Marzunisham Omar: Takaful agents - striving for excellence in a
disruptive world
Speech by Mr Marzunisham Omar, Assistant Governor of the Central Bank of Malaysia (Bank
Negara Malaysia), at the 1st National Takaful Annual Convention 2018 "Takaful Agents: Striving
for Excellence in a Disruptive World", Kuala Lumpur, 14 April 2018.
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Saya ingin mengucapkan terima kasih kepada pihak penganjur atas jemputan untuk
menyampaikan ucaptama di Konvensyen Takaful Tahunan Kebangsaan yang pertama ini.
Tahniah diucapkan kepada NAMLIFA atas inisiatif untuk menganjurkan program khusus bagi para
ejen takaful buat julung kalinya. Forum seumpama ini penting bagi menyediakan platform untuk
pertukaran idea, pengalaman dan pandangan antara pakar-pakar industri dan agen takaful.
The future seems to be a favourite theme at various forums nowadays. Today's is no exception,
and rightly so. In a time of rapid, successive change, it is crucial that we seek to understand the
underlying currents shaping our future. Just as important is where we see ourselves in that same
future.
There is a quote from Soren Kierkegaard, a Danish philosopher, that offers a practical advice on
this matter: "Life can only be understood backwards, but it must be lived forwards."
Therefore, while we contemplate the forces of change and challenges of today, this must be
coupled by action and determination to change for tomorrow. We need to be prepared for the
future. Otherwise, we may become irrelevant.
While agents are a formidable force in the insurance and takaful industry today, there is no
certainty that this will be the case going forward. Already the industry has undergone substantial
transformation in recent years. Products, distribution channels, customer sophistication, and risk
types, all look vastly different from how they used to a decade ago. I have no doubt that this trend
will accelerate moving forward.
A key source of change are regulatory initiatives. While these are primarily intended to enable
easier and cheaper access to products by a much wider market, it also means a lower degree of
reliance on agents. Examples include the liberalisation of fire and motor tariffs, and the
requirement under the LIFE Framework for companies to offer pure protection term products
through direct and online channels since July 2017, and starting in July 2018, to extend this to
pure protection critical illness and pure protection medical and health products.
At the same time, the regulatory expectations on the conduct of agents have also intensified. It is
the aim of Bank Negara Malaysia to continuously strengthen the professionalism of insurance
and takaful agents.
This is not to speak of the impact of technology. In the case of agents and intermediaries more
generally, the information revolution can be a particular source of anxiety. In an age of apps,
aggregators and "Ask me anything" chatbots, suppliers and consumers are closer than ever
before, potentially bypassing the agents or intermediaries altogether.
With the emergence of fintech and insurtech, insurers in other countries are starting to
experiment with chatbots capable of independently maneuvering sales and servicing processes.
Product aggregators are also fast growing in prominence. An Accenture survey revealed that
aggregators account for 70% of new business premiums in the UK private automobile insurance
market. Indeed, two product aggregators platforms are already operating within Bank Negara
Malaysia's Regulatory Sandbox. The Bank is reviewing the regulatory framework to enable the
aggregators to operate by the end of this year.
These are headwinds that the industry has to tackle head-on, and like it or not, they will further
intensify. While we cannot stop these changes, we can certainly choose how we respond to it.
With challenges are opportunities. These can only be reaped through a combination of traits -
greater proactiveness, a willingness to adapt and clear strategic thinking.
I do not doubt that this is much harder than it sounds, but I believe a good place to start would be
focusing on three priorities. Allow me to elaborate on each in turn.
Technology that matters
The vision for the life insurance and family takaful industry is to achieve a penetration rate of 75%
of the Malaysian population. Within this, the takaful industry has set a 25% target to be achieved
by 2020. For this to happen, it is crucial that the industry gets to grips with the shift in market
demographics, especially where interactions with technological platforms are concerned.
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It is imperative that agents embrace technology. A 2017 study by Bain & Company indicates
that nearly 60% of insurance customers in Malaysia are digitally active. This is not surprising
given that 40-50% of our workforce are made up of technology-savvy millennials. Any industry
player seriously looking to achieve long-term sustainability will need to master the integration of
technology within their operating models beyond just setting up websites or establishing a social
media presence.
