Extracts from the address of the Chairman,

YM Tunku Dato' Ya'acob bin Tunku Abdullah ,

at the 33rd Annual General Meeting on 23rd March 2006

Annual report on the activities of National Insurance Association of Malaysia (“NIAM”) for the year ended 31 December 2005.

The year was a satisfactory period for the Association, with much activity being attained on a broad front was achieved under still fairly difficult insurance market conditions.

Details of the Association's achievements are highlighted in the subsequent paragraphs.

This high level of activity has been brought about principally, by the cooperation of member companies, in working together, on exciting projects, for the betterment of the industry.

•  Committee

For the year under review, the Association operated under the following committee structure:

•  Executive Committee

•  Education Sub-Committee

•  Finance Sub-Committee

•  Sihat Malaysia Standing Committee

•  Teras Malaysia Standing Committee

•  Bancassurance Standing committee

•  Anuiti Malaysia Standing Committee

•  Tani Malaysia Standing Committee

The Executive Committee held 4 meetings during the year, together with a total of 32 meetings being conducted by Sub-Committees and Standing Committees. This level of activity is reflective of the commitment of the committee members towards the goals of the Association.

•  Membership

As at 31 December 2005, the Association's membership base stood at thirty (30) companies, an analysis of which is as follows:

With the declining membership base of NIAM, brought about by the merge of members, and their acquisition by foreign insurers, it is a wonder that the Association is able to exist at all, yet continue its work, to optimise members' interest. As Malaysian controlled insurers become a rare breed, it becomes even more imperative that our members bind and work together, to face the challenges of the 21 st century.

The famous adage that says, “United we stand, Divided we fall”, is as relevant yesterday as it is today. As our numbers grow fewer, it becomes more important, for us to stand together, to build upon and strengthen our brand, financial, human and social assets.

Our motto, “Owned By Malaysian, For Malaysian”, is key to our survival today and tomorrow.

•  Sihat Malaysia Project

“Sihat Malaysia ” is a hospital and surgical product for both life and general insurers. The product was launched by the Association in September 1999, and was created out of the joint effort of member companies, with the objective of introducing a profitable block of business, using a common pricing, coverage and promotional strategy, to attain strong brand awareness and economies of scale.

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

In the last six (6) years since its launch, NIAM had invested heavily in product promotion through aggressive advertising campaigns in the press, billboards, radio and television. The Association will continue to take advantage of its economies of scale, of having eleven (11) member companies share advertising and promotional cost, to promote a common brand name.

The total number of Sihat Malaysia cardholders has reached over 1,055,000 with total cumulative annual premium income of RM 261 million.

Since 2005, the Sihat Malaysia Standing Committee had participated with the Joint Committee of PIAM and LIAM, on developing the nation's Hospital & Surgical Insurance (HSI) Underwriting Guidelines. The same was officially approved by Bank Negara Malaysia (BNM) on 15 November 2005, after which necessary changes were made to the Sihat Malaysia policy contracts, brochures and proposal forms, effective 1st January 2006.

Due to the introduction of several new health insurance plans by our participating member companies subsequent to NIAM's successful launch of Sihat Malaysia, sales of the Sihat Malaysia plan during 2005 declined by 24.9 %  to RM 33,230,957 million (2004: RM 44,291,789 million).

This impact was not unexpected as members introduce more sophisticated health plans to improve upon Sihat Malaysia 's coverage, which by its very nature, is a basic plan designed for its simplicity and affordability, whilst acting as a platform product for others to bench-mark minimum premium pricing against.

The Standing Committee has, over the years, managed to regularly re-price the plan, to take into account high medical inflation experience, which has averaged 15% per annum over the past few years. Due to this timely re-pricing strategy, the underwriting performance of the plan has been healthy. We expected the situation to remain stable following this year's re-pricing, scheduled for September 2006.

In addition to this, the Standing Committee expects to launch a new rider for the Sihat Malaysia plan, known as the “ExPan” rider, which offers the policyholder an Extended Panel of “cashless” hospitals, not currently available with the basic Sihat Malaysia plan.

•  Teras Malaysia Project

The “Teras Malaysia ” plan is an individual life insurance product that caters for the insurance needs of the middle-income and working-class, a sector which up till now, has had minimal insurance penetration. The plan which is basic by design, and affordable by nature, has been well accepted by the public.

The original 8 participating companies have achieved cumulative sales of over 246,000 policies, with an annualised premium income of RM 213 million, for the seven (7) years, since its launch in October 1998.

For the year under review, new business sales had declined by 33 % to RM 33,065,433 million (2004: RM 49,360,555 million), principally due to the number of participating life insurers falling to five (5) in numbers.

The 3 companies that no longer participate in the Teras Malaysia scheme are:

•  Tahan Insurans Bhd (due to new business restraints imposed by BNM)

•  Mayban Life Assurance Bhd (due to new bancassurance commission limits introduced by BNM).

•  Allianz Life Insurance (M) Bhd (due to cessation of their NIAM membership following their new foreign shareholding structure).

The Teras Malaysia Standing Committee has organised a total of six (6) “Super Bonanza Competitions” for agents of the plan since its launch. The 7 th Prize Draw is scheduled to be held on 23 rd March 2006 with a budget of RM100,000 comprising of 18 prizes to be won. In support of the existing bill-board advertising campaign, the Standing Committee has planned a fresh marketing campaign for 2006, and we can look forward to better results in the year to come.

