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PART A
(The Basics of Insurance)
16
PART C
(Life Insurance)
1116
1

The Basics of Insurance
Copyright reserved @ June 2015 by FSA strictly for internal training use only
The Basics of Insurance
Risk Definition
Risk Categories
Peril, Hazard, and Loss
Risk Management
Risk Handling Methods
Insurance & Takaful
Nature of Insurable Risks
Life & General Insurance
The Insurance Market
Insurance Industry Performance
Risk Definition
Risk Categories

Fundamental Risk

Particular Risk

Pure Risk

Speculative Risk


Peril, Hazard, and Loss
PERIL
:

HAZARD
: LOSS
:

(,)
RISK
:


,,
Risk Management
Risk Handling Methods
Prevent
Retain
Avoid
Control
Transfer

1.


2.


3.


4.


5.
,

?
?
Life Fund
?

Fortuitous events

:,.
Insurance & Takaful
, Takaful /
Insurance & Takaful
Riba ()
-Tabarru ()
-Mudharabah ()

Syariah Advisory Council of Bank Negara Malaysia (SAC)
SAC 19975






Social
Creation of Benefits
Employment
Financial
Peace of
Mind/
Protection
Cost Security
Loss Stabilization
Capital for Control
Compelled Investment
Saving


Insurable
Interest

Homogenous
Pure Risks
Exposures

Particular
Risks

Public Policy Financial
Value

Fortuitous
Life & General Insurance
Life

-
- //
General

-

.
The Insurance Market

Insurance Industry Performance
(54%)
2012 Penetration Rate New Business Total Premium
2012
RM 8.20
billion
2011
RM 7.92
billion
20123.6%
Malaysia Life Insurance Industry Grew
2012
RM 15.180
billion
2011
RM 14.029

General Insurance Industry
billion
2

Basic Principles of Insurance
Utmost Good Faith
Insurable Interest
Indemnity
Subrogation
Contribution
Proximate Cause

Principle of
Utmost Good
Faith
Utmost Good Faith
(Uberrima Fides)



Insurers Rights
Innocent Fraudulent
Breach Breach
1. ?
2. ?
3. ?
4. ?
5. ?

2013FSA9
9241
a.

b.


Non-Consumer Insurance Contract (Trade/Profession)


9256
Consumer Insurance Contract (Individual)

Insurable
Principle of Interest
Utmost Good
Faith

: :
,
,,
,

Insurable Interest
?

:

:


2013FSA83

()

Principle of Insurable
Utmost Good Interest

Faith
Assignment
Assignment

!
!

()
()
,


2013FSA10
10216



Faith
Assignment

Indemnity
Indemnity

()
Property

+
Liability

Pecuniary

Marine


Faith
Assignment

Indemnity

Principle of
Subrogation
Principle of Subrogation

,


.

&
Tort / Common Law Accident

Contract
Money policy
,

Salvage
Fire


Faith
Assignment

Indemnity

Principle of
Contribution Principle of
Subrogation
Principle of Contribution
()


Faith
Assignment

Principle of
Proximate
Cause
Indemnity

Principle of
Contribution Principle of
Subrogation
Principle of Proximate Cause

Operation of a Single Cause

Perils

Insured Peril Uninsured Peril Excluded Peril

Concurrent Causes

Separable Losses
Liability for loss caused by
insured peril only
Concurrent Causes

Inseparable Losses
Full liability

Successive Causes
3

Legislation and Consumer Protection
Legislation and Consumer Protection

1965
2011 - PIDM

2010 (PDPA)
2001
2010

FSAIFSA2013630
FSA 2013 IFSA 2013
1989
1983 IBA)
BAFIA)
1 953 ECA) 1984
1996 (IA)
2003 PSA)
FSA 2013IFSA 2013
1965 Companies Act 1965

CCM)/SSM

Annual Returns
Statutory Report
Dissolution of a Company
1965 Companies Act 1965
2011
Malaysia Deposit Insurance Corporation Act 2011
(PIDM)

PIDM

:
RM250,000
RM500,000

Financial Consumer Literacy & Education
(CEP)
Insurance Info

insurance
Copyright reserved @ June 2015 by FSA strictly for internal training use only INFO INSURANS

Financial Consumer Complaints & Disputes
Financial Mediation Bureau (FMB)

:

FMB



<RM200K
<RM100K
<RM5K

BNMLINK

FMB
FMB

/



Lodge
State essential Sort details in Keep original
complaint in
information sensible order documents
writing
BNMLINK
Financial Mediation Bank Negara Malaysia Laman
Informasi Nasihat and Khidmat
Bureau (FMB) (BNMLINK)

Personal Data Protection Act 2010 (PDPA)

