Sunday, February 13, 2011

Timber companies having difficulty logging in insurance

By Sonia Krisnan
Timber-based companies in Malaysia are facing an uphill task to underwrite their risks as insurers are shunning them due to past claims ratio for the sector.

The companies are having issues in getting underwriting for their properties, workmen's compensation claims and fire risks, one timber-based company representative told a recent dialoque organised by the Malaysian Timber Industry Board (MTIB).

When contacted, insurers say they are more careful and selective in underwriting risks from timber-based companies as the experience in insuring the sector has generally not improved despite insurers introducing risk improvement measures over the years.

"We're very selective, unless proper risk management and prevention are in place," Syarikat Takaful Malaysia Bhd (Takaful Malaysia) group managing director, Datuk Mohamed Hassan Md Kamil, told The Malaysian Reserve.

In an email reply, Overseas Assurance Corp (M) Bhd chief executive officer Ng Kok Kheng said that the timber industry needs to seriously look at its own operations and find ways to actually reduce its bad claims incidents.

"Although the inherent fire risk is said to be high, not much effort has been taken by industry players to reduce this hazard," he said.

Without providing any figures, a spokesman for the General Insurance Association of Malaysia (PIAM) said that the "losses are beyond tolerance".

Malaysia's timber and timber products growth is projected to grow 6.5% this year compared to its record of RM19.49 billion in 2009, according to a survey by Malaysian Timber Industry Board.

Another general insurer said Malaysia has seen foreign investments in the sector and at least they bring in their better technology and risk management thinking.

"Locals should try to learn from them or take the advice of risk engineers on how they can improve the safety of their operations," he said.

On the insurers' side, Mohamed Hassan said the insurance companies are also finding it tougher to get reinsurance support for wood-based companies.

Insurance companies generally parcel out risks to reinsurance companies like Malaysian Reinsurance Bhd and Swiss Reinsurance Company as part of their risk management strategy.
Another issue faced by insurers are the rates at work in the present market.

"Rates are thin, risks are high. As an insurer, obviously, I would like to see an upward movement of rates," he said. In the past, Mohamed Hassan said Takaful Malaysia has actually declined business coming its way from woodbased companies.

[The Malaysian Reserve, 7 Feb 2011]

Tuesday, May 11, 2010

Manulife eyes smaller insurers

By Ishun P. Ahmad

Manulife Insurance Bhd, which has been on an organic growth path in the last five years, is now looking at buying smaller insurers as one of the ways to expand its market share and business.

“There will be consolidation and Manulife will be one of the consolidators,” said Manulife Insurance’s chief executive officer Kevin McWhinney.

He told The Malaysian Reserve in a recent exclusive interview that the insurance firm, whose listed parent is Manulife Holdings Bhd, is on the look out for an opportunity like buying into insurance companies that works well for its shareholders and be good for policy holders.

When asked if Manulife is open to buying insurance companies, McWhinney replied if the right opportunity presents itself, Manulife has the resources, capital, and the knowhow to integrate companies.

A case in point was when Manulife purchased John Hancock back in 2005.

“With the introduction of risk-based capital, there are players in the market today that have a decision to make whether if they would want to inject more capital into their companies or continue with their insurance business, if that is not their core business they will exit the market and concentrate on their core business. And so definitely those opportunities will present themselves, especially in the next couple of years,” said McWhinney.

According to McWhinney, Manulife has major initiatives to double its 2,000 strong agency force in the next three years with a record increase of 500 agents added in the last 15 months.

Apart from increasing its agency numbers, he said Manulife is looking to have more full time agents, that will have a multiplying effect on productivity and professionalism.

“Feeling the pickup in the market confidence and people interest to join Manulife, we are training people to be more full time professional advisors,” said McWhinney.

Furthermore, Manulife is also looking at growing its distribution by strengthening its agency force through increasing professionalism and productivity. “Last year 2009, Manulife experienced a 25% increase year-on-year, 1Q 2010 over 1Q 2009, on the agency side, which is already doubled the amount of production with overall sales up by 30%,” said McWhinney.

