Source: The Star

Date: Tuesday June 1, 2004

New guidelines to instil confidence
BY DALJIT DHESI

THE proposed Proper Advice Practices Guidelines for life insurance business, which will come into effect on July 1, will instil public confidence in the industry, enhance the professionalism of insurance intermediaries and encourage the development of innovative products, according to industry players.

The move, they added, was a positive one undertaken by Bank Negara in its effort to further develop the life insurance industry in Malaysia .

John Hancock Life Insurance (M) Bhd chief executive officer Khor Hock Seng said the guidelines would instil public confidence in insurers, intermediaries such as agents etc, and the products offered by insurance companies.

Under the guidelines, intermediaries will have to go through a proper fact-finding process with their customers, study their needs and see whether there are any financial gaps and then propose a solution that can address these needs and gaps.

An important aspect of the guidelines is that the intermediary will have to sign on a form to state that he has gone through the process with his customers and has provided advice based on the information provided.

The customer, too, has to acknowledge that he has received the advice that he deems sound and appropriate, Khor said in an interview with StarBiz.

This, he said, would eliminate the possibility of a dispute arising from any mis-selling of policies, and eventually lead to an overall marked improvement in the way insurance was sold.

It would also boost the image of the industry and enhance the penetration of insurance among Malaysians and at the same time, raise the importance of insurance as a choice for career development, Khor added.

MCIS Zurich Insurance Bhd CEO Datuk L. Meyyappan said the guidelines were framed with the consumer in mind and were meant to ensure that agents provide proper advice to buyers of insurance products.

He said from the life insurance industry's point of view, it was also good because the buyers would be able to choose insurance products most suitable to them. This would in turn ensure that the policies stay in the books of a company for a longer duration, probably until maturity or a claim, he added.

From the agent point of view, the guidelines would give them a good opportunity to review the needs of buyers and to propose policies that meet their needs.

MCIS Zurich views the proposed guidelines as being good for consumers, intermediaries and life insurers.

The Life Insurance Association of Malaysia (Liam) president Ezamshah Ismail said the guidelines, introduced by Bank Negara in consultation with Liam, were to ensure that agents were more accountable for their advice and the type of life products recommended to policyholders.

The guidelines aim to further improve insurers, intermediary and consumer relationships, and strengthen consumer protection and public confidence in the insurance industry. This is important as life insurance is a long-term contract and it is essential that policyholders purchase the most appropriate insurance plan to meet their needs.

This augurs well for the life insurance industry and will help to rapidly transform the sales force into financial advisers, hence further boosting the professionalism of intermediaries, and resulting in better services to consumers,he said.

Khor said the fact-finding process used by intermediaries in conforming with the guidelines would give insurers an indication of customer trends in buying insurance, which would enable companies to develop innovative products and further improve their backroom operations.

Asked whether there would be any possible drawbacks from the implementation of the guidelines, Meyyappan said the only drawback envisaged would be that the agent would require more time to establish the needs of the buyer.

He said some people might find this process cumbersome and might want to eliminate it, but overall, such a move would be good for the industry.

Khor said John Hancock did not foresee any implementation problems. There may be little more work for the insurance company's staff and intermediaries but it will become the norm through time, he added.