Personal Data Protection Act 2010 (PDPA)
(refer pg. 36-37)
2001
Panti-Mondey Launcering and Anti-Terrorism Financiang Act 2001 (AMLATFA)
2001

Placement Layering Integration
2001
20139
(CDD)
2010
Competition Act 2010

2010
Competition Act 2010

Malaysian Competition Commission (MyCC)

2010

4

The Insurance Contract
The Insurance Contract
The Law of Contract
Formation of an Insurance Contract
Void, Voidable and
Unenforceable Contracts
Parts of an Insurance Policy
The Law of Contract
1950


Offer & Acceptance

Intention to Create a Legal
Relationship

Consideration

Capacity of Contract

Legal Form

,







15
5

Law of Agency
Law of Agency
Duties of an insurance agent to the principal
Duties of the principal to the insurance agent
Authority of agents
Insurance Contracts formed through an agent
Termination of agency
List of prohibited business conduct
Law of Agency

Principal

()


Pay the agreed remuneration

Indemnify the agent

Actual Authority Express Actual
Authority

Implied Actual Authority
Apparent / Ostensible Authority


()

-2013 7

-2013 7
6

Introduction to Medical and Health Insurance
Introduction to Medical and Health Insurance
Introduction
Types of Medical and Health Insurance (MHI) Products
Emergence of Managed Care Organizations
Regulations Applicable to Medical and Health Insurance
Underwriting Policies and Procedures
Group Medical and Health Insurance
Cost Containment Measures
Renewal of Medical and Health Insurance

Automatic Termination of a Policy
Personal Income Tax Exemption
Introduction

Medical and Health Insurance (MHI)

General Life

Stand-alone policy Stand-alone policy and/or rider
Medical and Health Insurance (MHI)

/
/
Types of Medical and Health Insurance (MHI) Products
(HSI)


:-


(HSI)

36

60% - 70%
MCO
Emergency of Managed Care Organizations (MCO)
BNMMCO

Regulations Applicable to MHI

1 Jan 2006 1 Jan 2010


15
Copyright reserved @ May 2013 by FSA

MHI Underwriting Policies and Procedures
Group Medical and Health Insurance

75%

Cost Containment Measures

(deductible)
(20%)
Renewal of Medical and Health Insurance

30
/

/
/
Automatic Termination of a Policy
Personal Income Tax Exemption
MHI + = RM 3,000
Life + EPF= RM 6,000

Life Insurance
11

Legal Aspects of Life Insurance
Misstatement of Age
Objection to Life Policy

Surrender of Life Policy
Non-Payment of Life Policy Premiums
Non-Contestability for Life Insurance Contracts
Introduction
2013 FSA 8
Misstatement of Age

- Cooling-off / Free-look Period

(15)

(

Insurable Interest


1016 -

16


Life Policy Monies


() Surrender of Life Policy

3

,30%

Non-payment
Non-forteiture Condition

Paid-up Policy
Extended Term Assurance
-

Paid Up Policy
:-
a)
b)
c)
d)

Disclosure Requirement



2013 FSA 93
(2)

12

Life Insurance Products
Life Insurance Products
Introduction
Types of Life Insurance Policies
Critical Illness Insurance
Group Life Insurance
Supplementary Contracts
Participating and Non-Participating Contracts
Methods of Distributing Surplus
Introduction
Life Insurance Policies



Term Insurance
/:


Whole Life Assurance

3

Sum Assured
Premium

Continuous Payment
@ 100

-
/ (e.g.60)

Premium Limited Payment

@ 100

Endowment Insurance

Investment-linked Life Insurance Policies

),,

Life Insurance Policies
Life-Annuity Plan

:

Purchase
Money
$ $ $ $ $ $ $

Purchase
Money Deferred

$ $ $ $ $

20138%

10
RM3,000

Critical Illness Insurance

Group Insurance

10
-
1660(
-
-
Supplementary Contracts

Rider Personal Accident (PA) Waiver of Premium
Provision


Participating Contracts

Sum Assured

Age

Non-participating Contracts


Simple Reversionary Bonus

Compound Reversionary Bonus
Cash Bonus
Maturity or Terminal Bonus
Interim Bonus
Guaranteed Bonus
13

Life Insurance Premium Rating
Introduction
Costing the Risk
Level Premiums
Gross and Net Premiums
Loading for Contingencies
Group Insurance Premium
Personal Income Tax Relief
Costing the Risk
:
Mortality
Investment returns
The effect of inflation on expenses
Amount of corporate tax
management expenses in the present
contractual obligations in the future
- Mortality
- Investment Returns

