The insurance industry in Malaysia has been accused of failing to increase penetration rates over the last three years, with a likely industry shake-up expected to have a number of wide-ranging impacts, including on the recruitment of insurance agents working in the Southeast Asian nation.
Bank Negara Malaysia (BNM) governor Datuk Muhammad Ibrahim, delivering a keynote address at the 6th Malaysian Insurance Summit in Kuala Lumpur on Oct. 18, said that between 2000 and 2010, the total assets in the insurance and ‘takaful’ (‘insurance in compliance with Sharia’) sector tripled from RM52 billion to RM181 billion. In that same period, life insurance penetration increased from 33 percent to 51 percent of Malaysia’s population, he said.
“In the more recent years however, this growth has started to plateau. Life insurance penetration has remained stagnant at 55 percent for the past 3 years, while in the general insurance sector, domestic capacity for larger and more specialised risks appears to be reaching its limits,” Muhammad said. “This in turn has contributed towards sustained reinsurance outflows which have an impact on the country's long-term current account balances.”
Muhammad said there were a number of steps the insurance industry in Malaysia needed to address, including growing talent or human resources to take the insurance and takaful sector to the next level.
“As our economic structure evolves, we will need a deep pool of insurance and takaful professionals who can develop and support new solutions for managing risks,” he said. “Unfortunately, talent shortage has been a persistent issue which, if not resolved, will not only hold back the industry from gaining new ground; it could lead to a further retrenchment of business growth. The industry needs to make further efforts to attract and nurture new talents.”
The BNM Governor said insurers also needed to leverage new technologies to be more accessible, more efficient and more agile to stay ahead of the curve, as well as “cultivate and continuously affirm society's trust in the industry.”
“Insurance and takaful products have become more complex with the result that most consumers do not fully understand what they have purchased,” Muhammad said. “A larger number of players chasing the same pool of customers, result in intense competition that gives rise to poor sales practices. Pressure to improve underwriting results by controlling claims costs can also have unintended effects on the consumer experience.”
Muhammad said the industry also needed to explore new cost-efficient delivery channels. “The industry has not done well in this respect. As a catalyst, beginning next year, insurers will be required to offer pure protection products through a direct channel without commissions,” he said. “The high internet and mobile phone penetration in Malaysia suggests that internet or mobile insurance makes good sense. Other untapped channels include banking agents, retail chains, employers and cooperatives. We expect the industry to fully adopt these channels to diversify delivery of services.”
Chow Pui Yee, a consultant with executive recruitment company Monroe Consulting Group Malaysia, said that currently, anyone with a high school certificate and a couple of industry qualifications could sell insurance, and that increased professionalism would be good for the industry.
“Once the policy of offering pure protection policies is implemented, there could be a decrease in the hiring of poorly trained insurance agents as consumers will be able to buy insurance products directly from the insurance companies,” Chow said. “Even if insurance companies were to hire, the people they hire will be more professional and knowledgeable about the latest technology.”
The policy could impact on a range of products, including vehicle, travel, personal accident and house insurance.
One insurance agent with more than 10 years’ experience in the industry said he did not expect to see a reduction in the number of agents in the industry, but “the profiles of salespeople would certainly change.”
“People with direct sales and marketing experience, a background in CRM [customer relationship manager] and being IT savvy will certainly be in greater demand,” he said, adding that the measures would be introduced to make insurance more affordable and accessible to a greater cross-section of society.
Chow, from Monroe Malaysia’s Banking, Finance and Insurance Division, said she looked forward to continuing to work with leading insurance companies to help them meet their specialised recruitment needs.
In addition to banking, finance and insurance, international award-winning Monroe Consulting Group Malaysia specialises in executive recruitment in the Technology, Consumer Goods, Industry and Health sectors.