SJER4271

Group Presentations on Selected Topics

in Actuarial Science and Finance

Topic: General Insurance

 iNSURANCE
a form of risk management mainly used to hedge
against the risk of unforeseen loss.

General Insurance
 Any insurance that is not determined to be life
insurance.
 Coverage period is usually one year which normally
requires one-time premium payment
Major Categories:

Miscellaneo
Marine Fire Aviation Motor Personal us
and transit Accident
Facts:
According to BNM data, as of 2016 there were 40 licensed insurers, of
which 33 are direct insurers. Out of 33, 10 firms offer life insurance, 19 offer
general insurance and 4 offer both life and general insurance.

There are 7 reinsurers currently operating in Malaysia, 5 general reinsurers,

1 life reinsurer, and 1 life and general reinsurer.

According to PIAM, motor insurance remains the main line of non-life

business in Malaysia

BNM is advancing its phased detariffication of motor and fire tariffs plans.
Bank Negara Malaysia(BNM)
 In Malaysia, the insurance industry including the general
insurance industry was brought under the supervision of BNM in
1988
 Roles:
 regulate entities which carry on general insurance business, insurance
broking, adjusting and financial advisory
 supervise the pricing of products from each insurance company
 Sets the level of minimum paid-up capital required and the margins of
solvency of insurance companies
General Insurance Association
of Malaysia (PIAM)
 The general insurance industry’s self regulating body
 Help patrol the fixed tariffs of the motor and fire
insurance for conventional companies
 Working within the context of the government’s Financial
Sector Master Plan(FSMP).
 This plan addresses every area of insurance practice, with an
overall target of moving towards greater deregulation and the
encouragement of free market practice
Distribution Agency
System
Channels
Brokerage
Bancassurance
System

Direct
Group
Response
Marketing
System
 Agency System
As of today, there are over 39,000 general insurance agents in
Malaysia

Agents are required to be registered with General Insurance

General Association of Malaysia(PIAM)
Insurance
Each can only represent a maximum of two general insurance
Agency companies
System
However, it is common practice in Malaysia to sell insurance from
several companies by partnerships between insurance agents.

Sit and pass the Pre-Contract Examination for Insurance Agents (PCEIA)
conducted by The Malaysian Insurance Institute (MII)
Independent Agency
Marketing System

Exclusive Agency
Marketing System

Direct Writer Marketing

System
 Brokerage system
 Licensed by Bank Negara Malaysia (BNM)
 Member of the Malaysia Insurance & Takaful Brokers Association (MITBA)
 Malaysia’s only statutory association approved by Bank Negara Malaysia (BNM)
to represent the interest of insurance and takaful brokers.
 Represent the client
 Advantages:
 Client save time in searching, negotiating and picking the right insurance
protection
 Advise clients on the best to manage their risk
 Guide clients through the claim process
 Direct Response System
Insurer markets directly to customers
No agent is involved
Advantages
 Faster
 Convenient
 Lower cost
 Gaining access to large markets
Disadvantage
 Limited products due to complexity of most policies

Call Centre Online Internet Mobile Device Direct

(Telemarketing) Portals (MobileApplications) Mailing
 Group Marketing
 To sell individual insurance policies to:
 Employer group
 Labor unions
 Trade associations

 Premiums are payed by payroll deductions

 workers no longer employed can keep their insurance in
force by paying premiums directly to the insurer.
 Typically 5% - 15% rate discount may be given.
 Bancassurance
• Partnership between a bank and an insurance company,
whereby the insurance company uses the bank sales
channel in order to sell insurance products.
• Benefits :
Banks Insurers Customers
Greater income stability Lower distribution cost Low premium

Satisfaction of more Expand customers base Enhanced convenience

financial needs

Customers retention Improved brand equity More confidence

INSURANCE DOCUMENTS
Proposal
Form
Cover
Note
Policy
Form
 Endorsement

• Used to modify the policy terms and the

standard policy document
• Used to incorporate alterations to an existing
policy
Renewal
Notice
Claim
Form
 Discharge Form
The discharge form issued would include a
declaration stating that
• the insured claimant has received a sum of
money from the insurer
• the money received is in full satisfaction of
his claim under the policy in relation to that
loss.
CLAIM PROCEDURE
 Claim exist
Investigation
– Submit
of loss
claim form

Notification Preliminary
of Loss check
Payment of
claim

Claim does Claim denied

not exist
 Precaution
to avoid claims being denied
 1) Non-disclosure

When you should disclose information?

 When the insurers ask you specific questions
 When there is information you should
reasonably know, which would be relevant to
the insurer’s decision to accept the policy
 2) Exclusion Clause
 What is exclusion clause?
 Conditions and circumstances in which insurer will not cover you
against certain loss or damage

 Common examples
 Car was unroadworthy
 Car was modified without the insurer approving these changes
 Using the car for business when this was not disclosed
 3) Fraud
 What is insurance fraud?
 Fraudoccurs when someone knowingly lies to obtain a benefit or
advantage to which they are not otherwise entitled

 According to the law, the crime of insurance fraud can be

prosecuted when:
 The suspect had the intent to defraud.
 An act is completed.
 The act and intent must come together
 Actual loss is not needed
4) Policy Cancellation

 Common situations
 When additional information provided by you
increase the insurer’s risk to an unacceptable level
 When you failed to pay the premium for the policy
Case study
 Situation

 The insured’s motorcycle was stolen and the

insured submitted a ‘theft claim’ to the insurer.
 The insurer rejected the claim on the ground
that the theft was notified to them more than
four months from the date of the loss.