4%
- Expenses
Level Premiums
Gross and Net Premiums
= +
Net Premium = Pure Risk Premium + Interest
= +
+
Gross Premium = Net Premium + Management Expenses
and Contingencies + Profit
Loading for Contingencies

Personal Income Tax Relief
RM
Group Insurance Premium
14

Life Insurance Underwriting & Document
Life Insurance Underwriting & Document
Introduction
Risk Selection
Underwriting Guidelines
Assumption of Risk

Role of the Insurance Agent in the Underwriting Process
Insurance Documents
Risk Selection
Risk Selection
Risk Selection

- -

- : - :

Risk Classification

Standard Risks Sub-Standard Risks

Uninsurable Risks
Below Average Risks
Risks Classification

/

Acceptable on standard terms & Acceptable, but with extra premiums,
premiums loadings, and/or limited coverage

Without any adverse risk factors With health / occupational hazards
Risks Classification

May not be accepted / may be deferred Rejected or declined
for a specific period

Unclear illnesses Terminal illnesses

Handling Adverse Risks

/
Adverse selection or Anti-selection

Assumption of Risk
-
15

Insurance Documents

The Proposal Form
AgentsReport

Medical The Policy Form
Examiners Report
15

Life Insurance Claims
Life Insurance Claims
Introduction
Types of Claims
Death Claims
Maturity Claims
Critical Illness Insurance Claims
Total and Permanent Disability Claims
Personal Accident Claims
- The Claims Process
Types of Claims

Maturity

Permanent and Total
Disability

Death

Critical Illness

Other benefits under
riders
Death Claims

/ /


Death Claims
()
Death Claims
2013 10

, 195623

Death Claims
Death Claims
1958
6

Death Claims
Death Claims FSA 2013

RM100,000

RM100,000

2013 -
/
/

+
1% (
60
)
Maturity Claims

Discharge Form

Critical Illness Insurance Claims

36

Total and Permanent Disability Claims

TPD TPD claim form
TPD medical report
Original policy document
/ Other supporting test/laboratory report
and investigation

Police report (for TPD caused by accidents)
Personal Accident Claims
report
16

Code of Practice for Life
Insurance Agents
Code of Practice for Life Insurance Agents
Introduction
Code of Ethics
Code of Practice
Selling Life Insurance
Providing Insurance Coverage
Disclosure Requirements
Accounts and Financial Aspects
Existing Policyholders
Claims
Insurance Agent
Code of Ethics
Integrity
Fairness
Honesty
Code of Conduct
Accountable
Responsible
Professional
Code of Ethics
1
2
3
4
6
7
Code of Practice
Selling Life Insurance

Providing Insurance Coverage
Accounts & Financial Aspects

- Keep proper
account of all financial transactions
-
Acknowledge receipt of all money received
-
Remit any such monies so collected in strict conformity with his agency appointment
Existing Policyholders
Claims
Non-Contestability Period applies

Agent is required to assist policy owner / his
beneficiary to notify insurer of a claim within the time stipulated

The claim notification should be supported with relevant supporting documents
All The Best & Thank you

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Reaching out to you

Peril, Hazard, and Loss

Risk Handling Methods

Insurance & Takaful

Nature of Insurable Risks

Life & General Insurance

The Insurance Market

Insurance Industry Performance

Utmost Good Faith

Non-Consumer Insurance Contract (Trade/Profession)

FSA 2013 IFSA 2013

1 953 ECA) 1984

Financial Mediation Bureau (FMB)

(refer pg. 36-37)

The Law of Contract

Formation of an Insurance Contract

Void, Voidable and

Parts of an Insurance Policy

Duties of the principal to the insurance agent

List of prohibited business conduct

Types of Medical and Health Insurance (MHI) Products

Emergence of Managed Care Organizations

Regulations Applicable to Medical and Health Insurance

Underwriting Policies and Procedures

Group Medical and Health Insurance

Cost Containment Measures

Renewal of Medical and Health Insurance

Copyright reserved @ May 2013 by FSA

Life + EPF= RM 6,000

Objection to Life Policy

Non-Contestability for Life Insurance Contracts

- Cooling-off / Free-look Period

Life Policy Monies

() Surrender of Life Policy

Extended Term Assurance

Copyright reserved @ May 2013 by FSA

Types of Life Insurance Policies

Critical Illness Insurance

Group Life Insurance

Participating and Non-Participating Contracts

Methods of Distributing Surplus

Premium Limited Payment

Simple Reversionary Bonus

The effect of inflation on expenses

Amount of corporate tax

management expenses in the present

contractual obligations in the future

Copyright reserved @ May 2013 by FSA

Selling Life Insurance

Providing Insurance Coverage

Accounts and Financial Aspects

Non-Contestability Period applies

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