When Sun Life Financial president and CEO Dean Connor pushed for Asia to be the cornerstone of its portfolio, its investors were sceptical. But he proved the naysayers wrong when Sun Life Malaysia made a net income of C$32 million last year. In the final part of the series, Connor shares about the company products and the global outlook for this year.
IN Malaysia, where Muslims make up 60% of the population, takaful products perform exceptionally well as they strictly adhere to the shariah regulations. Moreover, as these products are not limited to Muslims, they are gaining in popularity among non-Muslims as an alternative to conventional insurance products.
Sun Life Malaysia offers medical insurance, endowment policies and investment-linked products in both the conventional and takaful space.
At the moment, it is its takaful products that draw everyone, regardless of their faith, as they focus on the principle of sharing surplus dividends.
“Before Sun Life took over [from Aviva], surplus was never declared. Once the company stabilised, and we put in place robust financial discipline, we distributed the surplus to takaful policy holders for the first time last year. We expect to continue [the payout] this year,” Connor says.
The company plans to introduce more products this year, one of which is a top-up medical plan for customers who are already covered under the group insurance policies provided by their employers. The plan, which can be attached to any other policy, will pay for claims that exceed the limit set under the group policy.
“The medical top-up is for group benefit customers, where your employer’s insurance covers you to a certain limit. You just have to buy this top-up, at a cheaper rate. It is portable, so even if you change jobs or retire, you can continue with the top-up.
“Even if you don’t have the first layer of [insurance] protection, chances are that for minor surgery, it won’t be a huge damage to your savings. When you are hit with one major illness [and costly medical bills, that is where] we come in,” he says.
This product, which Sun Life expects to roll out by the middle of this year, is aimed at boosting one’s coverage upon retirement. “It is very important for people who are currently employed that when you retire [healthcare] is not going to be costly and you don’t have to cover at a high premium.”
Low global interest rates pose a challenge
Building on the success of its takaful programmes, Sun Life Malaysia plans to introduce a shariah-compliant life insurance product this month that will allow a nominee to perform the policy holder’s haj pilgrimage should the latter die prematurely.
Despite the positive growth in Asia, there are challenges. Like other global insurers, Sun Life is saddled with a protractedly low global interest rate environment, especially in Europe and the US. Such an environment poses a major threat to the business models currently used by insurance companies, by reducing investment income and squeezing product margins.
“Some parts of the insurance industry — products, pricing and profitability — are challenged by low interest rates. We are so focused on building the Asian pillar and here, in Malaysia, because the products [we offer] are generally less sensitive to interest rates,” says Connor.
Health insurance and accident insurance, for instance, do not rely on built-up investment income over long periods, as they do not depend on low interest rates, he adds.
Despite the global economic uncertainties, the outlook for life insurance remains positive as it remains an essential product in the area of wealth management — for saving, investing and passing on wealth to the next generation. Ooi notes that existing conditions have helped people realise that life insurance will help protect one’s wealth and family.
“Life insurance takes into consideration the long-term perspective of economic factors instead of the short term. Thus, one should not get overly alarmed and think that their protection and financial benefits will be eroded immediately,” he says.
With Malaysia’s young population and expanding middle income bracket, the demand for protection and wealth accumulation products is rising, Ooi points out. One other important aspect is having enough saved for your golden years, he adds.
Statistics from the Employees Provident Fund (EPF) show that 80% of its contributors will not have enough savings in their retirement fund when they hit 55. The majority of them will not be able to live above the RM830 poverty line in Peninsular Malaysia, especially when more than 75% of its members earn RM2,000 or less a month.
“In general, and not just Malaysians, people are not fully prepared for retirement. The general rule of thumb is you need to have two-thirds of your last salary to maintain your lifestyle post-retirement.
“This does not include medical bills and cost of debts. If you are debt-free, in terms of savings, you have to save at least one-third to achieve the two-thirds,” says Ooi.
“For Malaysians, this is actually easier than you think. Saving 30% of your salary may seem big, but take into consideration your EPF contribution, which already contributes about 23% towards your retirement. The gap is only 10%.”
Apart from financial services and tools, Sun Life also focuses on philanthropy. Its global network is committed to diabetes awareness programmes. Connor says the health and wellness trend has helped the company to educate its clientele.
Last year, Sun Life Malaysia kick-started its campaign by handing out more than 250 diabetes monitoring devices and supplies to underprivileged families. This was part of its “Brighter You” initiative, undertaken with non-governmental organisation Diabetes Malaysia, which provides direct financial assistance to people affected by the disease.
“Diabetes was chosen because it is an epidemic and because no one in insurance, around the world, has stepped up to talk about and deal with it ... We think it is a very important topic, so it is the centrepiece of our campaign,” Connor says.
While Sun Life is still new to the country, its commitment to its customers will not waver, says Connor. The insurer turns 150 this year — this is a testament to its long-term commitment to its customers worldwide, he adds.
“It is a pretty remarkable achievement to be able to survive and strive. Our oldest customer in Hong Kong took out a policy in 1949 and he turns 100 next year. Our longest standing policy holder in the Philippines took out her policy in 1946,” says Connor.
“So, we are making promises that we expect to keep for many decades [to come]. That is how we think about our business.”
This article first appeared in Personal Wealth, a section of The Edge Malaysia, on April 6 - April 12, 2015.