Certificate

Examination In
Investment-Linked Life
Insurance
(CEILLI)

ENGLISH
Study Guide
 Content
Page

Chapter 1 – Introduction to Investment-Linked Life Insurance 3

Chapter 2 – Key Considerations In Investment 4- 7

Chapter 3 – Types of Investment Assets 8 - 18

Chapter 4 – Investment-Linked Life Insurance Products –

A World Scenario 19 - 20

Chapter 5 – Types of Investment-Linked Life Insurance Products 21 - 24

Chapter 6 – Structure of Investment-Linked Funds 25 - 27

Chapter 7 – How Investment-Linked Life Insurance Products Work 28 - 34

Chapter 8 – Benefits and Risks of Investing In Investment-Linked Funds 35

Chapter 9 – Comparison Between Investment-Linked Life Insurance

and Traditional With-Profit Life Insurance Products 36 - 37

Chapter 10 – Taxation and Law Covering Investment-Linked Life

Insurance Products 38 - 39

Chapter 11 – Identifying And Satisfying Customers’ Needs 40

Chapter 12 – Marketing And After-Sales Services, Ethics And

Code of Conduct 41 - 45

2
 Chapter 1 : Introduction to Investment-Linked Life
Insurance

Introduction

• Investment-linked insurance offers investors policies where

values are directly linked to investment performance.

• The policyowner’s premiums are used to purchase funds

in one of the insurance company’s investment funds.

• Policyowner are offered a range of unit-linked funds in

which they can invest.

• Term of “Investment-linked” in countries such as the

UK and US are called:
 UK: Unit-linked
 US : Variable Life

3
 Chapter 2 : Key Considerations In Investment

Fund for
children

A comfortable Improvement on
standard of living financial position

(1)
INVESTMENT
OBJECTIVES

Fund for Income for

dependants retirement

Fund for expenses

and taxes
after death

4
 Chapter 2 : Key Considerations In Investment

(2) FUND AVAILABLE

More money, More choices of investment available to the investor

(3) RISK OR SECURITY

(1) Losing some or all of the initial investment

Risk
(2) Rate of return ≠ expectation

Risk/Return Trade-Off

Risk
Different level of
accepting risk

Return

5
 Chapter 2 : Key Considerations In Investment

(4) INVESTMENT HORIZON

One’s investment horizon depends on:
Short Term
The Investment Objectives Medium Term
Long Term

The Age
Young age may have longer investment horizon compare to elder age

Investors’ Current Financial Condition

If the investor is financially stable, he may opt to have a longer investment
horizon.

(5) ACCESSIBILITY OF FUNDS

Maturity Period
The maturity period of the investment must meet the investment objective

Cost/Penalty of Realising the Investment Before Maturity

A higher cost/penalty will require more considerations before making any
decision

Initial Cost
Fund with higher initial cost have lesser accessibility

6
 Chapter 2 : Key Considerations In Investment

(6) TAXATION TREATMENT

Individual should consider the different tax treatment on different types
of investment before making a decision on what to invest.

Tax status of investment-linked life insurance product

= traditional life insurance products

(7) PERFORMANCE OF THE INVESTMENT

• Economy
• Management team
• Invested company
• Investment Life cycle

(8) DIVERSIFICATION
Investing across different investment types

Minimize Risk, Maximize Return

7
 Chapter 3 : Types of Investment Assets

(1) CASH & DEPOSITS

• Short term debt instruments

• Serves as a medium of exchange
• Advantage : low risk + interest in return
• Disadvantage : low return

Types of Cash & Deposits

i. Treasury Bill
Short Term government funding vehicles issued on a regular basis
with repayment normally within a year

ii. Bank Account

Time or fixed deposits

• Advantages
- Low risk

• Disadvantages
- Low yielding in return
- Do not provide a good inflation hedge
- Penalties upon early /premature withdrawal

8
 Chapter 3 : Types of Investment Assets

(2) FIXED INCOME SECURITIES

• A group of investment vehicles that offer a fixed periodic income
• Issued by companies or government to raise fund

