for conventional insurers and 59 percent for Takaful insurers. Fire, personal accident and medical contributed 30 percent of total GPW for conventional insurers and 27 percent for Takaful insurers. Other lines for conventional insurers include marine, aviation and transit (10 percent), engineering (4 percent) and liability (3 percent). The composition of general insurers’ funds has remained stable over the past five years, with the majority of assets held in debt securities. In 2012, private debt securities and Malaysian government securities accounted for 25 percent and 20 percent of general insurers’ funds, respectively. The remainder are cash and deposits (25 percent); other investments
Feature Trend
“
According to BNM, the industry’s risk management continued to improve.
took effect in January 2012, introduced premium adjustments across all vehicle types and paved the way for eventual de-tariffing of motor insurance premiums in 2016. According to BNM, the industry’s risk management continued to improve. By 2012, the capital adequacy ratio for the whole insurance industry was adequate at 222.3 percent, compared with 221.5 percent in 2011 and well above the supervisory minimum requirement of 130 percent.
FINANCIAL SERVICE ACT 2013 AND ISLAMIC FINANCIAL SERVICE ACT 2013 With the
and assets (20 percent); amounts due to clients (7 percent); property, plant and equipment (2 percent); and loans, investment properties and foreign assets (1 percent). Between 2008 and 2012, GPW in Malaysia’s conventional general insurance market increased by an average of 7.8 percent annually. In 2012, Malaysian general insurance recorded total GPW of MYR 14,678.8 million, up 8 percent from MYR 13,604.9 million in 2011. The Malaysian general insurance market is expected to maintain strong growth in the next couple of years, and intense competition will continue in both direct and reinsurance markets.
At the closing of 2012, the Malaysian general insurance sector reported an underwriting profit of MYR 1,399 million. In the past five years, favorable results were driven by improving underwriting performance across most lines of business. In 2012, the industry combined ratio dropped to 86.5 percent from 97.4 percent in 2008, primarily due to the industry’s efforts to tighten underwriting policies and claims management. Specifically, the net claim ratio of Motor Act business improved somewhat to 242 percent in 2012 from 301 percent in 2011. This ratio is expected to reduce further as the New Motor Cover Framework, which
Financial Service Act 2013 and Islamic Financial Service Act 2013 taking effect June 30, the regulatory and supervisory framework for the financial services sector in Malaysia entered a new era. The introduction of the two new acts is expected to provide a uniform legislative framework to govern all financial sectors in the country, including both conventional and Islamic. The most significant change to the insurance industry is that composite insurers and Takaful operators no longer are allowed to carry on both life insurance/family Takaful business and general insurance/general Takaful business. The only exemptions to this new requirement are licensed professional reinsurers and ReTakaful operators. Also, insurers are given a period of five years before the new rule is enforced.
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Trend Feature
The separation of general insurance and life insurance licenses will benefit the long-term health of the Malaysian insurance industry. On one hand, it prevents composite insurers from filling the short-term cash flow shortage arising from general insurance claims with the long-term investment fund from life insurance business. On the other hand, the separation will enhance operational efficiency in the longer run, as operations can be more focused in terms of strategic management, product design, customer service, etc. In the near term, the separation might increase operational costs, as more resources and personnel will be needed up front. However, given its long-term benefits, the proposed separation is still considered positive to the Malaysian insurance industry. Insurance companies as well as policyholders will benefit in the end. The new act is also expected to drive mergers and acquisitions in the market. Larger composite players are likely to have sufficient funds to secure both general and life insurance licenses. However, some smaller composite insurers might have trouble meeting the capital requirements for both entities. They might then choose to retain only one license and dispose of the other sector of business, thus heating up consolidation activity again.
MALAYSIAN GENERAL INSURANCE TOTAL GPW
2012
MYR14,678.8 million UP
8%
2011
MYR13,604.9 million THE COMPOSITION OF GENERAL INSURERS’ FUNDS (2012)
7 21 20
25
% 20 25 PRIVATE DEBT SECURITIES
MALAYSIAN GOVERNMENT SECURITIES
CASH & DEPOSITS
OTHER INVESTMENTS & ASSETS
As there are more Takaful operators than conventional insurers with composite licenses (eight composite Takaful operators vs. six composite conventional insurers at year end 2012), the new act is likely to have a bigger impact on Takaful operators than on conventional insurers. However, the new rule will not apply to the four family Takaful companies that secured their licenses in 2010.
AMOUNTS DUE TO CLIENTS
PROPERTY, PLANT & EQUIPMENT
LOANS, INVESTMENT PROPERTIES & FOREIGN ASSETS
MARKET PREPARES FOR GRADUAL REMOVAL OF VOLUNTARY CESSION The voluntary cession (VC) arrangement to Malaysia’s national reinsurer has operated since 1973; primary general insurers in Malaysia strictly follow the cession percentage indicated by BNM. With the development of the local insurance and reinsurance markets, VC has been on a downward trend. In fact, BNM has indicated the VC arrangement will be eventually removed. In April 2013, Malaysian Reinsurance Berhad (Malaysian Re) announced that BNM had confirmed the VC arrangement would be extended for another two years from Jan. 1, 2014 through Dec. 31, 2015, with the VC level for classes other than motor and personal accident further reduced to 2.5 percent. The VC arrangement is also expected to be removed from 2016, in line with the de-tariffing of fire and motor premiums. The removal of the VC in Malaysia gives local direct insurers more flexibility in selecting their reinsurance programs. Direct players with solid capitalization will choose to fully retain the smaller risks such as motor and personal accident. However, players facing capital pressure might continue with proportional reinsurance programs for solvency relief, but they will have more options. Removal of VC is likely to have some impact on Malaysian Re’s premium revenue from the local market. However, it is not expected to substantially affect other reinsurers in the market, although some players might be able to pick up more quota-share business. i
Open Column
Networking Tips for Introverts Text Hairul Hilmi Ramlee, AMII | hairul@mii.org.my
WHEN AN ACQUAINTANCE FROM THE INDUSTRY SHARED with me her challenges with some agents that do not network with other fellow participants during coffee breaks at venues such as conferences, seminars or official gatherings, it gave me the idea to write something that could be interesting to some, hopefully to the introverts. I was once a hardcore introvert and am probably still in my nature, but I like to believe that I am very much improved now. My career in the financial services industry of more than 15 years has helped me with some essential social skills, and thanks to close friends who have been sincere in providing guidance and tips.
“...there is nothing wrong with being an introvert. Imagine if this world was full of extroverts!”
