The market is expected to de-regulate in phases that began in July. AIG meets with us to explain what it all means to the average man on the street.
We meet with AIG’s Head of Personal Insurance, Ganeswaran Subramanian to get some insights and to be better informed about the de-tariff implementation for motor insurance in Malaysia.
“We are well prepared and ready to go ahead. In some markets where it was implemented aggressively, it did have teething issues, which is why the regulator here proposed a phased introduction.
“Consumers will be adequately informed and agents will have time to better communicate and offer a more complete explanation to their customers on the new products, services and the upcoming risk based prices. This way, there will be no disruption.
“We have a lot of experience in liberalized markets like in Singapore, where we are one of the leading industry players. We have the expertise in a liberalised market and we, like the rest of the industry, can offer an easy transition and we can bundle and package new solutions. We are ready and we will be ready for it in 2017.”
1. Why would the de-tariff implementation for insurers’ like AIG be different from that experienced by China and India following their de-tariffication a few years ago?
AIG is a company that is comfortable and happy to work in a liberalised market. AIG already has the expertise in pricing and segment positioning to give Malaysian customers better and more flexible solutions.
2. Following the de-tariff implementation, how are the business dynamics of the Insurance industry expected to change?
The de-tariff implementation will lead to a paradigm shift in the manner in which general insurance is provided to Malaysian consumers. With de-tariffication, insurers will be free to design solutions to suit the needs of customers and also price them accordingly to risks of an individual. Yes, there will be open pricing but product features, mechanisms and justifications would still be regulated.
3. Are you offering training for your sales people to be ready for this coming change?
Yes, we have kicked off our training exercises for our agents and this will be further intensified in the coming months leading to July next year.
4. What will be the impact of de-tariffication on commission levels?
There will be no change in commissions and it as it would remain as before.
5. Will there be consolidation in the market on account of de-tariffication?
Some 20 years ago, there were 50 or so insurers in the market and up till about 10 years ago, there were about 35 insurers. This has been consolidated to the current 24 insurers. This is a result of the regulator’s financial master plan to maintain good governance and strengthen general insurance companies’ position through things like risk based capital and capital adequacy ratios over the years. Thus, the market, to a large extent, has already been consolidated. A free market will encourage competition and it will be good for consumers in the long term.
6. What would differentiate successful insurers from the rest in a de-tariffed environment?
Speed. Companies that respond to the needs of the ever-changing behaviours of customers and deploy products tailored for them fast will be key to differentiate a successful insurer. The flexibility to do this without hassle will also play an important role. Today’s auto insurers have its customers only knowing about loading, vehicle age and personal profile. In the future customers will be more discerning and they will want more coverage and different price levels to show the variances. And they would surely want value, from the solutions we offer, to the service we provide.