Types of Fixed Income Securities

i. Government Bonds
Short term bonds (<5 years)
• Fixed Term and Interest
Medium term bonds (5-10 years)
Long term bonds (>15 years)
• Advantages : - low risk + guaranteed income
- marketable
• Disadvantages : capital will be eroded during high inflation

ii. Corporate Bonds

• Debenture stocks
- Security on company’s assets, secured loan to a company

• Loan Stocks
- No Security, unsecured loans to a company

• Convertible Stocks
- conversion to ordinary shares

Advantages :- higher return than government bonds

- more marketable than government bonds
- can be sold for capital gains

Disadvantages : more risky 9

 Chapter 3 : Types of Investment Assets

(3) SHARES

• A shareholder is a part owner of the company

• Value of a share fluctuates according to the market’s view of the worth
of the company
• A share can be a volatile investment
• Advantages :
- investors participate directly in the future of the company
- provides good dividends and capital appreciation
- very liquid (can be traded in the open market)
• Disadvantages : high risk

Preference Shares
• Priority claim on a firm’s assets and earnings
• Returns from Fixed Dividends

Ordinary Shares
• Representing the ownership interest in a corporation
• Return from Dividends + Capital Gain

10
 Chapter 3 : Types of Investment Assets

(4) UNIT TRUST

• A three-way arrangement among investors, the trustee and the fund
manager
• Units can be sold back at any time without the need to find a purchaser
• Suitable for medium to long term investment (> 3 years)
• Regulated by Security Commission
• Advantages : - spread of investment
- lower risk when compared to share
- professional investment service

• Disadvantages : - bewildering array of funds

- extra cost or charges for switching service

Trust deed
Investors
• Power for fund managers
to invest.
Pool Of Funds • Price structure
Trustee
(Open-Ended) (Usually a bank) • Registration of unit trust
• Remuneration of fund
managers
Fund Manager • Accounting and auditing
rulings

11
 Chapter 3 : Types of Investment Assets

(5) INVESTMENT TRUSTS

• A company, registered under Company Act

• The company will invest in a wide range of equities and other
investment
• Investors purchase shares instead of units in the company
• Suitable for medium to long term investment (> 3 years)
• Advantages : - investors can borrow to finance their purchases of the
investment trusts
• Disadvantages : - due to the loan flexibility, investors are opened to
greater risk exposures when investment value drop
• Regulated by Security Commission
• An example is Seacorp Schroders

Look for
Investors
own buyers

Pool Of Funds (Closed-Ended)

Size of fund is fixed

Fund Manager

12
 Chapter 3 : Types of Investment Assets

(6) PROPERTY

Real Estate

Agricultural Commercial/ Domestic

property industry property property
Affected by - Affected by - Affected by -
Quality & profitability  Location  Location
of crops  Types of  Types of
building building
 Location
 Value of the
building

•Advantage :
- good capital appreciation and steady flow of income

•Disadvantage :
- difficult to be disposed off during recession

13
 Chapter 3 : Types of Investment Assets

(7) DERIVATIVES

Financial instruments whose values are linked to the price of underlying

instruments in the cash markets

Types of derivatives
i. Shares Options
• Rights to BUY (Call Option) or SELL (Put Option)
shares of stock at a specific price within a specified period
• Advantage : - investor has the potential to boost profits
from share price movements
• Disadvantage : - high risk

Call Option
Investors will hope for raise in share price when option is exercised

Premium
Value of shares
+
Fixed Price
< in the market

Put Option
Investors will hope for falls in share price when option is exercised

Premium
+ > Value of shares
in the market
Fixed Price

14
 Chapter 3 : Types of Investment Assets

(7) DERIVATIVES
Types of derivatives

ii. Warrants (Transferable Subscription Rights)

• Corporate-created Option to Buy at pre-determined

1. Conversion Ratio
2. Exercise Price
3. Time Period

• Issued free, attached to loan stocks

• Can be exercised by:

1. Subscribing Ordinary Shares
2. Exchanging the loan stock

• Advantage :
- exposure to share with a small initial outlay
- when the price of underlying share goes up,
investors can benefit from capital gain by
selling or exercising the warrant

• Disadvantage :
- upon maturity, if not being exercised,
warrant will lose its value completely
- warrant holders don’t receive any interest or dividends

15
 Chapter 3 : Types of Investment Assets

(7) DERIVATIVES
Types of derivatives

iii. Futures

• Contract between buyer and seller which set a price today for
an instrument that will be delivered on specified future date

