Extracts from the address of the Chairman,

YM Tunku Ya’acob Bin Tunku Abdullah

at the 30th Annual General Meeting on 28th March 2003.

NIAM
Our membership has decreased by 6 companies due to discontinuance of QBE-MBF Insurans and Amanah General Assurance as members of the Association. In both cases, these insurers ceased to be members because of their inability to comply with Malaysian shareholding requirements as set by our Constitution.

Further drop in membership, has been result of The People’s Insurance’s merger with Tahan Insurance, Capital Insurance’s merger with United Oriental Assurance, Overseas Union’s merger with South East Asia Insurance and finally Safety’s merger with Mayban General Assurance Bhd.

The reduction in our membership base, to effectively 3 re-insurers (namely, MNRB, Labuan Re and MLRG) and to 29 Malaysian Controlled insurers, shows how effective Bank Negara’s policy of consolidation has been. With only 29 locally controlled insurers, 4 of which are Life Insurers, 6 of which are Composite Insurers and 19 of which are General Insurance Companies, our numbers appear to be fast dwindling.

In this respect, and in order to properly reflect the interest of locally controlled insurers, you will note that the EXCO is proposing an amendment to our constitution, that will clarify our membership base to also include Takaful operators. The current constitution actually does permit Takaful operators to be NIAM members, but it is best to clarify the situation. We understand that a majority of the Takaful Operators are interested in becoming NIAM members and we look forward to their involvement in our activities.

Highlight some of the activities that the Association has carried out and issues deliberated upon by the EXCO during this eventful last term.

1. TERAS MALAYSIA
Teras Malaysia, which is a life insurance product that caters for the insurance needs of the middle and working class, has now entered its fifth year of operation.

Teras Malaysia has been well-accepted by the public and the eight participating companies have achieved a sales record of 108,969 policies with an annualised premium of RM87 million for the 4 years since October 1998.

The product advertising and promotional activities, the committee has launched their very own Teras Website in November 2002. Further, the committee has held four Super Bonanza Lucky Draws for agents since its launch. The 5th Super Bonanza lucky draw contest is currently in progress and is scheduled to end in September 2003.

All Agents are entitled to one lucky draw coupon for every ringgit of new business premium sold during the contest period, and for your information, a budget of RM100,000 for the prizes has been allocated.

The Teras Malaysia Steering Committee is chaired by Mr Toi See Jong of Mayban Life Assurance. This Committee under Mr Toi’s very capable leadership has also planned the next phase of their marketing campaign, and look forward for even better results from Teras Malaysia in 2003.

2. SIHAT MALAYSIA
Sihat Malaysia is the hospital and surgical product for both life and general insurers. The product was created out of the joint effort of our member companies in September 1999 with the objective of using common pricing, policy conditions, coverage and promotional activities.

The Sihat Malaysia product, offers ‘cashless’ hospital admission and discharge facilities, with comprehensive coverage of medical, hospital and surgical insurance benefits.

In the last three years, we have invested heavily in product promotion through an aggressive advertising campaign in the press, billboards, radio and TV. The same continues for this year, and we are assured by the Standing Committee, that they will continue to take advantage of this economy of scale of having 18 member companies sharing the advertising and promotional expenditure, to promote the Sihat Malaysia brand name.

Based on the mixed underwriting results experienced during the last three years, the Standing Committee has introduced the 2nd enhancement effective 1st April 2003. These enhancements are specifically in the areas of Revision of Premium Rates, Structural Changes to Family Plans and amendments to Benefit Schedules. With these changes, the Standing Committee is confident that for the year 2003, insurers will begin to experience favourable underwriting results.

To-date, the total number of Sihat Malaysia cardholders have reached 300,000 and with total annual premium income of RM64 million. Being the largest health insurance product in the country, in terms of premium income and membership base, Sihat Malaysia plays a dominant role in the H&S industry, and will dictate whether H&S business can be written on a profitable basis or not. This dominance gives us the confidence to allow premium rates to be adjusted to reflect the effects of inflation, as and when needed.

The Sihat Malaysia Standing Committee is chaired by YM Tunku Ya’acob, with the Sub-Committees headed by Mr Sonny Tan, Pn Nora Ishak and Ms Lim Saw Im.

3. PENSION ANNUITY
The SAKK or Skim Annuity Konventional KWSP was suspended and subsequently cancelled by the Government in 10 May 2001. However, the six approved conventional annuity insurance companies, all of whom are NIAM members, have gone to great lengths to assure existing policyholders that their policies are still valid with full benefits intact and which will continue to be honoured. Preservation of business underwritten up till May 2001 has been the order of the day.

The Standing Committee together with their actuaries has not been idle. The team has been working on a Second scheme, which is an Investment Linked based annuity plan. The appointed Actuaries have finalised the Certificate and will be soon submitting the papers to Bank Negara.

The product will be named “Annuity Malaysia” but unlike the first scheme, will not be sold through the EPF. Instead, cash sales will be the mainstay of Annuity Malaysia’s premium income.