First, let me make this very clear: there is nothing wrong with being an introvert. Imagine if this world was full of extroverts! What is not quite right is when we allow our nature to limit our potential to grow and succeed. Have you encountered these while attending conferences or seminars? • Find reason to spend time in the rest room during coffee breaks, even though there is no need to do so • Busy on the mobile phone and tablet, checking for emails and messages, even though there is no urgent message at all • Making non urgent calls during coffee breaks • Busy eating and drinking by yourself • Busy visiting exhibition booths, although it can be done during non-peak time • Be at a spot which is far away from the crowd or sitting alone at one corner • Keeping close with your own group – never wanting to be apart; even during lunch breaks, must sit side by side
Focus
• Don’t go for coffee breaks, instead remain in the room, pretending to read important materials • Go up to your room during coffee breaks or skipping lunch Well, the list can be exhaustive. The above could be among the many things that we do or excuses that we make in order to avoid networking. If you hate networking, it is an issue that we can’t address in this article. This article is intended for those who want to network, but who are not quite successful in doing so. Some tips you can consider next time you are social networking: • Don’t prejudge people too early • Don’t associate people with negativity quickly • Face your fear factor • Don’t be inferior with yourself • Embrace differences, i.e. race, nationality, lifestyle, language, etc. • Pre-set your mind with positive targets before attending the event • Always keep your name card ready in your pocket and set targets of how many business cards you want to exchange during the event. Dropping your card in a lucky draw box does not count! • Always stay in the crowd • Stop finding reasons to stay away from coffee breaks In any change of management, baby steps can lead to bigger successes. Hence, choose a solution that you think you can commit 100 per cent and just do it. In the next round, you can choose another set of solutions. The important thing is that you want to change. When we want to change, we will do whatever it takes to make things happen. i
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Open Column
Fact Versus Misconception Text Billy Gumbang, CMII, AMII | Labuan FSA | billy@labuanfsa.gov.my
“Although there is nothing wrong with this general understanding one cannot ignore the truth that there are many possibilities where insurance offers may be structured.”
INSURANCE MAY NOT BE THE HOTTEST TOPIC FOR discussion for many people from different walks of life. In fact some label it as a waste of money and simply ignore its importance until they hit the wall and a dire need to have a policy arises. No doubt that, to some extent, the low acquisition of knowledge and less attention given to the subject of insurance, is influenced by the belief system and environment where we are living in, as well as the values rooted in our upbringing. Although today we are living in a modern and borderless world, where almost everything can be reached by a swipe of our finger, it is difficult to comprehend the fact that the level of market awareness on insurance is still relatively low as compared to other more developed societies. This trend is not only seen in Malaysia but other countries within the region where the driving force for insurance penetration relies heavily on government intervention through compulsory cover and the aggressiveness and marketing prowess of the agents.
THE JOURNEY BEGINS Under the backdrop of many misconceptions about insurance, one may think that starting a career in this field could prove to be more risky as compared to other sectors that are more prominently established. To a novice that has just started to establish a strong grasp on the subject matter, I must say that it is not an easy journey to travel. The main stumbling block is not the negative hearsays that keep on nagging in the mind, but rather the fear of failure for taking the wrong career path. Being raised in one of the most remote areas in the Land of Hornbill, where accessibility and basic needs remain a major issue, I was nurtured to be an independent person with the liberty to decide what I want
to do in my life. Difficult situations allowed me to be extra prudent and cautious with any major decisions and I did not have any buffer for making mistakes. I started off my career as an insurance dummy with trivial experience on the subject under my belt. With limited knowledge and exposure on the subject matter, not knowing whether or not I had made the right choice, I braved my pursuit of insurance back in 2006 when I took up a job with the organisation that I am still serving. I must say that it was not an easy decision, given that I had limited options to consider at that particular time. To make the story more exciting, allow me to share on how my bonding with insurance began. My very first encounter with insurance began at the end of 2004 when I took “Insurance and Risks” as part of my first-degree coursework in my final semester. Believe it or not, I was awarded the Best Student Award for that particular subject, fully sponsored by the insurance industry players as part of their annual Corporate Social Responsibility programme, which made me 500 ringgit richer. Even then, I was very naive and clueless as to whether or not such limited knowledge gained from one particular syllabus would be useful in my future endeavours. After all, my major was international finance, and it is quite different as compared to insurance. Without thinking too much about it, given my financial and accounting acumen, I was quite determined to purse the finance-related profession, and surely not insurance! I thought my journey with insurance ended there, but it evolved instead. In 2005, prior to my graduation, I was offered to be an intern at one of the major reinsurance companies where a large proportion of the business was undertaken with overseas counterparts. Such internship programmes were made compulsory as a part of the prerequisite in completing the coursework. Little did I know that the internship programme would bring any merit for a deeper bonding with insurance until I realised that I was actually surrounded by people who are passionate about insurance and the jobs they are doing, to be exact, reinsurance business. That was where my interest and the desire to know more about insurance took off and continues to flourish today. Although the nature of my job does not involve developing any insurance product, I, however, started to accumulate knowledge and experience
Open Column
Focus
have ventured into more complex yet viable structures such as captive insurance, which in itself presents a wide continuum of formations: either pure captive, group or association captive, rent-a-captive, to name a few. Other more complex structure includes the protected-cell company captive, or in some jurisdictions, it is called segregated portfolio company.
SEEING THE BEAUTIFUL PICTURE
in my day-to-day task of drafting sets of regulations for licensing and operations of an insurance company. Guided by self-courage and the desire to acquire the knowledge at all costs, supplemented by the pressure to be fit to do the job, I persevered. The tasks required of me were not only challenging but also interesting due to the variety of unique insurance structures that I was exposed to. After several years of working in the sector, I started to widen my paradigm beyond the fundamentals by understanding the fact that indeed insurance is a massive subject to be explored. To any average person, understanding insurance revolves around rudimentary life and general business. Although there is nothing wrong with this general understanding one cannot ignore the fact that there are many possibilities where insurance offers may be structured. For those who are familiar with the landscape of the international financial centre, it is not uncommon to note that many jurisdictions
Today, after a modest eight years of looking at insurance from the regulatory standpoint, I realise that there are so many areas that remain foreign to me. It is indeed very exciting when I began to see it as an opportunity to explore more, and at the same time, stay updated with the developments in the industry. The personal strive, passion and highest appreciation towards knowledge are the main driving forces for me to complete the Certificate of MII - Insurance last year and still continue on with DMII and AMII. To be frank, although the recognition accorded for having such qualifications is undeniably important, it is the true passion about the subject matter that is propelling me to move on. Simply said, learning is a never-ending journey. As a little point to ponder by those who are still deciding whether or not to pursue insurance as a profession, my simple advice would be: search within your heart and try to link the dots. I am grateful that today I am able to see a beautiful picture of the connected dots in my life. Your first dot, as mine, could be as small as just reading this article! i
“After several years of working in the sector, I started to widen my paradigm beyond the fundamentals by understanding the fact that indeed insurance is a massive subject to be explored”
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Knowledge Management Feature
LEARNING & IDEA CAPTURE Text Dr Ida Yasin | Senior Manager | Malaysia Productivity Corporation (MPC) | ida@mpc.gov.my
A KEY ASPECT OF KNOWLEDGE MANAGEMENT (KM) AT THE PERSONAL AND TEAM LEVEL IS TO MORE 'COLLECTIVELY AND SYSTEMATICALLY' CAPTURE THE LEARNING AND IDEAS THAT ARE TAKING PLACE. THE CONCEPT OF LEARNING AND IDEA CAPTURE PROVIDES A GUIDE ON HOW TO DO THIS.
Feature Knowledge Management
the beginning of projects, and then become forgotten over time.
WHAT IS LEARNING AND IDEA CAPTURE? his is particularly important in the insurance industry because you will need to help clients understand their insurance needs, explain their options to them and hopefully help them purchase appropriate insurance policies. You could work in a variety of areas in insurance, such as an underwriter, a sales representative, an asset manager, a customer service representative or an actuary. A theme that is constantly emphasised by insurance professionals is that the industry is ultimately about helping people when they need it the most.
