More competition and new entrants with financial liberalisation

Monday January 4, 2010Tougher year for insurers
More competition and new entrants with financial liberalisation

PETALING JAYA: Insurers in the country are bracing for tougher competition this year with more players joining the race for a slice of the growing domestic insurance business.
The liberalisation of the financial services sector announced earlier this year is expected to result in new entrants to the market until 2011.

With this in mind, existing insurers are aggressively strategising to grow their businesses amid rising competition.

Some of the areas of focus are agency, bancassurance and niche products. Prudential Assurance Malaysia Bhd (PAMB), among others, is expanding the number of its bumiputra agents to further penetrate the bumiputra market which it views as a potential growth area.

Chief executive officer Charlie E. Oropeza said that with more bumiputra agents on board, the company would be able to boost its takaful as well as its conventional business.

In an interview with Starbiz, he said between 15% and 20% of Prudential’s business at present was derived from takaful or Islamic insurance.

PAMB hoped to double its bumiputra agency force to about 3,000 by end of 2009 from the 1,500 in 2008.

Oropeza said the company would not compromise on the quality of its agents as the company increased their numbers.

In this regard, PAMB has been training its agents to become wealth planners so that they advise their clients based on their needs and risk profiles instead of merely selling products.
He described the bumiputra market as lucrative but underserved.

“More than half the population in the country consist of bumiputras and penetration rate of insurance for this segment is in a single digit range. We will also be opening up branches in areas where we see there is potential market for Bumiputras,’’ Oropeza said.

PAMB currently has a total agency force of 11,000, of which about 3,000 are bumiputra agents.
The company had recruited between 4,000 and 5,000 new agents this year, and plans to take in the same number next year.

The insurer has 39 branches nationwide, including East Malaysia.

Bancassurance is another area in which Oropeza hopes to expand with the right partners.

At the moment, Standard Chartered Bank Malaysia distributes PAMB’s insurance products.

Oropeza is confident that PAMB would be able to perform better next year compared with this year.

The insurer’s full year results for 2009 would be out in February.

One of the areas that would boost profitability going forward would be from investment-linked funds, he said.

Prudential’s conventional investment-linked business grew 27% to RM295mil in the first nine months, which was one of the highest in the industry despite the unfavourable economic climate.

Koh Yaw Hui, the CEO of Great Eastern Life Assurance (M) Bhd, the largest life insurer in Malaysia, said the company would be adopting a multi-distribution strategy to reach out to different customer segments.

He added that more focus would be put on the tied agency channel as it was the most dominating channel contributing to more than 80% of the insurer’s business.

Great Eastern currently has about 17,000 agents.

In terms of asset size, Great Eastern is the largest with close to RM40bil, with a base of more than 2.8 million policyholders.

“We will focus on improving the professionalism, leadership and selling skills of our agents in line with our Agency Transformation Programme initiated in 2008.

“Our goal for 2010 is to attract at least 50% of new recruits from graduates and professionals out of the additional 5,000 target set for our agency force,” Koh said.

To beef up its bancassurance business, the company has tied up with OCBC Bank to distribute its products. Moving forward, Koh said he expected this channel to contribute “handsomely” to the company’s overall business.

Apart from this, he added that the company was currently considering opening new branches at various strategic locations.

Great Eastern is also looking at the underserved segment of the younger population and new entrants to the job market with a lower disposable income.

Koh said the company has designed unique products to cater to this segment’s needs, including providing critical illness/medical coverage and long-term savings products starting from as low as RM100.

Great Eastern is targeting double-digit growth next year.

“Up to the third quarter (2009), our total weighted new business premium has grown by 17%,” he said.

“We are very confident in meeting our goals of RM800mil in total weighted new business premiums set for 2009.”

http://biz.thestar.com.my/news/story.asp?file=/2010/1/4/business/5325061&sec=business