Putting customers in the driver’s seat on motor insurance

Motor insurance is not something that usually generates massive amounts of news in the local papers. They are, thanks to mandatory laws, a necessity for vehicle owners to bear and not often thought of beyond that.
That all changed last week when news broke about a proposal by the General Insurance Association of Malaysia (PIAM) to introduce rebates of up to 10% to motor insurance policy holders who deal directly with insurance companies instead of going through an independent insurance agent.
The initiative, apparently, was the result of correspondence and meetings between PIAM and Bank Negara Malaysia to promote self-regulation within the motor insurance sector as well as to promote alternative channels of distribution that would spur industry growth and reduce the number of part-time agents.
When contacted by The Malaysian Reserve, Allianz Malaysia Bhd chief executive officer Alexander Ankel praised what his company saw as a move that could eventually lead to a more de-regulated market that is on par with what can be found in developed countries.
"Our experience shows that the culture of open dialogue as being promoted by (Bank Negara Malaysia) has always helped to smoothen the transition of the industry into a more deregulated market.
"We believe that our clients should be able to obtain our products through the distribution channel of their choice," he added. The European market, which is the Allianz Group home market, is an extremely open one that allows for innovative and multi-structured products and Ankel said the group's experience with its home markets indicated that a move towards deregulation was not a bad one.
"A career as a professional insurance agent creates thousands of job opportunities and delivers best customer-centric solutions to consumers," he added.
Some industry observers have indicated that PIAM's move is a welcomed and long overdue one that could help eliminate problems which have hindered the motor insurance sector, including unscrupulous independent agents.
However, there are also those who are against it. These critics have condemned the move, stating that such an initiative did not take into consideration the views of about 40,000 independent agents nationwide and the impact this would have on their livelihood.
The Proton Dealers Association Malaysia (Peda) went so far as to say that the move would destroy the automotive eco-system. According to various reports, Peda said PIAM's initiative could see independent agents lose more than 20% of their income as many new and second-hand car dealers do become agents for the general insurance agents.
At stake, it added, was that annual motor insurance premiums generated by these agents for the insurance firms on average hit the RM1 million per agency mark. The General Insurance Representatives Association Malaysia (Perwakim) has also voiced its criticism on the plan, stating that the industry, which was already feeling the impact of the global financial crisis, could see retrenchments taking place as the staff of up to 20,000 agents are let go.

When contacted, a Bank Negara Malaysia spokesperson said the central bank was not making any statements on the matter and to refer to a statement issued by PIAM last Saturday (May 23).
In that statement, the association said agents would remain a vital part of the sector even with the introduction of mandatory rebates for direct motor insurance purchases. It said agents would continue to be used as long as car owners were comfortable with and appreciative of an agent's services.
"The concern of some agents that there will be a mass exodus of their customers to purchase directly is highly speculative and unwarranted," it added.
PIAM said agents accounted for 60% of all business generated and that its move was intended to benefit consumers who wished to deal directly with companies; who wanted more choices in terms of how they purchased their policies; who wanted the savings generated by dealing directly and who were more mobile and IT savvy.
Allianz Malaysia's Ankel said his company catered to the needs of motor insurance customers via three dominant distribution channels, namely, agency, a bancassurance partnership with CIMB Bank and through motor franchises.
"We are committed to the strong agency workforce of Allianz Malaysia who play a very important role in our distribution capabilities and we are not considering shifting our business model to direct distribution (and) we also entertain walk-in customers who come to our branches to purchase direct insurance. — by Alfean Hardy

(This story appeared in The Malaysian Reserve on May 27, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER)