Insurance premium rebate to go ahead, says BNM

By JASON NG
Bank Negara Malaysia (BNM) will proceed with insurance premium rebate, a move that would give “millions of ringgit” back to consumers, said deputy governer Datuk Mohd Razif Abd Kadir.
The latest policy has come under protest from various quarters as it would effectively give consumers the incentive to bypass the use of agents by mandating insurance companies to give rebates for a direct purchase from insurance companies.
"We should look at the broader perspective particularly in fairness toward consumers," Mohd Razif said in a media briefing in Kuala Lumpur last Friday [June 19, 2009].
The policy for direct purchase channels will be effective July 1, 2009 and the quantum of rebates will depend on the type of insurance covers purchased.
Direct purchase includes walk-in, via internet, direct mailing and telemarketing. For motor insurance, individuals will receive 5% premium rebate in the first year of implementation and 10% subsequently. For others including businesses, insurance companies have the flexibility of providing the rebates.
Last year, the general insurance industry recorded gross premiums of RM4.4 billion, half of which are from the motor insurance segment.
According to BNM, about 15% of the gross premium collected are via direct channels.
"This is part of our fine-tuning of policy to put cash back in consumers' pocket. It is not necessary that the livelihood of the agents would be affected. People will still use the service of the agents if (the service) are value-added," Mohd Razif said.
It is understood that insurance companies pay 10% of the premium to agents, numbering around 40,000 with 15,000 working full time, as commission and consumers should be entitled to enjoy rebates that would otherwise, be pocketed by the insurance companies, he added.
Among those reported to be unhappy includes Proton Dealers Association Malaysia that claimed the policy would "destroy" the automotive dealers network while General Insurance Agents Association Malaysia organised a meeting recently to protest the implementation.
"We had a lot of protest and pressures for us to withdraw," Mohd Razif said, adding that "there is nothing much BNM can do" should there be further protest from any quarters.

(This story appeared in The Malaysian Reserve on June 22, 2009. The Malaysian Reserve is a daily business/finance newspaper published out of Kuala Lumpur, with a sectoral page on insurance & takaful called UNDERWRITER, appearing on alternate Wednesdays)