Meeting the demand for professional advice (Part 1)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Retraining agents 

Formed in April last year, Gibraltar BSN is a partnership between US-based Prudential Financial Inc (PFI) and BSN. The former has a 70% stake, while the latter holds the other 30%. 

The partners took over the business from Uni.Asia Life Assurance Bhd, which is no longer in operation. PFI is not affiliated with Prudential Assurance Bhd, whose parent is UK-based Prudential plc. 

PFI had more than US$1.2 trillion (RM4.7 trillion) in assets under management as at March 31. It is one of the largest insurance companies in the US, with a history that goes back 139 years. It has a presence in more than 40 countries and about US$3.5 trillion worth of gross life insurance in force worldwide.

Gibraltar BSN’s business grew 81% in the first half of this year in terms of annualised premiums, compared with the same period last year, while its gross sum assured grew 113.2%, says Kwo. 

The company is looking to bring something different to the table, he says. “When we look at our vision to deliver a better life insurance offering for all Malaysians, what we want to provide is life insurance solutions; we are not selling products. 

“This goes back to our heritage. John Fairfield Dryden, the founder of PFI, made a statement that a person who works in the life insurance industry should be a ‘missionary of love’, so the whole culture and system [of how we operate] is different.”

To meet the demand for more holistic, professional and personalised advice, Gibraltar BSN plans to retrain its agents using a step-by-step process to help them provide advice and products that are aligned with the needs of its customers.

“We will use a life consultancy system to guide them through a step-by-step process to provide proper advice and services. They are given a blue book with all the steps involved — what to do and what to say when they meet the client,” says Kwo.  

“For example, the life consultant will sit down with the customer and conduct a thorough needs analysis. Then, the consultant will look a chart and offer the customer products that meet his needs. A lot of people don’t really do that.”


This story first appeared in our new digital publication Wealth, a section within the new digitalEdge weekly. Click here to subscribe to our digital products for the next three months.