Financial planning the order of the day

Tuesday July 15, 2008

Players say it’s key to insurance peneration amid challenges

PETALING JAYA: Strong emphasis on financial planning is all the more needed to improve the local penetration rate of insurance given the unfavourable economic climate, according to industry players.

Manulife Insurance (M) Bhd president and chief executive officer Peter Roberson said lack of knowledge on insurance was not the reason for the low penetration rate, rather how products were distributed.

“If distributors approach their customers from a financial planning perspective in a professional manner, then customers will be better educated on their needs and more prepared to accept solutions to address those needs.

“Once we can move agents towards practising financial planning, there will be greater awareness on the benefits of insurance among the public. But, to be effective in providing proper financial planning service, one needs to be full-time and professional in the manner he conducts his business,'' he said in an interview.

According to Robertson, distributors have to change their mindset from product pushing to one that focuses on needs-based approach.

What this meant, he said, was instead of seeing a customer to sell a product, the distributor would conduct a proper financial planning analysis before proposing a suitable product.
A spokesman from a general insurance company who shared similar views said currently agents still lacked financial planning skills and there was an urgent need for them to upgrade their skills to ensure products were sold in accordance with customers' needs.

“Although there are programmes and training on financial planning, there are agents who still push products ather than analyse their customers' needs. A change in mindset is crucial here,'' he noted.

Life Insurance Association of Malaysia (Liam) president Ng Lian Lu said the percentage of the population insured last year was about 40.1% and, to enhance the penetration rate, continuous education on the importance of life insurance as one of the wealth management tools was needed.
Ng said a study conducted by US-based Life Insurance Marketing and Research Association International on consumer attitudes and buying behaviour between December 2006 and January 2007, showed the majority of consumers did not understand how life insurance worked, nor did they realise the value of financial planning.

“Therefore, the challenge for the industry is to create branding and educational campaigns to show the value of life insurance and financial planning by utilising a variety of mass media channels in order to reach different segments of the market,” he said.

“In addition, the industry has to provide continuous training and education to the agents to develop the skills necessary to meet the policyholders’ needs.”

Ng said with effect from January 2004, all agents were required to attend a minimum of 30 continuing professional development (CPD) hours each year to maintain their agency contracts.
The CPD framework is a comprehensive training guide covering the different types of training that each level of agency force should pursue.

“The industry is doing its best to enhance the skills of agents on financial planning. Liam continuously works with the Malaysian Insurance Institute, the Malaysian Financial Planning Council and the National Association of Malaysian Life Insurance Financial Advisors to develop new training programmes for the agency force,'' he said.