•  Bancassurance Project

Due to the new bancassurance commission limits imposed by BNM last year, the sales of Teras Malaysia between the two channels of distribution, namely agency and bancassurance, has become difficult to reconcile. The Association has therefore taken the decision to introduce a new bancassurance plan, which will not compete with Teras Malaysia in terms of coverage and premiums, but yet will still be targeted at the same market segment.

Seven (7) member companies have agreed to support the project, which will further accelerate the joint development of a new bancassurance plan for the industry. If all goes well, hopeful that the Standing Committee will be able to launch, this new policy in 2006.

•  Anuiti Malaysia Project

The “Anuiti Malaysia ” plan is a yet-to-be launched life insurance plan designed as a retirement programme for the public, with two key elements; a pre-retirement and a post-retirement component. The pre-retirement component will be managed by an investment-linked policy, while the post-retirement component by an annuity policy to provide lifetime income.

With seven (7) participating member companies, all sharing in a common advertising and promotion programme, we believe the take-up of the Anuiti Malaysia plan by the public will be strong. Combined with an added feature that allows for free switching between the funds managed by the seven (7) participating member companies, the plan boasts of investment flexibility that is second to none in the industry. 

The Anuiti Malaysia Standing Committee, together with their actuaries has successfully re-submitted a revised Actuarial Certificate to BNM on December 2005 in accordance with the revised JPI/GPI 33 – The Guidelines on Investment-Linked Business.

Hopeful that approval will be forthcoming in the near future to enable the Standing Committee to launch the plan in 2006.

•  Tani Malaysia Project

In order to address the lack of agricultural insurance coverage in the country, the Association had set up the “Tani Malaysia ” project in 2004.

The Standing Committee had made representation, at the request of the Ministry of Agriculture (MOA), to provide insurance coverage for padi farmers and their crops. With a comprehensive coverage and a reasonable premium charge, the proposal held great potential. Unfortunately, the MOA has not been able to take the proposal any further, while it wrestles with the issue, on how to implement and finance such a project, for the padi farmers in Malaysia .

Upon BNM's request, the Standing Committee has now refocused its attention, to work on a framework for a National Poultry and Aquaculture Insurance Scheme. Such a scheme will, see the introduction of a higher level of coverage for the sector, through NIAM's subsidiary, Tani Management (Malaysia) Sdn Bhd, which will manage all aspects of agricultural insurance for its members, including reinsurance, research, premium pricing and claims management.

The Association is aware of the huge amount of effort that had gone into the planning for the padi farmer insurance programme, and is hopeful that the Poultry and Aquaculture programme will see better light of day. As such, we are eagerly looking forward to the successful launch of Tani Malaysia 's first agricultural insurance programme in the near future, hopefully in 2006.

•  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 2005, NIAM have successfully conducted a total of nine (9) seminars for middle and a top management.

In view of favorable support and feedback from our member companies, NIAM shall be continuing with our seminars and will be carrying out nine (9) programmes for this year. To encourage our members to send more staff for training, NIAM will continue giving 10% discount to member companies who register 3 or more participants per course.

Further, as a show of appreciation, and for the benefit of members, the Association has re-distributed 80% of the nett surplus earned from 2005 seminars back to members, in the form of Credit Notes, on a pro-rata basis based on the amounts spent by members. These Credit Notes can be utilised for any seminars conducted during the year 2006.

NIAM take this opportunity to thank Malaysian Reinsurance Bhd, and specially the Managing Director, Encik Anuar Mohd Hassan and the Senior General Manager, Encik Mustaffa Ahmad, for continuing to support the Association, by sponsoring the course fees of the facilitators. With Malaysian-Re's kind and generous subsidy, the seminar fees charged to our members are much lower, thus enabling greater participation of member companies.

•  National Insurance Claims Society (NICS)

NICS, or the National Insurance Claims Society, was sponsored and launched by NIAM on 15 December 1998. The Society is presently chaired by Mr Thomas Zachariah (Malaysian Reinsurance Bhd) with support from ten (10) Executive Committee members.

For the year 2005, NICS organised a training programme on Medical Insurance Claims attended by member companies' Claims Departments. The Society had also organised a day visit to Northport in August 2005, the objective of which was to observe the operations area, the container scanning facility and vessel operations, to further develop the knowledge of the Claim Executives on marine claims.

I hope that NICS will continue to have the full support from NIAM member companies, for if Insurers are serious about managing claims must commit time and resources to this very worthy organisation.  The impact of claims, as the single largest cost component of Insurers operations, should never be underestimated. The development of professional and highly competent claims management is paramount, for the long-term success of Insurance industry.

•  Summary

It is indeed very rare to companies, who are in fact competitors in the same field, come together to develop goodwill and mutual support for the common good of all.

NIAM would like to take this opportunity to also thank the officers at Bank Negara Malaysia for their guidance and support in strengthening local participation in Insurance industry.

In particularly, to name the Director of Insurance Regulations, En Donald J Jaganathan, for his attention, positive responses and invaluable guidance to our various proposals. No industry can progress without a caring Regulator; and NIAM are certainly progressing, and being well cared of.

Thank you.

TUNKU DATO' YA'ACOB BIN TUNKU ABDULLAH

Chairman