• Physical commodities and financial instruments typically are

traded in Cash Market : -
1. Spot Market – Immediate Delivery
2. Forward Market – Deferred Delivery

• Future markets are organised and standardised forward markets

• Index Future :- buy or sell a hypothetical portfolio of stock at a

currently determined price

• Advantage :- hedging*
- price discovery for a future date
• Disadvantage : - high risk

*Hedging – assuming of futures positions opposite to cash positions

in an attempt to minimize the risk of financial loss from
adverse price changes

16
 Chapter 3 : Types of Investment Assets

(8) COMMODITIES
• Commodity market exist primarily for commercial buyers and sellers
of the commodity concerned.

• Advantage :
- high profit potential with low outlay

• Disadvantage :
- high risk. Commodity prices depend on supply and
demand, weather and unexpected pests attacks

Physical Futures

 Good Exist  Good does not

 Delivered Exist
immediately  Delivered in
future

17
 Chapter 3 : Types of Investment Assets

(9) LIFE INSURANCE

• Pool of fund of policyowners in relation to their risk exposures

• A specified sum of money will be paid in the event of death or other

contingencies dependent on human life

• Types of Insurance
i. Term
ii. Whole life
iii. Endowment
iv. Annuity
- Immediate Annuity
- Deferred Annuity

• Advantage :
- guaranteed lump sum payment or regular income

• Disadvantage :
- expensive build-in charges

18
Chapter 4 : The Investment-Linked Life Insurance Products -
A World Scenario

UNITED KINGDOM
1957 London & Manchester Individual Retirement Annuity for
Assurance self-employed

Investment-linked Whole Life Plan

1977 Hambro Whole Life Plan
• Sum assured guaranteed for a
given investment of premium
for the first 10 years
• Fixed sum assured per investment of
premium according to age of entry

1979 Skandia Life UK Allowed policyowners to select whatever

sum assured the policyowners required within
a given range of cover

UNITED STATES OF AMERICA

Variable life insurance was more affected by regulations in United States
The Securities Act Required potential client be provided with a prospectus that
1933 among others disclose the identity and nature of the insurer’s
business, how the premiums are going to be invested, financial
information of the insurer, chargeable fees and expenses and
rights of policyowners

Securities Exchange • Insurance company or sales company must register as a

Act 1934 broker-dealer
• Agents & agency office employees pass an examination
in securities business and registered with NASD and pass
an examination

The Investment Regards entities that investment assets of variable life insurance
Company Act 1940 policyowners as investment companies and regulates the
investment company’s management and operation
19
Chapter 4 : The Investment-Linked Life Insurance Products -
A World Scenario

SINGAPORE
1973 NTUC Income Single Premium Investment-Linked Policy

1992 Prudential Single and Regular Premium

1993 Central Provident Fund Enchanced Investment Scheme (EIS)

(CPF) • CPF members who have cash of at least
S$50,000 in their Ordinary Account, to
invest 80% of the excess in the Ordinary
Account above S$50,000, in one or more
of the eligible investment instruments

1997 Central Provident Fund EIS merged with BIS (Basic Investment
(CPF) Scheme) to form Investment Scheme (IS)
• CPF members who retain at least the required
minimum sum in their CPF account, including
the cash amount will be allowed to invest up to
80% of their remaining CPF balance in all the
eligible instruments, including those which
were previously reserve only for EIS scheme

MALAYSIA
1985 Syarikat Takaful Malaysia Berhad Investment-linked Life Insurance Product

1994 MNI Takaful Sdn. Bhd. Investment-linked Life Insurance Product

1997 Berjaya Prudential Assurance Bhd Single Premium Whole Life Insurance
Product
1998 Mayban Life Assurance Bhd Unitised Investment Plan (Bancassurance)

1999 MAA Assurance & several other Investment-linked Life Insurance Product
insurance companies
20
 Chapter 5 : Types of Investment-Linked Life Insurance
Product

INTRODUCTION

Unallocated
Protection

Capital Gain
Allocated
(Converted to unit)

Protection Investment
(Funded by cancellation (Fund managed
of units) by life office)

21
Chapter 5 : Types of Investment-Linked Life Insurance
Product

CHARACTERISTIC OF INVESTMENT-LINKED LIFE

INSURANCE POLICIES

INVESTMENT REGULAR
SAVING
Larger exposure to
equity.
PROTECTION
 Life/TPD/Accident/Health
 Charges vary with age and
coverage.
 Types and level of charges
are stipulated openly in
CASH VALUE policy terms.
Value of units allocated.  Benefits are determined by
Determined by investment investment performance.
performance.