Instead, consider the interesting reality that customers use multiple channels before deciding to
purchase protection. In the United States, half of the insurance customers that responded to a
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survey preferred to purchase life insurance in person with agents or advisors, as compared to
purchasing online. Similarly, in the same Bain & Company study from earlier, it was found that
inperson interactions still generate higher loyalty scores than other channels in most European
countries.
The fact is that customers employ a mix of on- and offline channels. Many of us already do this in
other parts of our lives. We search for something online, then make the purchase at a
bricksand-mortar outlet. And sometimes the other way round. The key takeaway here is that often,
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customers use digital channels to complement, not replace, traditional channels .
This bodes well for agents going forward - but only if the right conditions are in place. Agents and
takaful operators need to work hand in hand to develop a comprehensive ecosystem catering to
all segments of customers, whether online or off-line - or in marketing speak, an "omnichannel"
approach. While it is imperative that takaful operators seek to provide as seamless an
experience as possible in terms of online content for consumers, this does not have to lead to
the substitution of agents.
On the contrary. Agents can in fact enrich the process by being trained and equipped with useful
tools to guide and advise potential customers. Agents should also work with aggregators as a
means to develop an online presence, in the same way real estate agents are featured on
property websites.
It is important to note, however, that technology is only a platform, a tool. Without strategy or
purpose, the adoption of tech alone cannot spur change. What is needed to complement this is a
fresh approach to business. This means broadening one's horizons beyond given market
conventions, and being courageous to compete in new, unexplored strategic areas.
Compete better - and more broadly
To truly capture the market of the future, agents will need to sharpen their competitive edge.
There are many ways to go about this, but I'd like to talk about two in particular: Doing what you
already do better, and doing it for a much broader market.
Akio Morita, the co-founder of Sony, once said about his company's products - "We don't ask
consumers what they want... We focus on what they need, what they will want and make sure
we're there, ready."
I find this relevant to the role of agents today. Most people who need insurance and takaful
products may not have the time or access to information to even know that it's there for them.
Agents create that awareness. For many, their first contact with insurance would have been
through an agent-initiated meeting. For this reason, customers tend to rely on agents to a large
degree for information to help them make the right decisions, quite often ones involving lifelong
commitments.
While competition will only intensifies moving forward, agents who will excel are those that are
knowledgeable, diligent and trustworthy. However, findings from the Bank's recent supervisory
reviews are rather disappointing - three in four agents were found to have failed to complete a
comprehensive fact-finding process for more than 80% of their customers. This may be a
symptom of a product-pushing mentality at the expense of customer welfare. The lack of
objectivity increases the risk of unsuitable products being sold to customers, and could well
permanently taint the industry's reputation in the long-run.
Things can, and must be done better. With the new Balanced Scorecard developed in
consultation with the industry - including NAMLIFA, the incentive structure has been improved so
that agents work more effectively and objectively in the best interest of their customers. The
Scorecard also reinforces our vision for agents to move towards higher value-add activities that
involve advice, sales and customer support for more complex products.
Another aspect that takaful agents must recognise is that takaful products embody universal
value propositions that would appeal to all market segments, whether Muslim or not.
One of the more distinct features of takaful is the distribution of surplus to takaful participants,
reflecting the principles of solidarity, risk-sharing and mutuality among takaful participants. The
outcome of this are not just socially meaningful products, but also commercially competitive
ones. Take a motor takaful product as an example: In addition to the 'No Claim Bonus' feature
that is common in conventional motor insurance, takaful participants could receive additional
financial benefits when the takaful fund performs well through the sharing of surplus.
Often, the advantages of the takaful products are not sufficiently highlighted, potentially
hampering the competitiveness of takaful products The key is to continuously espouse the value
propositions of takaful products. This is an aspect that agents could certainly help to address.
The market potential for takaful products is so much larger than what is realised today. Let me
offer you two key information. As at end-2016, insurance and takaful penetration in the B40
segment of working age stood at 30.3%, compared with the overall penetration rate of 46.8%.
Second, the global Halal industry is worth USD2 trillion annually and Malaysia has a large and
growing Halal industry. The question is to what extent the takaful industry fulfills the insurance
needs of the Halal businesses.