As of 3Q 2009, he said Manulife was at number 12 in terms of market share, and anticipates to move up two notches to 10th place in 2010.

The insurance firm is looking to step up more regional support centres and is actively looking at Kuching for its growing and young population, Penang Island for its mass affluent market, and Kota Kinabalu to increase its presence in East Malaysia.

“The investment is in the hiring of people, agents, and managers in the regional centres,” said McWhinney in regards to the cost of setting up the support centres.

Manulife has currently six of these centres that are also equipped with training facilities each located in Bukit Mertajam, Ipoh, PJ, KL, Johor, and Sibu.

McWhinney said Manulife will continue to focus on three segments that matter most to Malaysians, namely products relating to retirement plan, medical emergencies, and children's education plan. Furthermore, he said Manulife would also look into underserved markets like the Bumiputera market that has a very high potential due to its extremely low penetration rate as well as the underserved markets in the rural areas.

McWhinney commented that the industry has to deal with the high turnover of agents mainly due to the fact that the bulk are part timers and are more likely to be discouraged and less motivated. Malaysia has about 75,000 licensed agents, high in proportion to the country’s 27 million population.

McWhinney said the main challenge is to ensure insurance careers are a fulltime job and not seen as part time, adding that Manulife is tackling this issue head on, and believes in producing caring and professional advisors rather that “you get somebody paddle you a product“.

“Industrywide, we see agents that come and try out the business for a short period of time and because they don’t give it their full commitment, they may get discourage quickly and just return to their fulltime job and don’t pursue it,” he said.

[The Malaysian Reserve, 12 May 2010, page 1]

Deposit insurance limit to be increased

By Bhupinder Singh

The Perbadanan Insurans Deposit Malaysia (PIDM), which administers the deposit insurance system, is proposing to increase the deposit insurance limit from RM60,000 per deposit per member bank to RM250,000 per deposit per member bank effective January 2011.

The PIDM plans to advance a legislative package to the tabled in Parliament for debate and enactment before year-end as part of government backed measures to enhance financial consumer protection in the country.

The government deposit guarantee will lapse at the end of this year and the new guarantee limit proposed by PIDM will replace it as the higher limit level will provide protection to 99% of depositors.

The premium is paid by the financial institutions annually and the PIDM collected some RM131.8 million in premiums at the end of last year when its total Deposit Insurance Funds amounted to RM369.9 million, with the Conventional Deposit Insurance Fund totaling RM320.9 million and the Islamic Deposit Insurance Fund of RM49.0 million.

The PIDM intends to develop legislation to introduce an explicit Insurance Compensation Scheme (ICS) for insurance and takaful policy holders as well.

The ICS, which will be administered by PIDM, is a scheme designed to protect policy holders from the loss of their policy claims or insured benefits in the unlikely event of a failure of an insurance or takaful company.

Hence, the ICS will ensure policy holders of the 14.4 million or so policies in force till the end of 2009, be it insurance and takaful products, will also enjoy the same level of protection provided by PIDM to depositors of commercial banks and Islamic banks.

“The proposed ICS will enhance financial consumer confidence and promote consumer demand for insurance and takaful products,' PIDM said in a statement yesterday.

PIDM will hold discussions with the various stakeholders on the ICS before its tabled to the government.

[The Malaysian Reserve, 12 May 2010, page 1]

Friday, March 19, 2010

Takaful Ikhlas eyes rental, property investments

By Alfean Hardy

Takaful Ikhlas Sdn Bhd, which has invested RM97 million on two tower blocks in Bangsar South, Kuala Lumpur, is targeting similar investments going forward given the long-term sustainability of rental income for revenue generation, its president and chief executive officer Datuk Syed Moheeb Syed Kamarulzaman said.

The Islamic insurance firm used RM87 million of its policy holders’ funds to buy the commercial property and another RM10 million was invested in renovating both towers. The company has more than a million individual and group policy holders to date.

