If, as it’s often said, change is the only constant in life, then the country of Malaysia is really living it up. At least that’s what its advisors believe.
“The life insurance business is changing fast in Malaysia,” said Lim Ren En, RFP, an 11-year MDRT member from Petaling Jaya. “I have seen many changes happen in the industry.”
He also expects the COVID-19 crisis will lead to additional changes in both the short and long terms.
“The pandemic has really impacted our economy and businesses,” he said. “Life will change and never be the same again. People will be more open to the idea of doing complicated business online. We as advisors must learn to use technology to sell online and gain popularity on the internet.”
Lai Kim Siew, a four-year MDRT member from Petaling Jaya, agrees that embracing technology will make a big difference in the coming years.
“There seems to be a gap in technology adoption, while consumers’ purchasing behavior is increasingly driven by digital experience and expectations,” she said. “As with every other industry, insurance is becoming more technologically advanced, though the transformation is much too slow.”
For years, the only distribution channel in Malaysia was tied agents, but in recent years, the industry has opened to new outlets of distribution.
To Choy Fong Cheow, a three-year MDRT member from Petaling Jaya, the introduction of the Life Insurance and Family Takaful Framework (known as the LIFE Framework) was largely responsible for this shift. The initiative, introduced in 2015, aims to “promote product innovation while preserving policy value,” Cheow said. One of its three pillars is the diversification of distribution channels, including financial advisors, bancassurance and the internet. Takaful is a concept that allows participants to pool funds to assist each other in times of need rather than invest in traditional insurance products that are in opposition to Islamic law; according to the CIA, 61.3% of the Malaysian population is Muslim.
“Today we have Dr. Google for everything,” Siew said. “Clients always think ‘I’m an expert’ and claim to know it all. We are trained to know more.”
She believes it is crucial for advisors to emphasize their own expertise when talking to clients and prospects, and make sure clients understand the products they are purchasing. Recent regulations have strengthened product transparency and disclosures to ensure more informed decision-making.
“I increase awareness and educate my clients, because insurance products have become more complex,” she said. “The result is that most clients do not fully understand what they have purchased unless it is explained well.”
As Malaysia begins to emerge from the pandemic, “now is the perfect time to bring clients’ attention to income protection,” Siew said. “The country’s recent economic struggles are still fresh in their minds. Malaysians know the threat of losing their income firsthand. They understand how being unable to work and earn an income could dramatically change their financial situation. Many are taking risk protection strategies to heart and are looking for ways to minimize the impact of financial disruption.”
Cheow also foresees a major impact on health insurance.
“Malaysia’s medical insurance premiums are anticipated to increase up to 30% in 2020 on the back of rising health care costs,” she said. “The level of protection is still not adequate, and there is a wide protection gap in terms of insurance coverage needed.”
She expects that in the immediate future, the country will introduce medical insurance packages that offer comprehensive coverage to better serve people.
Ren En also anticipates a “cash flow problem” for middle- and lower-class clients in just a few months’ time.
“Now is the time when we, as financial planners, stay with our clients,” he said. “Hopefully, when things change for the better, they will support us in the future.”
He believes in building long-term relationships with clients because that’s the foundation of his practice. When Ren En first started in the profession, he sold four policies to a friend of his father’s, who later agreed to refer him to some fellow plumbers. Those referrals helped Ren En qualify for MDRT. Years later, he now has more than 200 clients who work in the plumbing industry, from manufacturers to contractors.
“I am known as the plumbers association’s unofficial insurance consultant,” he said. “They are loyal and down-to-earth businesspeople.”
Cheow has taken a similar approach with her clients. She primarily works with family-owned and closely held business owners, nurturing a relationship with the first generation and then leveraging those bonds into opportunities to work with the second and third generations.
She qualified for MDRT the first time as a result of her relationship with five couples; now she also provides service to their grown children.
“I’m progressing and moving with the clients’ phases of life,” she said. “The clients first invested in life insurance planning and medical health insurance. Later, our continuous touching base allowed us to extend our financial services to them. You must have flexibility to adapt and to move forward.”
And in Malaysia, advisors’ eyes are certainly on the changes on the horizon. Life insurance penetration might have increased to 55%, but it’s been stagnating there for almost five years. So the government is bulking up educational efforts in hopes of jump-starting that figure to achieve its anticipated growth to $13 billion by 2023.
“The healthy performance of the life insurance industry reflects the increase in awareness among consumers of the importance of life insurance protection,” Siew said. “Given the uncertainties faced by the global and local economies partly due to the COVID-19 outbreak, counterbalanced by the strong resilience of the life insurance industry, it is expected to achieve growth.”