T
WHY USE THIS TOOL? Many organisations would like their people to be more creative, generate more ideas, learn faster and turn their new learning into better knowledge to share, apply and exploit. However, if you observe individuals and teams in most organisations, you will readily see that they are continually coming up with new learning and new ideas most of the time, especially in team conversations and collaborative work. 'The problem is not a shortage of new learning and ideas, but we do not effectively capture these learning and ideas — and systematically do anything with them!' We need to find better methods, tools and techniques to do this collectively and systematically. Imagine two organisations in the same competitive business, say in the insurance industry. One organisation does not capture learning and ideas, as they happen in the workplace — collectively and systematically — but does this 'episodically' from time to time. We know this is ineffective because most of the best new learning and ideas occur at
20% OF THE WORKING POPULATION LIKES CAPTURING LEARNING AND IDEAS — SYSTEMATICALLY AND COLLECTIVELY
The other organisation collects learning and ideas as they happen in the workplace — 'continuously' — and submit them to people who are able to appraise them and turn them into better applicable knowledge each month. It does not require much imagination to see that the second organisation will definitely learn faster, make smarter decisions and create new innovative products and services faster. The other key reason for capturing learning and ideas is also very powerful. 'The very process of writing down explicitly what you think you have learned, or a new idea, is a fundamental process of knowledge organisation that will develop further and refine the tacit knowledge in the individual to the next higher level.' If you have written a book or article/paper yourself, you will know intuitively that you are not just merely 'dumping what you know' on paper. The very process of writing is a creative process that forces and disciplines the individual to develop and organise his/her knowledge faster. So there is a very good reason why every individual knowledge worker needs to learn how to better capture new learning and ideas. You can also capture lesson-learned each day while doing your work.
HOW TO USE LEARNING AND IDEA CAPTURE There are many ways to capture new learning, ideas, and insights. As new technologies emerge, even more possibilities will exist. For example: Personal capture tools • Own memory (vulnerable as the only method) • Notepad (useful but can be fragmented)
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Knowledge Management Feature
• Personal paper-based organisers (adding more structure) • Personal digital assistant (PDA) notes and do not forget (more structure and electronic storage and dissemination) • Personal computer (PC) – email, notes, documents, databases (more structure and electronic storage and dissemination) • Blogs and K-logs (Knowledge Blogging) – a very powerful way to capture both spontaneous and structured learning, ideas and insights • Camera (pictures to add more information and context) • Camcorder (videos to add more information and context) • Voice recorder (to capture speech)
USEFUL LINK More information on effective capturing of learning and ideas may be found at http://bit.ly/NdhLtj
• Scanner (to capture documents to computer) Collective capture tools • Corporate Communities of Practice, network forums and discussion forums • Electronic chat rooms • Corporate Intranet(s) • Internet and websites • Team (Collective) K-logs (team blogs) • Wikis • Social networks (Facebook, Linkedin, etc.) • Corporate telephone system • Audio conferencing • Video conferencing (and PC-based video conferencing) Ideally, personal capture tools should be integrated with corporate capture tools; for example, a PDA (or say an Apple iPhone, Android or Blackberry) would be synchronised with a PC and a corporate intranet/knowledge portal. New learning, ideas and insights can be captured onto simple document formats/templates, capturing, for example: • Date and time • Person capturing the learning/idea
• Situation • Project or work (code) • Client or customer (code) • Location • Context • New learning or idea or insight • Next step/action
A NOTE ON FACILITATION Discuss with the group how people are too preoccupied with being driven and measured by performance activities. For example, ask 'What tasks have I performed/not performed today?’ Conduct a class exercise to enable participants to get a direct experience of 'personally capturing new learning and/or ideas.’ For example, ask the participants to consider a typical working day or session or recent meeting or even this course itself. Ask the group to think for a few minutes, personally, about 'What have I learned today?' and to write it down. Discuss with the group how these two different approaches feel doing and learning. Discuss with the group how 'learning' is 'doing' for knowledge workers. Discuss the old industrial paradigm of work ('what have I done') and the new knowledge-working paradigm ('what am I learning').
WHEN TO USE LEARNING AND IDEA CAPTURE (AND WHEN NOT) Naturally, electronic tools are much preferred to paperbased tools for less risk of omission, speed, and accuracy. However, the key step is to capture learning and ideas manually or electronically.
WHERE TO USE LEARNING AND IDEA CAPTURE Capturing learning and ideas — systematically and collectively — is a new way of working for many people. It is a new discipline to learn. Apparently, approximately 20 per cent of the working population automatically likes to work this way, and many do so, naturally. This means that 80 per cent of us need to learn how to work this way. The numbers are growing, especially among the young generation. i
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Feature Insight
Analysing Runoff Road Crashes Text Abdul Rahmat Abdul Manap | crashengineering@gmail.com
A RUNOFF ROAD CRASH TYPICALLY INVOLVES A SINGLE VEHICLE LEAVING THE INTENDED TRAVEL PATH. IN MOST CASES, THE ERRANT VEHICLE MAY ENCROACH ONTO THE ROADSIDE AND COLLIDE WITH ROADSIDE FURNITURE APPARATUS DURING THIS DEPARTURE PROCESS.
runoff road crash is generally categorised into two groups: off-road crashes and on-road crashes where the vehicle remained on road after the crash. In analysing runoff road crashes, there are few important issues that need to be considered. First and foremost is physical evidence pertaining to road marking evidence commonly associated with runoff road crashes. In a classic ‘fish-hook’ crash, where the driver exerts excessive steering input during a crash avoidance manoeuvre, evidence of a yaw mark is expected on the crash site. A yaw mark is different from a regular braking mark. A yaw mark is a scuffmark made on a surface by a rotating tire, which is slipping parallel to its axis. A yaw mark is typically less perceptible to detect, less dense than a normal braking mark and relatively does not last long. Yet, it is one of the important evidences in analysing a runoff road crash. It not only helps the crash investigator resolve some of technical issues, such as critical speed of the vehicle before crash or any possibility of road defect and design, it also helps explain driver behaviour before the crash takes place. For instance, examining the exit angle of tire marks leaving the roadway in a runoff road crash may reveal driving performance before the crash. An abrupt exit angle of the tire mark may indicate a sudden manoeuvre in avoidance of an obstacle on the road, while a shallow exit angle (yet an unusually long tire mark) may imply the driver fell asleep a few seconds before the crash.
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The second issue is physical evidence pertaining to the severity of the injury from the crash. One of the leading factors that increase the injury severity in runoff road crashes is that it usually involves striking a roadside object. The collision is extremely hazardous, as these usually involve narrow impact and nonabsorbing energy structures. Specifically, this type of collision is characterised by lack of stopping distance, massive deceleration of force experienced by the victim and intrusion of a roadside object inside the passenger compartment. The most commonly struck roadside objects are a natural or planted tree, a guardrail, poles, bridge parapets and concrete barriers. It is also worth mentioning that some
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aspect of the environment may contribute an increase of the severity of the crash injury. The substandard designs of road such as improper installation of road barriers, presence of hazardous road apparatus within a road clear zone and inadequate road signage are often cited among leading factors. Rollover crashes are frequently the result of a runoff road crash. It is commonly associated with a massive impact to the survival space of the occupant due to roof collapse, severe internal collision of occupant and occupant ejection from the vehicle. In technical terms, a rollover crash is generally defined as an event in which a vehicle rolls at least 90°. It is usually initiated with great force on the leading side tire that is sufficient enough to cause the centre of mass of the vehicle to rise. For example, a vehicle that drifted from the roadway may roll due to the impact with road kerb. In the real world, a rollover crash may not be straightforward to analyse. Tasks such as a determination of the number of rolls of the vehicle, the orientation of the vehicle during the impact with the ground and an analysis of interior collision are necessary for detailed analysis of the vehicle’s deformation, occupant kinematic and injury causation. In the perspective of crash epidemiology, it is well established that the contributing factor of a crash seldom has one single unambiguous cause, but is mainly encompassed of three main factors: environment related, vehicle and human. In term of environmental factors, many studies have demonstrated that substandard design of road curves, rural type roads and highspeed roadways are among the significant factors that increase the likelihood of runoff road crashes. Similarly, adverse weather and night time periods are often associated with the high risk fatality of runoff road crashes. In term of vehicle-related factors, vehicle characteristic may contribute to likelihood of runoff road crash. A short wheel base and high centre of gravity may increase the propensity of rollover during a runoff road crash. There is a small percentage of runoff crashes that are caused by mechanical failure, such as brake or steering failure. However, cases involving vehicle mechanical
failure may be underreported, as it is quite difficult to establish a pre-crash mechanical failure from the already damaged vehicle. In terms of occupant-related factors, vehicles with male drivers, younger drivers and those driving under the influence are found to be more likely involved in runoff road crashes. Driver performance, such as sleepiness, inattentive driving and fatigue are also among the leading risk factors that contribute to the occurrence of runoff road crashes.
EFFECTIVENESS OF ABS SIGNIFICANTLY REDUCED REAR-END AND PEDESTRIAN COLLISIONS
INCREASED THE LIKELIHOOD OF RUNOFF ROAD AND ROLLOVER CRASHES
SINGLE VEHICLE RUNOFF ROAD CRASHES
17-28% ROLLOVER CRASHES
49%
In a recent study on the effectiveness of ABS (antilock braking system) in crash reduction, there is an alarming concern pertaining to its relation to runoff road crashes. While it is evident that ABS has significantly reduced rear-end and pedestrian collisions, it has increased the likelihood of runoff road and rollover crashes. Data from various countries shows a statistically significant increase in single vehicle runoff road crashes ranging from 17 per cent to 28 per cent, and a dramatic increase of up to 49 per cent in rollover crashes. Some experts argue that the very steering control that ABS provides ‘allows’ steering inputs that translate into runoff road crashes, whereas the non-ABS equipped vehicle will skid out of control until striking a stationary object. Electronic Stability Control or ESC, a more advanced braking system that combines ABS and a traction control system, has demonstrated a promising result in reduction of runoff road crashes. So far, it has been shown that vehicles fitted with ESC were involved in less accidents and less serious crashes than the vehicles without. ESC has now become a widely recognised safety system in crash avoidance and has become mandatory for all new cars in many countries in Europe. This article has highlighted some of the salient findings pertaining to runoff road crashes. It is important to note that similar to any other type of crash, a runoff road crash varies in its nature throughout the time, depending on how the automotive ecosystem changes in its policy and adoption to technology. Having a continuous monitoring and in depth analysis on information on crashes will provide better understanding in measuring the magnitude of problems as well as designing effective and strategic intervention. i
Featuring the Following Leading Speakers:
Feature Insight Alan Polivnick Partner Watson, Farley & Williams (Thailand) Ltd, Thailand
Anand Ghnavello Mechanical Engineer Forensic Services Sdn Bhd, Malaysia David Jonas CEO - CMC Insurance Solutions Markets Cooperative Research Centre Australia
Henry Dumas Supervisor RGL Forensics, Singapore
Ian Roberts Partner, Clyde & Co, Singapore K Karunamoorthy Advocate and Solicitor Karunamoorthy & Associates Malaysia Peter Shelford Country Managing Partner, Thailand (Director (Partner) DLA Piper Singapore (Pte) Ltd)
Rudolf Frei Managing Director of Insurance Management Consulting ASIA IBNR Insurance Consulting Ltd, Hong Kong
Sydney Soo Head of Claims Asia Capital Reinsurance Group Pte, Singapore
and many more...
Organized by:
Supported by:
General Insurance Association of Malaysia (PIAM)
Life Insurance Association of Malaysia (LIAM)
Association of Malaysian Loss Adjusters (AMLA)
Malaysia Insurance and Takaful Brokers Association (MITBA)
Media partner :
National Insurance Claims Society (NICS)
Malaysian Takaful Association (MTA)
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Cover Story Feature
Unintended Governance Challenges For CEOs Text Navin Pasricha | Chairman | Columbus Circle Governance | navin@cct-global.com
THERE IS NO DOUBT THAT THE CORPORATE GOVERNANCE ARRANGEMENTS IN LISTED COMPANIES HAVE BEEN IMPROVING OVER THE YEARS, AND THERE HAVE BEEN A NUMBER OF REASONS FOR THIS. FIRST, THE PREFERENCE BY INVESTORS TO PUT THEIR MONEY INTO COMPANIES WITH GOOD TRANSPARENCY, RATHER THAN OPAQUE CORPORATE GOVERNANCE ARRANGEMENTS, HAS FORCED COMPANIES ALL AROUND THE WORLD TO IMPROVE IN THIS AREA. SECOND, THE REGULAR WAVE OF CORPORATE SCANDALS OVER THE YEARS HAS CATALYSED REGULATORS AND STOCK EXCHANGES TO INTRODUCE MORE COMPREHENSIVE CORPORATE GOVERNANCE LEGISLATION AND REGULATIONS TO IMPROVE THEIR SURVEILLANCE METHODS.
Feature Cover Story
“MORE PRESSURE ON THE ROLE OF CEOS”
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The CEO is the lynch pin – the person in the middle of the board and the management team that carries out the board’s strategy and policies
nfortunately, as a side effect of this general improvement in corporate governance practices and standards, there has been more pressure placed on the role of the CEO. Some of the new governance challenges have been intentional. Others, however, are unintentional consequences and perhaps not even fully recognised, but they do add a significant burden to the CEO’s already challenging role. The best example of an intentional impact on the role of the CEO is the split of the chairman and CEO positions. At one time, it was fairly commonplace for the same person to be both chairman of the board and the CEO. While this was practical and undoubtedly efficient, it obviously did not hold well in a situation of an overzealous CEO, as it gave him/her too much power, while at the same time, the guidance and monitoring role of the board became depleted. It is because of this, that in most jurisdictions, there is a requirement to split the chairman and CEO positions. This is a governance initiative, where even though the CEO’s challenge increases, the benefits are worthwhile. There have been other governance changes, where the impact on the CEO is perhaps unintentional. Chief among these is the gradual introduction of a larger proportion of independent directors on the boards of listed companies. The theory is that the more independent that the directors are, the more likely the board is likely to act in the interests of the shareholders as a whole, rather than in favour of a single or select group of shareholders. There is no argument that the presence of independent directors does bring a
more objective mind-set to the scene. However, this has also brought with it a class of directors that is not familiar with the business. In some cases, an independent director is not only unfamiliar with the workings of the company, but also has negligible experience of the industry itself – we have all heard of some of the difficult situations created by, say, medical doctors being on the boards of banks or insurance companies. They put themselves at risk because they do not understand some of the technicalities, and they also put the performance of the company at risk as well for the same reason.