The unit of main boardlisted MNRB Holdings Bhd moved into all of Ikhlas Point Tower 11A and three floors of Ikhlas Point Tower 11 on Feb 1, 2010. Covering a built-up area of 99,286 sq ft in total, some 32,000 plus sq ft in one of the towers have been earmarked for rental/future expansion.
Speaking at a media briefing in Kuala Lumpur last Thursday, Syed Moheeb said, essentially, the buildings were not Takaful Ikhlas’s.
"These buildings were paid by policy holders’ funds coming from our risk fund. So, inevitably, the policy holders are the owners of the buildings, we’re merely renting it from them.
"We chose this strategy because we wanted to ensure rental income to policy holders and, over the last few years, one of the better revenue generating strategies is rental income, which is more sustainable over the long-term," he said.

Going forward, he said Takaful Ikhlas would make use of either shareholders’ funds or policy holders’ funds to purchase buildings and then rent them out to generate rental income.
"By doing this, we will slowly acquire property. Eventually, we also want to house all our branches in our own buildings. We’re not sure yet whether we will use funds from our shareholders or from our policy holders (when we buy these buildings)," he said, adding that Takaful Point was the firm’s first property investment.
Syed Moheeb said Takaful Ikhlas could have ventured into property investment earlier, but he felt that the firm needed to ensure that, whatever it bought, would have made an impact to investment income.
"The fact that (the two towers) have a capital appreciation of more than 20% indicates that this was a good decision.
"Among some of the things that we’re looking at will be rentable office premises and it won’t be anything else at this point in time. Our investment policy has been very cautious and has been more towards capital preservation and, in any thing that we do, we have to make sure that we don’t have to answer to any bad decisions later on," he said.
Syed Moheeb said Takaful Ikhlas was currently looking at housing two new branches in Klang, Selangor, and Kuala Terengganu, Terengganu, by middle of the year in new properties.
"At this point in time we haven’t identified yet any properties yet (for these two new branches). If you look at the 10 branches that we have currently, these are the areas that we would be looking to make investment opportunities," he said.
The Islamic insurer currently has branches in Kota Baru, Johor Baru, Sungai Petani, Ipoh, Kuching and Kota Kinabalu in Kelantan, Johor, Kedah, Perak, Sarawak and Sabah respectively. Asked on how much would be set aside for Takaful Ikhlas’s property buy war chest going forward, Syed Moheeb said the company’s investment strategy was set by the board, which decides how much went into equities, governmentbacked securities and others.
"Where property is concerned, we’re looking at not more than 20%. In the shorter term at least, until our financial year ending Mar 31, 2011, we will cap this at 20%," he said.

(This story appeared in The Malaysian Reserve on 1 March 2010. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on Islamic finance on Mondays, edited by Habhajan Singh, at

Sunday, August 2, 2009

Factory bus operators fume over insurance ‘risk’: The Star

Bus operators ferrying factory workers are fuming with insurance firms for classifying them in the “high risk” category with express and tour buses.
Selangor Workers Bus Operators Association president Jackie Chew Soo Mee said factory buses should not be classified in that category, reports The Star ( July 31, 2009).
"Our operators have a set timetable and the distance is within a district or the next town. Our daily mileage is much lower and the condition of factory buses over a period of time is much better compared to express buses," she said.
Chew suggested that insurance companies create a new scheme to accommodate factory buses in order not to burden operators. Of the 100 factory bus operators in Selangor, half are members of the association.
"With the tough economic period, factory bus operators should not be burdened further. If the new insurance structure is not created, several of our operators will be forced to wind up," she said at the association’s first annual general meeting (AGM).
Chew said the association would appeal to the General Insurance Association of Malaysia (PIAM), Bank Negara and Finance Ministry to create a new insurance scheme for factory bus operators.
She said buses over 12 years old were not allowed to take out comprehensive insurance, with such operators having to buy third party insurance with loading.
Road Transport Department director-general Datuk Solah Mat Hassan, who opened the AGM on behalf of Transport Minister Datuk Seri Ong Tee Keat, said discussions on the insurance scheme was going on with PIAM.