22
 Chapter 5 : Types of Investment-Linked Life Insurance
Product

(1)SINGLE PREMIUM INVESTMENT-

LINKED WHOLE LIFE INSURANCE PLAN
Long Term Savings Investment

• Minimum Single Premium of RM3,000.00 with Top-Ups

• Insurance Protection as percentage of single premium (=125%) at a
minimum of RM5,000.00 (Malaysia)
• Investment Management Fee of 0.5% - 2.0%
• Surrender fund units for liquidity

(2)REGULAR PREMIUM INVESTMENT-

LINKED WHOLE LIFE INSURANCE PLAN
Investment Life Protection

• Scope similar to Single Premium Policies

• Vary level of regular premiums
• Taking premium holidays
• Stop paying premium when account has sufficient funds
• Sum assured can be varied.
- The higher the level of coverage, the more the morality charges and
consequently the cash values will be lower and vice-versa
• Withdrawals and surrenders after a few years

23
 Chapter 5 : Types of Investment-Linked Life Insurance
Product

(3) INVESTMENT-LINKED INDIVIDUAL

PENSION PLAN
Retirement

• No Life insurance cover unless funded by cancellation of investments.

• Convertible to a traditional with-profit life insurance policy.

(4) INVESTMENT-LINKED PERMANENT

HEALTH INSURANCE
Cash Value + Health Coverage, e.g.
Disability Income

(5) INVESTMENT-LINKED DREAD DISEASE

INSURANCE
• Risk Cost is reviewed on a regular basis

• Life insurance policy which advances the face amount upon diagnosis
of dread disease

24
 Chapter 6 : Structure of Investment-Linked Funds

ACCUMULATION UNITS
• Income is ploughed back into the fund
• Unit Price increases over long term
• E.g.:
Before After
Investment Value RM1,000 RM1,100
Unit Price RM1.00 RM1.10
No. of Units 1,000 1,000

DISTRIBUTION UNITS
• Income is distributed to policy owner as additional units
• Unit Price unchanged, number of units increased
• E.g.:

Before After
Investment Value RM1,000 RM1,100
Unit Price RM1.00 RM1.10
No. of Units 1,000 1,100

25
 Chapter 6 : Structure of Investment-Linked Funds

TYPES OF INVESTMENT-LINKED FUNDS

Cash Funds Cash, bank deposits • Lowest risk

Equity Funds Stocks, shares • Capital returns

Bond/Income Funds Government/Corporate • Lower risk than

(Fixed Income Funds) bonds equity funds

Property Funds Real estates, property • Lower risk

shares than equity
Defer redemption of funds
units for up to 12 months • Lower
liquidity

Specialized Funds Segmented based on • Involves

geographical regions or currency risk
particular industries
ASEAN Fund, Emerging
Markets Fund, International
Bond Fund, China Fund, U.S.
Fund

Managed Funds Wide variety of asset allocation

Balanced Funds Fixed proportion of specified assets

26
 Chapter 6 : Structure of Investment-Linked Funds

RISK-RETURN PROFILE
RISK

Equity
Funds X
Managed
Funds X

X
Bond
Funds Balance Funds
X

X
Cash Funds

RETURN

SWITCHING
A facility that allows a policyowner to switch part or all of his investment
from one fund to another fund

27
 Chapter 7 : How an Investment-Linked Insurance
Policy Work

SINGLE PREMIUM/TOP-UP

Allocated Unallocated
Premium Premium
used to buy units
from investment-
linked funds at
offer price

Surrender

Units which Life Office

belong to (Marketing and
Withdrawals policy owner set-up expenses)

Death Cancel units

Claim

28
 Chapter 7 : How an Investment-Linked Insurance
Policy Work
(A) CALCULATION OF SINGLE PREMIUM
POLICIES
i. SINGLE PRICING METHOD

Offer Price = Bid Price

Single Premium = RM 4,000.00

Unit Price = RM 1.00

Charges = 5%

Mortality Charge = 1%

Policy Fee = RM 100.00

Balance Premium = RM 4,000.00 - (RM4,000 X 5%)