Takaful agents can play a key role in reaching out to this broader market, particularly by
understanding the takaful products, and being able to explain them simply without diluting the
distinct value propositions of takaful. Part of this will require greater acumen and empathy on the
part of agents for the diverse needs and preferences of customers from all walks of life.
But it is also about developing long-term strategic value: By being well-versed in both fields,
agents stand to position themselves as an authoritative voice in advising both takaful operators
and insurance firms in relation to the changing trends in the demands and needs of consumers
and product features that would better cater to these.
Embody what you sell
I've spoken at length about the tools and methods that can help sharpen the niche of takaful
agents as they enter a new, potentially disruptive phase in the industry's development. But my
final point makes a recourse back to unchanging core of this profession: In particular, the values
embodied by takaful. The very existence of this industry rests on the ultimate objective of
attaining the well-being of mankind as called for in Islam. Takaful agents, being an essential part
of this ecosystem, must embody their role as 'wakeel' of takaful to the highest standards.
Trust, honesty and fairness are values that I am sure everyone in this room seeks to exemplify in
all their dealings with customers. In a few months' time, the Bank will be issuing an Exposure
Draft on Fair Treatment of Financial Consumers which will set out heightened regulatory
expectations for all players. Agents will need to exercise greater care, skill and diligence in their
dealing with customers.
But rules and regulations are in themselves not sufficient to create a pool of agents trusted by
customers: That would require all-round, holistic professionalism - an agent who is technically
qualified, fully committed and uncompromising on ethical standards. To me, it is this integrity and
calibre that will ultimately guarantee the continued success of agents into the next decade, more
so than any other factor.
Faced with a more demanding and complex business environment, agents must continuously
develop and equip themselves with skills and knowledge that are relevant, and that will continue
to remain relevant well into the future. There are plenty of formal programmes available to help
agents progress in their technical competencies. There is also a whole host of open online
courses which can be accessed anytime, anywhere, with the desire to learn is the only
prerequisite.
It is encouraging that various professional training courses are already being offered through
NAMLIFA's Financial and Life Practitioners Council, and that one of the programmes has been
accredited by the Financial Accreditation Agency (FAA).
Going forward, I hope that we will see more industry-driven standards and protocols that will
assure customers that they can only expect consistent, top-notch quality service from their
agents - putting to rest any public doubts that may have been caused by the few "bad apples" in
the sector.
Conclusion
The three areas that I have just described will require, at its core, a strong willingness to learn
and adapt. The uncertainties of the future may appear to loom large over the horizon. But if we
take the time to consider the lessons of our past and circumstances of our present - which I am
sure will be robustly discussed today - we are likely to be surprised by how much we already
know of what we need and ought to do.
In this regard, NAMLIFA is well-positioned to play a proactive role in facilitating ongoing,
constructive dialogues on important industry issues that will certainly demand a concerted
response by all parties. New skills and capabilities must be developed, processes need to be
redesigned, and assumptions need to be revisited. Would the industry be better served were it to
move away from the existing "tied agent" model? How should entry requirements and training
offerings for agents evolve going forward? Should all agents be full-time agents? To what extent
can, and should, insurance agents be allowed to sell takaful products, and vice versa? These are
just some of the questions that could potentially revolutionise the way agents do business.
I'd like to conclude with another quote on the future, this time from Nelson Mandela, more than
150 years after Kierkegaard: "A bright future beckons. The onus is on us, through hard work,
honesty and integrity, to reach for the stars." I have every confidence that today's agents have
what it takes to thrive in the future, but the hard work of laying the necessary foundations must
begin today.
With that, I thank you for your time, and wish all of you a productive day ahead.
1
Customer Behavior and Loyalty in Insurance: Global Edition 2017.
www.bain.com/publications/articles/customer-behavior-loyalty-in-insurance-global-2017.aspx
2
Insurance Barometer Study survey in 2016 by the Life and Health Insurance Foundation for Education (LIFE) and
LIMRA
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Customer Behavior and Loyalty in Insurance: Global Edition 2017.
www.bain.com/publications/articles/customer-behavior-loyalty-in-insurance-global-2017.aspx