THE CEO IS BY NATURE THE CAPTAIN OF THE SHIP WHO GETS THINGS DONE. HE/SHE IS A LEADER, NOT AN EDUCATOR. This situation, of a large number of independent directors, has an immediate impact on the role of the CEO. The CEO is the lynch pin – the person in the middle of the board and the management team that carries out the board’s strategy and policies. If a large proportion of board members do not understand the business in detail, a lot of the CEO’s time is taken up in educating them in too much explanation of proposals and “holding the hand” of the non- technical board members. This can greatly impact the performance of a CEO that is by nature the captain of the ship that gets things done. He/She is a leader and not the born educator that he/she suddenly has to act as. If the CEO does not excel at this type of education, the governance impact is that board decisions are slower or worse, and there are no decisions at all in areas where the board is uncomfortable. In order to get around this, board members are usually allowed to engage consultants at the cost of the company – this unfortunately simply adds to cost and
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slows things down even further. Another solution that some companies adopt is to set up board committees made up of those directors that do understand the dynamics of the business. This, too, is not ideal because there is a proliferation of committees and, as before, the speed of decision-making is affected. The independent board, although a good thing from a governance perspective, has meant that the successful CEO has to be much more skilled at internal education and persuasion than was the case in earlier times. As boards have taken on more and more responsibility and liability, such as for overseeing risk and controls, they have generally formed subcommittees to focus on these areas: for instance, the audit committee and the risk management committee. Once these board committees are formed, it becomes clear to the committee members that they have a great deal of responsibility but no resources to check or implement. So for instance, if you are on the audit committee, you have the responsibility to make sure that the audit is done properly and the controls were adequate and working properly throughout the year. Unfortunately, as an audit committee member, you will have no resources to actually “check” anything. It is because of this, that in recent years, the reporting line of the internal auditor has gone from going to the CEO to the chairman of the audit committee.
THE CEO IS DEPRIVED OF THIS USEFUL RESOURCE. The change of the reporting line of the internal auditor is good for the audit committee, but not so good for the role of the CEO. The CEO also manages by remote control, and in the past, actually relied on the internal auditor to be his/her eyes and ears and ensure that the information that was being passed to him/her was always good and accurate and that
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The obvious answer to the internal audit gap seems to be to increase the audit resources and give some of the newly available time to operational issues
things were working fine down the line of management. Since the reporting line of the internal auditor changed, the CEO is deprived of this useful resource and is left exposed. Of course, some of the work done by an internal audit is still of use to the CEO and management team; however, by and large, the internal audit focus has changed to compliance and assurance on probity matters since the reporting line to the audit committee has changed. Prior to this, the greater focus of internal auditors has been operational and performance audits. The obvious answer to the internal audit gap seems to be to increase the audit resources and give some of the newly available time to operational issues. This is indeed the solution that many companies follow. The need for board committees to have resources has also led in some cases to the depletion of CEO authority in areas that he/she has primary accountability. The prime example of this is the risk function in banks. In some banks, the chief risk officer reports directly to the board’s risk committee and not to the CEO, as was the case in the past. This was largely a reaction to the problems of the sub prime mortgage crisis that led to global financial problems in 2007 and 2008. At the beginning of that crisis, in a number of cases, the opinion of the risk officer was overridden by a dominant CEO. There is a very telling quote from a written submission by Paul Moore, former head of Group Regulatory Risk at HBOS, to a U.K. treasury inquiry. He argued that HBOS had “a cultural indisposition to challenge” and that the task of “being a risk and compliance manager … felt a bit like being a man in a rowing boat trying to slow down an oil tanker.” Due to the prevalence of the sales culture in HBOS, Mr. Moore suggested that the “balance and
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separation of powers was just far too weighted in favour of the CEO and their executives.” He also alleged that his team had been subject to “threatening” behaviour during the course of its risk compliance. Mr. Moore was dismissed by HBOS in 2004. He sued for unfair dismissal. With this kind of behaviour among some top executives, it is only natural that boards and regulators would want to shore up the authority of risk officers by making them semi-independent of the CEO, and giving them the clout of the board to back them up. However, on the flip side, there is a price to pay in terms of the effectiveness of the CEO. Consider this – the CEO is ultimately responsible for delivering the profit result of the company. In most companies, profits are a fine balance between the risks taken and expected returns. This is especially so in banks, where the entire business is one of risk and return. In this situation, it is surely a large restraint on the performance of a CEO by making him/her solely responsible for returns but having a joint or committee decisionmaking body for risk decisions. There has no doubt been a large advancement in corporate governance over the past few years. However, it is important to realise that all advances come with a cost and the cost in terms of additional challenges for CEOs is perhaps underestimated. i
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...the CEO is ultimately responsible for delivering the profit result of the company. In most companies, profits are a fine balance between the risks taken and expected returns.
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Challenges Ahead for De-tariffication Compiled DeCalais Sdn Bhd
WITH JUST TWO YEARS TO GO BEFORE THE LONG-AWAITED DETARIFFICATION OF MOTOR INSURANCE IN MALAYSIA, IT IS CERTAINLY TIME FOR INDUSTRY PLAYERS TO BE DEVELOPING THE SYSTEMS AND EDUCATING BOTH THEIR STAFF AND THE PUBLIC TO MAKE DE-TARIFFICATION A REALITY AS PLANNED IN 2016. THE TOPIC WAS CERTAINLY A HOT BUTTON AT THE THIRD MALAYSIA INSURANCE SUMMIT IN KUALA LUMPUR LATE LAST YEAR.
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he benefits of detariffication are well appreciated by both insurers and consumers alike. On the insurers side, they will be able to differentiate between good and not so good motor risks and charge accordingly instead of having to stick to the table rate even for known bad risks. In other words, insurers will no longer have to do unprofitable business. On the consumer side, the good drivers will be able to receive lower premiums rather than being lumped together, for the purposes of calculating premiums, with all the other drivers in Malaysia who happen to own the same category of vehicle. The move will also encourage competition between insurers and this is usually a good thing from the perspective of consumers.
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WHAT INSURERS NEED TO DO TO BENEFIT FROM THE DETARIFFICATION? The discussions at the Summit homed in on some of the internal challenges that insurers now face in order to be ready to benefit from the detariffication in 2016. Two years seems a long time, but for such significant change as de-tariffication it is indeed a short period because not only do systems need to change but so does the whole sales culture. On the systems side, the technical aspects have to be completed such as the data analysis of the claims history of the insurer, the actuarial calculations and judgements, the internal classification of risk categories, pricing and the development and deployment of front-end systems. On the sales side, there has to be a cultural change from one of simply reading off the premium from a tariff table to one of using a front-end risk
assessment or scoring system of proposals and explaining the benefits of related aspects to clients such as claims processing speed and so on. This does not mean that every sales person is going to be making risk assessment decisions, but rather they need to develop the skills to use the software solutions, such as scoring systems, that are being developed to allow front line sales people to enter the relevant scores and come up with a risk score or other mechanism on which to base a premium.
HEADS UP GIVEN BY BNM These sorts of changes cannot happen overnight and if it was a case of starting today, a two-year lead-up would have been too short. Fortunately Bank Negara Malaysia (BNM) signalled the changes to industry players much earlier and has even been preparing the ground amongst consumers. For instance, the initial pricing impact could be an increase in premiums because motor tariffs were static for a very long time. As a preparatory step, BNM has brought in gradual premium increases since 2012 so that there will not be a sudden shock increase to premiums in 2016. Consumers’ expectations may need to be further managed in the run-up period and the impacts of the de-tariffication explained further to consumers.
