Fourthly, with globalisation and progressive liberalisation of insurance markets in Asia driving increased competition, the search for growth through new customer segments and improved margins from efficient operations will continue to intensify. In certain markets, players have shifted away from expensive face-to-face channels towards offering simple products through more cost efficient direct marketing channels. Such channels have also enabled insurers to make inroads into previously uninsured segments thereby going beyond just winning market share towards expanding the insurance marketplace. Finally, there is a renewed focus on financial inclusion to ensure that all segments of society benefit from economic growth. This includes ensuring that everyone is adequately protected from catastrophic events and other adverse shocks. Swiss Re has estimated the mortality protection gap in South and East Asia to be around USD32 trillion 8. Closing these gaps would require a clear vision to which all stakeholders, from the insurance industry to the Government and financial regulators, must aspire through stronger collaboration and coordinated initiatives. In this regard the Bank aims to increase the insurance and takaful penetration rate in Malaysia, defined as number of policies per population, to 75% by 2020 9 supported by other measures to promote the long-term sustainable growth and development of the industry as outlined in the Life Insurance and Family Takaful Framework (LIFE Framework). In the environment I have just described, insurers can no longer afford to rely solely on traditional business models and delivery channels.

By leveraging on banks’ existing branch network and customer base, which are well established throughout most markets in Asia, insurers are able to scale up very quickly into geographical areas and customer segments that might not be accessible by existing channels. It is therefore not surprising that bancassurance is the fastest growing global channel for insurance. In China, bancassurance sales increased by 415% within 5 years from 2004 to 2009 11. In Malaysia, bancassurance accounted for 36% 12 of new life insurance business premium and 39% 13 of gross contributions for Takaful business in 2013. At the current penetration level of 5% of the banking population, there remains significant room for growth. Under the LIFE Framework, the Bank has envisaged a bancassurance penetration target of 10% 14 as part of the move towards diversification of insurance distribution channels in Malaysia. Rationalization of incentive structures proposed under the framework are aimed at improving persistency through more widespread adoption of needs-based selling, product strategy reviews and quality post-sales service. These measures are also expected to shift the mix towards protection and savings products from credit-related insurance that currently dominates this channel in particular for bancatakaful 15. Financial advisers on the other hand have the advantage of providing advice to consumers on overall financial planning by growing, managing and protecting personal wealth to meet specific financial goals. With increasing affluence, a growing segment of consumers with more complex financial needs and goals will require the sort of comprehensive service that is delivered by financial advisers.