RHB Insurance Eyes RM1.2 Million Premiums From Maid Protector Policy

RHB Insurance Bhd is targeting RM1.2 million in premiums from its latest product, Maid Protector Insurance plan, within the first year of its launch.
RHB group managing director, Datuk Tajuddin Atan, said the premium would be as low as RM60 to RM95 per year.
"This product, which will be offered to only legal foreign maids, will receive an encouraging response from Malaysians who employ maids.
"As at May 2009, a total of 300,000 foreign maids are working in Malaysia," he told a media briefing after the launch of the product here Thursday.
The plan is offered jointly by RHB Insurance and Pos Malaysia Bhd.
It will provide employers with an attractive and competitive protection plan for domestic workers.
The product will provide insurance coverage for maids in the event that they meet with an accident or death, or in the event that an unwanted accident or damage happens to a third party due to negligence of the maids.
Tajuddin said the company was leveraging on Pos Malaysia Bhd's network to offer this product.
The plan will be available at 13 general post offices tomorrow and 671 other post offices nationwide from Aug 15.
The employers can opt for the 12-month or 24-month policy. -- BERNAMA

Finding the right pension model

While the Securities Commission (SC) says it is in the midst of finding successful private pension fund models that best fit Malaysia, fund managers want the models to be transparent and give investors the right to choose their fund managers. Financial planners, meanwhile, say the proposed funds should provide some form of incentives to ensure its successful implementation, reports The Star ( July 25, 2009).
Fortress Capital Asset Management (M) Sdn Bhd chief executive officer Thomas Yong said the proposed pension fund should be liberalised similar to models in many developed nations that allowed savers to choose whom they wished to manage their savings nests.
"If the fund is sufficiently liberalised like that in Australia, savers will have the choice of who manages their investments and what they invest in. While the message is clear that everyone including the self-employed should save for the long term, the issue is who should decide how these savings are managed.
"Should the savers be allowed to decide, with the fund providing adequate disclosures and information, or should the fund decide arbitrarily based on some national average," ,” he told the newspaper.
In any case, he felt the regulatory framework and disclosure standards must first be put in place to ensure effective transparency and liberalisation. A fund manager, who wished to remain anonymous, said the SC while scouting for suitable fund models should ensure investors would be kept informed of the performance of the pension funds managed by all participating fund managers.
“It is not sufficient that the funds’ performance only be disclosed to the regulators, as this will cause doubts among the retirees and the self-employed,” he added.
To ensure the success of such funds, the SC also needed to have asset allocation limits and determine the type of investment instruments permitted for the fund, apart from an appropriate ceiling on fees that fund managers may charge, said Yong. The SC, as the regulator of the proposed funds, is currently gathering input from various jurisdictions to ensure the adoption of successful private pension fund models.
Malaysia is set to have private pension funds by the middle of next year and several fund managers have shown keen interest to manage these funds.
Great Vision Advisory Group head of tax and financial planning Datuk Chua Tia Guan said the funds should not be too flexible to enable contributors to withdraw a lump sum upon retirement as it would easily be exhausted in a short period as in the case of Employees Provident Fund (EPF) withdrawals.
“The government should also provide tax break for the participants of the private pension funds in addition to the current tax relief given on insurance and EPF of RM6,000.
“In Singapore, the government provides tax relief for those who participate in the Supplementary Retirement Scheme, which was introduced many years ago, in addition to the Central Provident Fund,” Chua noted.
He added that proper studies should also be conducted to ensure the funds did not experience similar fate as the disastrous insurance annuity scheme introduced years back. A licensed financial planner said it was meaningless for existing EPF contributors to invest in pension funds unless certain tax benefits were provided.
Licensed financial adviser Jeremy Tan of Standard Financial Planner Sdn Bhd, on the other hand, said the launching of these funds would not be an issue as there was sufficient existing regulatory supervising and monitoring of legitimate investment schemes in the country.