We hope that with strong advertising, the public will take up the Annuity Malaysia product in large volumes. Hopefully, its success will, one day, be the door opener for the Standing Committee to use to convince the Government, to permit the rakyat to pay for their premiums from their EPF savings.

En Mohd Salihuddin Ahmad of Malaysia National Insurance and the representatives from all the six NIAM Life Insurance companies chair the Annuity Standing Committee.

With God’s blessing, the right of the Malaysian public to a decent retirement and pension plan, will eventually come to fruition with Annuity Two. The truth will always prevail.

4. TANI MALAYSIA
The Malaysian Government is embarking on the Third National Agricultural Policy, which aims to transform the agricultural sector to meet local food requirements and enable Malaysia to become a food processor and exporter for the region.

In August 2001, Bank Negara approached NIAM to formulate a National Agriculture insurance scheme, based on NIAM’s successes in designing and promoting Teras Malaysia, Sihat Malaysia and Annuity Malaysia. Based on this request, Tani Malaysia was created.

About 20 NIAM member companies have indicated their interest to participate in the Tani Malaysia Scheme, which will see the creation of a joint product for the agricultural sector which offers common pricing, promotion, underwriting and claims processing. The Tani Malaysia Technical Committee under the leadership of Mr Lai Poong Shen from Oriental Captial Assurance is finalising the scheme with Bank Negara and the Ministry of Agriculture. We understand that the Ministry will subsequently be submitting their recommendations to the Cabinet for approval; and if all goes well, the Government will launch the product during the second quarter of 2003.

Unlike the other NIAM sponsored projects, Tani Malaysia will be unique in two areas. The first being that NIAM has incorporated a Tani Malaysia Management Company (being a 100% subsidiary of NIAM) to put in place a structure that will underwrite, settle claims, arrange reinsurance support and handle all administrative matters for the Tani Malaysia product. This structure will therefore, leave insurance companies free to participate in the Tani Malaysia Risk pool without having to develop in-house expertise.

Secondly, the Tani Malaysia scheme will be unique as we understand the premiums payable will be partly or wholly subsidied by the Government. The level of the Government’s subsidy is unclear at the moment, but we hope that it will be significant.

We see great prospects for NIAM in this area and would like to wish Mr Lai and his Technical Committee good luck in this landmark venture.

5. SEMINARS
Over the years, NIAM has been focusing its attention on the improvement in professionalism, leadership and marketing skills of our Managers. In the year 2002, we have successfully conducted a total of 8 seminars for middle and a top management.

In view of favourable support and feedback from our member companies, we shall be continuing with our seminars and will be carrying out 9 programmes for this year. This programme includes a Top Management seminar, which is planned for July and will be held in Cebu, Philippines. The Speaker for this Seminar will be a distinguished Professor from the Asian Institute of Management in Manila. The CEO’s will be able to attend this seminar and would like to assure that they will really enjoy this trip.

We hope that the Malaysian-Re will continue to support our education and training programmes in the years ahead.

6. NATIONAL INSURANCE CLAIMS SOCIETY (NICS)
NICS, or the National Insurance Claims Society, was sponsored and launched by NIAM in 15 December 1998. The Society is presently chaired by Mr Eddie Lim from Hong Leong Assurance, with support from his 10 Executive Committee Members.

For the year 2002, NICS organized a training programme on Fraud & Claims Investigation, which was attended by 50 participants from our claims industry.

During the year, NICS organized a visit to the West Port in August 2002, and the Executive Committee held a meeting with the Repairers’ Association, to formulate Best Practice Guidelines for the Claims industry. Since the Committee’s meeting with the Chief Inspector of Kajang Police District in 2001, the Investigation Department has been forwarding their updated list of Stolen Vehicles to the NICS on a monthly basis for dissemination to member companies.

Other activities undertaken by the Executive Committee were a luncheon meeting with the Executive Committee of the Brokers Association, a meeting with Mr Donald Jaganathan, the Director for Insurance at Bank Negara Malaysia, and a dinner with the Adjuster’s Association, to better improve co-operation within the industry. Finally, a half-yearly cocktail reception was also held in September 2002 involving Claims Managers from our member companies.

NICS has implementing a Claims Supporting Documents Guide for general insurance claims and the Fraud Indicator Guide. The Committee is now working on the NICS Half-Yearly Newsletter, which would update members on the on going activities of NICS.

For your information, the members of NICS are all NIAM member companies. Individuals from the Claims Department of member companies and from the loss adjustment industry may participate in NICS in their capacity as Associate members.

NICS will continue to have the full support from our member companies. Claims, as the single largest cost component of our operations, should never be underestimated. The development of professional and highly competent claims management is paramount for the long-term success of our industry.

7. GUIDANCE AND SUPPORT FROM BANK NEGARA MALAYSIA
NIAM convey its appreciation to the Officers at Bank Negara Malaysia for their guidance and support for all the projects that we have undertaken, for their attention, positive responses and invaluable guidance to NIAM’s various proposals. It is because of their support in the development of Teras Malaysia, Sihat Malaysia, Annuity Malaysia and of late, for Tani Malaysia, that such great schemes have been made possible. No industry can progress without a caring Regulator; and NIAM is certainly progressing, and being well taken care of.