Number of Units = RM 3,800.00/RM 1.00 = 3,800 units

Cash Value = (Number of Units x Unit Price) - (Mortality Charge +

Policy Fee)
= (3,800 units x RM1.00)-[(3,800 units x RM1.00 x
1%)+RM100]
= RM3,800 - RM138
= RM3,662.00

29
 Chapter 7 : How an Investment-Linked Insurance
Policy Work

ii. DUAL PRICING METHOD

Offer Price > Bid Price

Single Premium = RM 4,000.00
Offer Price = RM 1.00
Bid-Offer Spread = 5%
Number of Units = RM 4,000/ RM 1.00 = 4,000 units

Unit Price Bid Price Unit Price

RM1.00 RM1.00 x (100%-5%) RM4,000 X 0.95 = RM3,800.00

= RM0.95

RM1.20 RM1.20 x (100%-5%) RM4,000 X 1.14 = RM4,560.00

= RM1.14

Cash Value = (Number of units x Bid Price) - (Mortality Charge

+ Policy Fee)
= (4,000 units x RM0.95)-[(4,000 units x RM0.95 x 1%)
+RM100]
= RM3,800 - RM138
= RM3,662.00

30
 Chapter 7 : How an Investment-Linked Insurance
Policy Work
CALCULATION OF SINGLE PREMIUM
POLICIES
Annual Yield on Gross Premium
Annual Yield = ( Return on Gross Premium, RGP )1/n - 1
RGP = Ending Value of Investment
Beginning Value of Investment

i. ANNUAL YIELD ON GROSS PREMIUM SINGLE

PRICING METHOD
Number Of Units = 3,800 units
Current Unit Price = RM1.97

Ending Value of Investment

= (Number of Units x Unit Price) - (Mortality Charges + Policy Fee)
= (3,800 units x RM1.97) - [(3,800 units x RM1.97 x 1%) + RM100]
= RM7,486 - RM174.86
= RM7,311.14

Beginning Value of Investment

= 4,000 units x RM1.00 = RM4,000.00

RGP = RM7,311.14 = RM1.828

RM4,000.00

The Annual Yield = (RM1.828)1/10 - 1 = 1.062 - 1

= 0.062 or 6.2%
31
 Chapter 7 : How an Investment-Linked Insurance
Policy Work

ii. ANNUAL YIELD ON GROSS PREMIUM DUAL

PRICING METHOD

Number Of Units = 4,000 units

Current Offer Price = RM1.97
Bid Price = RM1.97 x (100% - 5% )
= RM1.8715

Ending Value of Investment

= (Number of Units x Bid Price) - (Mortality Charge + Policy Fee)

= (4,000 units x RM1.8715) - [(4,000 units x RM1.8715 X 1%) + RM100]

= RM7,486 - RM174.86
= RM7,311.14

RGP = RM7,311.14
= RM1.828
RM4,000.00

The Annual Yield = (RM1.828)1/10 - 1

= 1.062 - 1
= 0.062 or 6.2%

32
Chapter 7 : How an Investment-Linked Insurance
Policy Work
WITHDRAWAL

If policy owner withdraws α units, he will receive

Single Pricing: α x Unit Price

Dual pricing: α x Bid Price

If policy owner withdraws RM ß, the number of

units canceled is,
Single Pricing: ß ÷ Unit Price

Dual Pricing : ß ÷ Bid Price

33
 Chapter 7 : How an Investment-Linked Insurance
Policy Work
DEATH BENEFIT
Unit Value PLUS Sum Assured

Death Benefit
c1 Value of Units
c0 b1
b0
a a Death Cover
o o
Time t0 Time t1
At time t0 : Death Benefit = oa + ob0 = oc0
At time t1: Death Benefit = oa + ob1 = oc1

Unit Value PLUS Sum Assured

Value of Units
Time t2
Time t0 Time t1
Death Cover

o o1 o2
At time t0 : Death Benefit = oa
At time t1: Death Benefit = o1b
At time t2: Death Benefit = o2c