INDUSTRY’S CONCERNS OF THE DE-TARIFFICATION … The three major concerns at the Summit were related to the possibility of a price war on the removal of the fixed tariff system, the scarcity of the necessary skills in Malaysia and the lack of adequately granular claims data on which to base pricing and reserving decisions. In respect of a price war it has to be recognised that it is an ever-present fact of competitive business. In fact the price competitiveness is one of the
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Consumers’ expectations may need to be further managed in the run-up period and the impacts of the de-tariffication explained further to consumers.
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direct benefits of de-tariffication for consumers. However, any price competitiveness is unlikely to be large for two reasons. Firstly, nobody is going to compete on price for the higher risks, after all, nobody wants low margin risks that you know are going to turn into claims. The price competitiveness is going to be for good risks and margins here could be eroded especially in the early days as insurers vie for market share in the new environment. However, these types of moves eventually make the industry more efficient as industry players start concentrating on internal costs in order to preserve their margins in an environment where there is price pressure. There may also be some consolidation in the market, as some players simply cannot make the grade in terms of margin. So the bottom line is that there will be more price competition, but it already exists in every other part of the business and it is not really a new challenge. Ultimately, it is a good thing for both individual companies and consumers alike. Equally, the lack of certain skilled resources such as actuaries cannot be denied. Fortunately, although the skills may not be home grown, they do exist at an international level. Malaysia is certainly not the first country to have a non-standard tariff basis for pricing of motor risks. Whilst for some players accessing these international skills may be difficult, we should also recognise that many Malaysian players already have access to both skills and systems through their overseas joint ventures or ownership structures. The existence of overseas standards in terms of operations, prudential guidelines and business rules also gives the industry in Malaysia a head start.
RECOMMENDATIONS & MOVING FORWARD … In order to assist in the data area, there were suggestions at the Summit to collate industry-wide statistics for use by insurers in the computation of basic claims costs. Gut feel estimates amongst some delegates at the Summit were that many insurers might be up to 12 months behind in planned development towards detariffication. For these players especially, but also for all affected insurers, the message to take away from the Summit would have been that although detariffication is a good move which will benefit them directly, it is not something that is being handed over on a plate. Making de-tariffication a success needs focus, investment and innovative solutions to the many challenges that are part and parcel of such significant changes. i
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...the bottom line is that there will be more price competition, but it already exists in every other part of the business and it is not really a new challenge
MII Highlight Events
MII Breakfast Talk 2014: Developing the Positive Self-Belief Within Text Edwin Antas
The Malaysian Insurance Institute (MII) organised the Breakfast Talk on Developing the Positive Self-Belief Within on 19 February 2014 at MII City Centre, Wisma Sime Darby, Kuala Lumpur. The complimentary half-day programme is an exclusive benefit for MII Members. There were 43 members from all sectors of the insurance industry that attended this talk. The talk was presented by Mr. Chan Say Aun, MBA, Portsmouth, UK. He is a trained InnerTalk speaker certified by Dr. Eldon Taylor. Dr. Eldon Taylor is the world’s foremost authority and guru in subconscious communications and self-empowerment programmes. The talk aimed to provide participants with InnerTalk’s programme on empowering human towards greater success in life. It covers the power of thoughts, how humans are being unconsciously manipulated and brainwashed, to discover the unconscious development which is self-reinforced, sabotaging ourselves towards achieving goals in life, and
the power of subliminal communication towards developing long-lasting positive self-belief in the subconscious mind. The InnerTalk programme is a powerful mind entrainment/empowerment programme. The InnerTalk programmes are very easy and friendly to use. It comes in the form of patented high technological audio CD backed by more than 15 clinical
double blind tests that is scientifically proven to be effective. The user simply plays the programme in the background while they carry on with whatever they are doing, even when they are sleeping. While the conscious mind enjoys the pleasant music and nature sounds, the subconscious mind recognises and receives the powerful, life-changing affirmations or positive messages. The programme is suitable for all ages.
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Events MII Highlights
Human Capital Development – Dialogue Text Harizam Mahalil
As part of the continuous effort to remain relevant and involved in the insurance industry, The Malaysia Insurance Institute (MII) has successfully organised a Human Capital Development – Dialogue on 22 January 2014 at MII City Centre, Kuala Lumpur. The objectives of the dialogue were to update the industry on MII’s development and projects, to obtain feedback from the industry and to strengthen the relationships within the industry. The dialogue managed to attract the community of Training Heads and Human Resource Heads from various insurance companies such as ACE Jerneh, MSIG, Tokio Marine Life, Great Eastern Life, Etiqa, RHB Insurance, Allianz, MCIS Zurich, and Sun Life, to name a few. A total of 47 key representatives from member companies of PIAM, LIAM, MITBA, MTA, and AIF participated in the dialogue session. The session was facilitated by MII’s Chief Executive Officer, Pn. Khadijah Abdullah and MII’s Chief Operating Officer, En. Mohd Taipor Suhadah.
Among the issues presented and discussed were the Capacity Building Projects i.e. Integrated Learning Management System (ILMS), Transformation Projects, newly developed training programme for 2014 etc. The lively and active participation by attendees at the dialogue provided many insights and fresh ideas that can help the industry and MII in achieving better growth and performance in human capital development together. One of the participants commented, “Very positive and exciting start to 2014 by MII in organising this dialogue. Looking forward to more.” This is a positive statement indeed to understand and further develop new programmes that matters and will strengthen the relationships within the insurance industry.”
EDUCATIONAL SERVICE PROVIDER OF THE YEAR 2012
The Malaysian Insurance Institute
PROFESSIONAL SERVICE PROVIDER OF THE YEAR 2007
ACTIVITIES CALENDER 2014 MONTH
DATE
PROGRAMME
VENUE
CODE
Field Trip & Site Visit I: Wes Port, MICS
MII City Centre, KL Klang, Selangor
MBT2
11
MII Breakfast Talk III: EQ Workout
MII City Centre, KL
MBT3
MARCH
18
MII Breakfast Talk I: Understanding FSA and its Impact on Insurers
MII City Centre, KL
MBT1
APRIL
12
Treasure Hunt
TBC
TH
JUNE
25
Annual General Meeting
TBC
AGM
AUGUST
21
MII Breakfast Talk IV: Retirement & Financial Planning
MII City Centre, KL
MBT4
SEPTEMBER
10
Field Trip & Site Visit II: MAS Hangar, KLIA
Sepang, Selangor
SV2
OKTOBER
1
MII Breakfast Talk V: Personal Development
MII City Centre, KL
MBT5
NOVEMBER
1
8th MII Inter Insurance Companies Bowling Tournament
Sunway Mega Lane
MBOWL
19
MII Breakfast Talk II: Inner Talk
27
MARCH
FEBRUARY
SV1
IMPORTANT NOTICE Programmes dates are subject to change at any time. Any changes will be made inform members in timely basis. For the latest information, please visit the latest version of Membership Activities Calendar 2014 from our website at www.insurance.com.my For enquiries, please email to edwin@mii.org.my
PRE – REGISTRATION FORM Full Name : Email :
NRIC : Mobile Number :
I wish to participate the following programme : MBT1
MBT4
SV1
TH
MBT2
MBT5
SV2
MBOWL
MBT3
AGM
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Events MII Highlights
The MDRT Experience 2014 Text Harizam Mahalil
The Amazing MDRT Experience meeting was held successfully from 13-15 February 2014 at the Kuala Lumpur Convention Centre, Malaysia. These three days of sharing was organised by The Million Dollar Round Table (MDRT). This meeting successfully attracted 5,263 participants of various countries from all over the world. The objectives of the meetings were to share ideas, inspiration, motivation and success secrets among MDRT members. MDRT is the key to achieving greater success both in professional life and personal life. The 2014 President of MDRT, Michelle L. Hoesley, delivered the keynote address on the first day and encouraged participants to take the knowledge learned back to work and start the journey to MDRT-level production. The meetings began with the tradition of flag bearers being presented by each member country, including Indonesia, Malaysia, Thailand U.S.A., India, Bangladesh, Pakistan, Hong Kong, Japan and more. The Malaysian flag was carried by Jenny Yeoh, President of MDRT Malaysia, and the MDRT flag was carried by Mohd Manmohan Abdullah, Chair of Host Country Committee 2014. It was a very proud moment for all MDRT members, especially those from MDRT Malaysia.