34
Chapter 8 : Benefits and Risks of Investing In Investment-
Linked Funds
BENEFITS
i. Pooling or Diversification
• Diversified portfolio of investment

ii. Flexibility
• Change level of premium and sum assured
• Take premium holidays
• Top-ups
• Withdrawals
• Switching between funds

iii. Expertise
• Professional fund manager

iv. Access
• Low initial investment of RM4,000

v. Administration
• Relieved of administration of investment

RISKS
i. Investment Risk
• Value of units is dependent on performance of the assets of
the fund

ii. Charges
• Not guaranteed
• Subject to regular review
35
 Chapter 9 : Comparison between Investment-Linked life
Insurance and Traditional With-profit Life Insurance Product

Traditional Life Insurance Products

Investment-
linked Life
Guaranteed With-Profit Insurance
Without Profit Product
Investment Guarantee a fixed Guarantee a fixed Returns vary
Return and rate of return. rate of return. according to the
Risk Does not depend on Allocate additional asset value of
the investment amount called bonus individual funds.
performance from the reserve Risk and returns
of company. fund. are transferred to
No investment risk. Three types of policy owners.
Risk of insolvency of bonuses: Cash,
insurance company. reversionary &
terminal.
Returns does not
depend directly to
the investment
performance of
company.
No investment risk.
Risk of insolvency
of insurance
company.

Premium Premium is fixed at Premium is fixed at Premium

Computation inception based on inception based on payments are
sum assured. sum assured and flexible.
expected bonus(es)
payable.

36
 Chapter 9 : Comparison between Investment-Linked life
Insurance and Traditional With-profit Life Insurance Product

Traditional Life Insurance Products Investment-

linked Life
Guaranteed With-Profit Insurance
Without Profit Product

Death Sum assured is Sum assured is Minimum

determined and fixed determined and fixed guaranteed
Benefit at inception. at inception. value for life
Bonuses (if any) will cover.
be payable. Based on current
policy value

Surrender Depends on the types Includes net cash Based on the

Value of insurance value of reversionary current policy
(Term/End/WL) bonus. value.

Option to Increase sum assured Normally not Can top-up

Top-Up during renewal of the allowed. anytime without
policy. effecting a new
policy.

Transparency Investment-linked life insurance policies

are more transparent. (e.g. fees and charges)

37
Chapter 10 : Taxation and Law Covering Investment-Linked
Life Insurance Products

TAX RELIEF ALLOWABLE

Life Insurance Premium on
 Individual’s Life Maximum
EPF
 Spouse’s Life RM5,000
 Joint Life
(Individual + Spouse)

Life Insurance Premium on Maximum

Education and/or Medical policies RM3,000

ON COMPANY
8% TAX ON
CHARGEABLE INCOME + REALISED CAPITAL GAIN

ON POLICY OWNER
TAX-FREE on policy proceeds
Disposal of units
Policy matures
The occurrence of an insured event
Cancellation / surrendering the policy

38
Chapter 10 : Taxation and Law Covering Investment-Linked
Life Insurance Products

1. Prior Written Approval from BNM

2. Maintain Separate Fund in respect of each Investment-Linked fund
3. Investment Limits
The lower of:-
5% total value of fund’s asset
• Securities
5% investee company’s paid up capital

• Loans or Debentures 5% total value of the fund’s assets

4. Frequent Valuation of Assets to provide accurate unit prices and

benefits
5. Annual Valuation of Liabilities to certify the level of reserves
6. Policy owner ≥ 18 years old
7. Free-look Provision ≤ 15 days
8. Minimum Death Benefits

The higher of :- RM5,000

125% of single premium

9. Minimum premium payment of RM3,000

10. Marketed by Qualified agents only
11. Disclosure of Information in :
• Sales Materials/Illustration/Policy Forms
• Statement on status
• Fund performance Report

39
Chapter 11 : Identifying And Satisfying Customers’ Needs

Fact-finding
• Customer’s personal detail
• Customer’s financial position
• Customer’s financial plans and objectives
• Types of investments and insurance that are currently in force
• Customer’s attitude towards risk

Assessing and satisfying

• Identifying the customer’s needs and priorities
• Determine the best policies and funds
• Determine the customer’s current affordability and what should
be purchased in the future
• Deciding if necessary to refer the customer to another expert
advisor

Recommendations
• Explains
• Customer’s awareness of the options and alternatives reviews
at regular intervals