The session continued with sharing from Jack Uldrich with the title “Ten trends of transforming the world of tomorrow.” He emphasised that the future is here today, that we need to change our thinking, and go out and create the future today. He then instilled the spirit of MDRT in the audience by sharing 10 trends, which included wearable technology, million to billion, big data, collaborative consumption and more. The most memorable quote for the audience was “The best way to predict the future is to create it yourself.” Sanjay Tolani, the second presenter, focused on “Getting to the Top” (of the table) and building a Top-of-the-Table team. He has achieved the status of being an 11-year member of the Courtof-the-Table and has accumulated seven consecutive Top-of-the-Table honours. He also shared his excitement of “Why choose me.” He encouraged participants to stand out and show unique selling points. He also stressed that members should be a competent advisor with full commitment. He defined the reason why someone should do business with you.
MII Highlight Events
Participants were given headsets for the speaker's zone sessions, which only worked inside the ConnecXion Zone. The new experience of the ConnecXion Zone was where participants interacted with successful MDRT members and main platform speakers. They shared advice, ideas, motivation and tools to enhance business and elevate success to the next level. Among the speakers were Mohamad Manmohan Abdullah, Jenny Yeoh Tan Fung, Anne-Marie Lee, Deddy Karuanto, Sanjay Tolani and more. Participants enjoyed the cultural showcase in the connection zone and experienced a variety of Malaysian arts and cultural, such as Do it Yourself (DIY), the school of hard knocks by Royal Selangor, batik painting, woods crafting and other activities.
Apart from that, Colleen Francis, who has achieved the distinction of being Sales Leader for more than 20 years, shared her excitement of the power of mentoring that guarantees success. She encouraged young people to admire and learn from mentors. She believes that success is achieved by teamwork in the facilitation process and during the closing process. The lesson learned here is that relationships are more profitable than sales. The VORTEX principles help. The session continued with panel discussion of “Great Meeting and Great Mentor.” Yolie Aleman Rodriques shared her valuable experience with her mentor, Logan Naidu, who has been a MDRT member for 32 years. The discussion concluded that an MDRT encounter can change business and life, the balance of life and how mentoring benefits both parties as they learn from each other. “Facing objections” was shared by Anthony Mattews Jones. He shared that handling objections is part of a financial advisor’s life. The acronym of FACE - which is Foundation, Agree, Congratulate and Emphasis – helps to handle it better. One must improve the skill and form a study group. He threw questions to the audience, such as “Have we done something different for ourselves?” He ended with the song – “You Raised Me Up” and received a standing ovation from the crowd. Day two was another amazing experience with the ConnecXion Zones. Here there were six (6) zones with five (5) speaker zones and one (1) technology zone. The concurrent sessions gave participants a chance to choose whomever speaker that they liked.
The main platform session on day three by the MDRT Executive Committee included Michelle L. Hoesly, D. Scot Brennan, Caroline A. Banks, Brian D. Heckert and Mark J. Hanna. They discussed how they achieved their success, became leaders of MDRT and now live a life that they cherish. Challenge was also discussed. Other inspired sessions were held by Duncan Macpherson, Eric Feng and Janine Shepherd, all of who received standing ovations from the floor. As participants parted on the final day, they were already thinking of the next MDRT experience in Hong Kong in 2016. It was clear that the objective of the experience had been met. The MDRT Experience was very relevant. Some of the participants extended their stay in Kuala Lumpur to enjoy the popular places and cultural venues. The MDRT experience 2014 in Kuala Lumpur indeed opened a new beginning and aspiration to all of its participants.
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Global Reach MII Highlights
New Ideas, Inspirations Highlight Synthesis of AIC Congress Text Carlo Diaz
Welcoming Speech by The 9th AIC Chairman, Carlo Angelo Diaz in Da Nang, Vietnam
The ASEAN insurance market was the hot topic at the Synthesis of AIC Congress held 4 to 6 December 2013 at the Vinpearl Hotel, Danang, Vietnam. The 3 Rs of insurance – regulation, risk management and ratings – were concepts presented early and discussed as building blocks for growth in the ASEAN transformation. These Rs are vital to insurers because risk sources and complexities have increased over time. The areas involved include traditional risk management, asset liability management, cash flow testing, dynamic financial analysis and enterprise risk and capital management. In order to drive the final growth in the ASEAN market, insurers must manage, monitor and mitigate the balance of their risk profiles and risk management disciplines, as these have a direct impact on financial ratings, which are ultimately embedded in regulation. Early discussions also focused on the ASEAN insurance economy, wherein the first panel illustrated that although the growth in the ASEAN region has been robust, regional business represents only a small fraction of the global and western insurance markets. Therefore, there is still so much potential to be tapped in the ASEAN region. One of the panelists presented a new perspective of integrating science in the way insurance professionals conduct insurance business for evidence-based and smarter business decisions. Some examples were shared on the use of internal and external data analytics being utilised to manage and mitigate
risks to increase efficiency and reduce risks. It was pointed out that insurance also must go back to the basics – operate efficiently, price adequately, pay claims promptly – so that the industry can rebuild consumer trust and drive forward the demand for faster growth. The ASEAN market is likewise evolving from an agri-based market to a vibrant emerging capital market. To boost insurance penetration and growth, there are no quick fixes. The point was made that the industry needs to get insurance basics right again, and deliver the insurance values correctly and efficiently at the right price. There is also a need for insurers to listen to customer barriers and pain points, and reduce them. They must also work to bridge the communication gaps with consumers, and emphasise insurance awareness and education. Conference attendees also discussed the fact that mobilassurance is also gaining strong popularity in its application as an exciting and viable distribution platform for insurance; thus, the opportunities for ASEANs are abundant to enhance outreach, which otherwise, traditional channels are unable to tap into this. Another innovative distribution channel highlighted was the use of social media as an information and feedback platform as a powerful tool to drive consumer endorsements of insurance products.