40
Chapter 12 : Marketing And After-Sales Services, Ethics And
Code Of Conduct

MARKETING
The management process responsible for identifying, anticipating and
satisfying customers requirements profitably

SALES ORIENTED
Hard sales techniques are used to stimulate customers’ interest in the
company’s products

MARKET ORIENTED
• Determine and satisfy customers’ needs by developing and distributing
appropriate products

• Functions of market-oriented company:

- planning & control
- market identification
- product development
- pricing
- selection of distribution channel
- promotion

• To ensure its marketing efforts, a market-oriented insurance company

must be complemented with a market-oriented agency force

5 STAGES IN CONSUMER BUYING DECISION PROCESS

1) Problem recognition
2) Information search
3) Evaluation of alternative policies
4) Purchase
5) Post-purchase evaluation

41
Chapter 12 : Marketing And After-Sales Services, Ethics And
Code Of Conduct

5 BASIC STEPS OF THE SELLING PROCESS

1) Locating the prospective customer
2) Creating a sales presentation
3) Conducting the sales interview
4) Handling objections
5) Closing the sales

AFTER SALES SERVICES

• Follow-up stage helps ensure that the customers remain satisfied with
the purchase

• Also helps in reducing customers’ cognitive dissonance

• Cognitive dissonance
A psychological state in which customers feel uncertain and often
question whether
- they should have purchased a product at all
- they should have purchased an alternative brand or another product
• Delivery of a policy can dispel customer’s cognitive dissonance
by reassuring policyowner and the family members about their
decision to buy the policy

42
Chapter 12 : Marketing And After-Sales Services, Ethics And
Code Of Conduct

LIAM’S GUIDELINES ON THE CODE OF CONDUCT

Part I – Guidelines on the Code of Conduct

This part deals with the following aspects concerning the code of conduct:

• Statement of Philosophy

• Coverage

• Monitoring devices

• Seven Principles of Guidelines

- to avoid conflict of interest
- to avoid misuse of position
- to prevent misuse of information
- to ensure completeness and accuracy of relevant records
- to ensure confidentially of communication and transactions
- to ensure fair and equitable treatment of all policyowners
- to conduct business with the utmost good faith and integrity

• Code of Conduct – as a guide

43
Chapter 12 : Marketing And After-Sales Services, Ethics And
Code Of Conduct

LIAM’S GUIDELINES ON THE CODE OF CONDUCT

Part II – Life Insurance Selling

This part deals with the following aspects relating to selling of life insurance:
• Introduction
• General Sales Principles
The intermediary shall
i. Introduce himself as an agent of the represented company
ii. Propose suitable policy to meet policyowner’s needs
iii. Advise on matters in which he is competent
iv. Treat policywners’ information confidentially
v. Make clear the different characteristics of each policy
vi. Render continuous service to the policyowner

The intermediary shall not

i. Make inaccurate or fair criticisms of any insurers
ii. Persuade a prospective policyowner to cancel any existing policies unless
these are clearly unsuited to the policyowner’s needs

“Twisting” – a form of misrepresentation in which a policyowner is induced to

discontinue an insurance policy made paid-up in order to
purchase a new policy to earn more income for the agent

• Explanation of the contract

• Disclosure of underwriting information
• Accounts and Financial Aspects

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Chapter 12 : Marketing And After-Sales Services, Ethics And
Code Of Conduct

LIAM’S GUIDELINES ON THE CODE OF CONDUCT

Part III – Statement of Life Insurance Practice

This part deals with the following aspects :

• Introduction

• Claims
- insurer may not unreasonably reject a claim exceptions to those circumstances
mentioned in the policy provisions or the provisions of the Insurance Act 1996
and Regulations
- time limit for notification of a claim
- genuine claim has to be settled without undue delay
- no claim processing fees will be collected

• Proposal Forms
- statement on disclosure of material fact and consequences of non disclosure
- intermediary to have a copy of the proposal form

• Policy and Accompanying Documents

• Sales Materials/Advertisements

45
 Tokio Marine Life Insurance Malaysia Bhd.

Tokio Marine Training & Development Academy (TMTDA)

Menara Tokio Marine Life
23rd Floor, 189, Jalan Tun Razak
50400 Kuala Lumpur
Tel : 03 – 2059 6188
Fax : 03 – 2162 8068