MII Highlight Global Reach
A multichannel approach to grow business segments highly encouraged by panelists, as well as cost efficiency over various distribution platforms. It was pointed out that automated underwriting using sophisticated pricing engines and predictive underwriting would be a good tool to drive online channels. In pursuing innovative distribution strategies, one of the speakers shared his concept of offensive and defensive strategies. He explained how offensive strategies are those that drive innovation while defensive strategies are those that sustain and enable innovations. Through standardisation of strategies, insurers may benefit from accurate, consistent, transparent and accessible data that can be utilised as a tool towards consistency in what insurers do. The development of an enterprise architecture for IT support should be driven by business demand so that there is a coherent approach in handling business waves and opportunities.
depending on the challenge at hand towards the ASEAN goal of economic integration. Key areas on ASEAN challenges for insurance leaders were likewise presented, wherein leaders must be inclusive, good communicators, multidisciplinary, forward-looking, and a person possessing the heart of a common man, capable of seeing needed conclusions to achieve regional objectives. All of the sessions were very beneficial to everyone, providing new perspectives towards strategic growth. The different views and opinions expressed during the sessions simply reflect the rich diversity of today’s industry. The real challenge is to address the common risks, common market issues and geographic concerns of ASEAN, as the industry moves towards a common objective of economic prosperity.
In addition, practical insights were provided on product innovation – such as exploring protection gaps and translating consumer demands in product designs. Product development and innovation should be based essentially on consumer needs. Customer comprehension of our product is key, through fair, reasonable and understandable product design and value. Some examples were presented on Microinsurance as well as usage-based insurance products, which have been earmarked to proliferate in the ASEAN markets very soon. Industry associations may likewise play a role in developing guidelines with which the industry can move in unison, to simplify policy forms to make products more consumer-friendly, as presented by the General Insurance Association of Japan. Conference panelists also made it clear that having a pool of young and vibrant insurance talent could be a useful source for innovations and growth as presented by the dramatic case study of Vietnam's emerging economy. Revisiting also the basics of insurance in serving the society and economy through voluntary and compulsory coverage likewise was presented as a strategy to grow insurance within the ASEAN market. And insurance products must be explored that reach untapped market space. The final session presented a discourse on leadership challenges in transforming the ASEAN market – and these are best summarised in the ASEAN 2015 Vision of one vision, one identity and one community. Leaders shall be faced with political, economic and socio-cultural challenges to bridge connectivity within the ASEAN markets and their respective sectorial/ministerial bodies. Leadership theories were presented, as a mental structure for leaders to apply the appropriate leadership style,
Mr. Carlo receiving certificate for participating in the 2nd Intake programme organized by ASEAN School of Advanced Insurance Leadership (SAIL)
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Recommended Resources Knowledge Centre
Recommended Resources
Actuarial Practice of General Insurance, 7th ed.
Flood Recovery Innovation and Response III
By Hart, Buchanan and Howe
Editors: D.Proverbs, S.Mambretti, C.A. Brebbia & D. de Wrachien
The 7th Edition is a major revision of this important text which takes into account recent developments in actuarial techniques and the general insurance environment. In particular, it incorporates changes to the legislative, market and social environment, arising in large part from the recommendation of the HIH Royal Commission. These changes have led to much greater responsibility for general insurance actuaries. This text is a reference for actuaries and general insurance practitioners and students, in Australia and overseas. For the past 20 years, the textbook has been authored by three senior actuaries who have, collectively, worked in general insurance, self-insurance and life insurance for over 75 years.
This book presents the latest research in the important area of flood management. It contains papers covering the following topics: flood risk management, flood risk vulnerability, emergency preparedness and response, flood forecasting, flood case studies, responses to reduce vulnerability to flooding.
The 8 Characteristics of The Awesome Adjuster By Carl Van This book provides real-life scenarios that will have true meaning to anyone who has ever dealt with a customer. The author often provides interesting and humorous true stories to outline each of the characteristics, and offers practical advice on how to improve oneself. It is the number one selling claims book every year since its release in 2005, and has sold in over 32 countries around the world. It has been the subject of numerous articles; the highlight of over 150 workshops and classes; and the subject of over 75 keynote speeches.
State Health Insurance Market Reform: Toward Inclusive And Sustainable Health Insurance Markets Edited by Alan C. Monheit and Joel C. Cantor This book provides a critical assessment of the current state of knowledge on insurance market reforms that is accessible to both policymakers and researchers. The contributions provide a critical evaluation of empirical research findings, applied methodologies, and policy implications associated with state reform of small group and individual insurance markets.
Knowledge Centre Recommended Resources
Please visit our Knowledge Centre (KC) at MII City Centre, Wisma Sime Darby, Kuala Lumpur, Malaysia to access our current collection, facilities and resources. For enquiries, please contact Ily or Safiyyah at 603-2692 8828. Email: knowledgecentre@mi i.org.my / Website: www.miielibrary.com
The Appeal of Insurance Edited by Geoffrey Clark, Gregory Anderson, Christian Thomann and J.Matthias Graf Von Der Schulenburg This book traces the ways in which insurance, over the past three centuries, has grown in concert with a clientele largely of its own making. Drawing on the fields of history, sociology, criminology and economics, these essays break new ground in insurance studies by illuminating the dialectical relationship between the expansion of the insurance business and the public demand for economic and social security.
The Leader Who Had No Title: A Modern Fable On Real Success In Business And In Life (6 CDs) By Robin Sharma For more than 15 years, Robin Sharma has been quietly sharing with Fortune 500 companies and many of the super-rich a success formula that has made him one of the most sought-after leadership advisers in the world. He offers a story designed to help people from all walks of life – as well as the organisations they are involved in – create extraordinary success that is meant to engage people, inspire them and deliver real-world tools that will help them live better both at work and at home.
Financial Literacy: Money and Personal Budgeting By Scott Pape Serious but fun. 'Financial Literacy - Money and Personal Budgeting' will help in managing money. It's vital to understand the concept of money and learn how to use it wisely. It provides the basic knowledge about making transactions, using the banking system and budgeting.
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CBP Updates MII Highlights
Status
Status
Status
Publication & Research – Insurance & Takaful Journal (INTAJ)
Integrated Learning Management System (ILMS)/ MES
Online Learning Content
Project Progress
Project Progress
Project Progress
99% 48% 10% Start 01 April 2013 End 28 February 2014
Start 01 April 2013 End 30 August 2014
Start 01 January 2014 End 31 December 2014
Milestones Achieved:
Milestones Achieved:
Milestones Achieved:
The development of the 6th issue of INTAJ was completed on 31 January 2014
• The Final Tender Process Stage 8 – Award (Vendor Appointment) was completed on 13 November 2013
• The RFI for eContent development was completed between 8 January and 17 January 2014. Fourteen Vendors participated in the RFI sessions
Next Milestones: The development of the 6th issue of INTAJ was completed on 31 January 2014
• The process of providing the Letter of Award and Purchase Order to the Vendor was completed on 30 December 2013 • The mobilization of the Vendor team’s to start work on the System Analysis and Design was completed 6 January 2014
Next Milestones: • To assess user requirements • Development (Customization)
• The OLC Tender Briefing was conducted on 24 January 2014 • Evaluated the first stage of the OLC Tender: Compliance Stage • The OLC Tender Committee Briefing was conducted on 25 February 2014.
Next Milestones: • To conduct the Tender Technical Presentation in second week of March 2014 • To evaluate the 2nd Stage of the OLC Tender: Technical Stage • To identify and appoint SME for the OLC project