The battle of the premium rebate continues, with Perwakim holding a peaceful picket last Tuesday…
(Business Times) PERWAKIM, an association of general insurance agents in Malaysia, has submitted a memorandum to Bank Negara protesting the central bank’s proposal to give rebates on premiums for consumers that renew their motor insurance directly with insurance firms.
They claim that the move, which takes effect from today, would adversely affect consumers, agents and the insurance industry in general.
Perwakim president Liza Lau said a copy of the memorandum was also handed to the office of Prime Minister Datuk Seri Najib Tun Razak, the Ministry of Finance and Ministry of Human Resources.
Lau led more than 50 agents in a peaceful picket in front of Bank Negara yesterday. The crowd dispersed after about two hours.
She said there are a total of 50,000 insurance agents nationwide of which 40 per cent are full-time agents.
Insurance agents earn a 10 per cent commission from the insurance companies.
If you’ve missed the previous rounds, here’s a summary of what happened so far:
1) BNM has approved General Insurance companies in Malaysia to give premium rebates to direct customers.
2) Direct customers would meant customers who approach the General Insurers directly (walk-in, through the internet, direct mailing and the telemarketing channel). In short, any method that does not go through sales agents or intermediaries.
3) The beef of the issue mainly lies with the motor insurance rebate, as this was ‘once’ considered the iron rice bowl for most agents. What happened was after the premium rebate was approved, customers who renew their motor insurance directly will receive 5% premium rebate in the first year of implementation and 10% thereafter.
4) For other types of general insurance products, the General Insurers are given flexibility by BNM in the rate of premium rebates.
If you haven’t read about my previous take on the issue, you can head over here: Duit Kopi.
Today, I would like to re-look into this issue from another perspective.
These general insurance agents did not get all worked up for nothing. There’s some element of betrayal here. Yes, for some consumers, these agents might not have deserved the 10% extra premium, but I would say that for any agents serious in the general insurance business, most of them are providing much better service from say, a typical General Insurer’s front-line customer service consultants or helpline operators. Imagine trying to get an answer from these front-line customer service consultants on the market value or to get a quotation for your vehicle. And compare this with a general insurance agent who is not under the direct payroll of the General Insurer. I can safely bet that the latter will be relatively more responsive and efficient. Most of everyone I know have had bad experience with 1800 customer service numbers.
Another aspect that was overlooked by the authority on the implementation of this premium rebate is the compensation for loss of income. Sure, it’s arguable and almost impossible to determine the value of these general insurance agents in soliciting businesses for the General Insurers, but what about the existing customer base that these hardworking general insurance agents have built for these General Insurers. How is the new premium rebate compensating for the historical loyalty of these agents? Yes, you can argue again that if the agent’s service is good, the customers are most likely going to stick around, but who’s to say otherwise? Malaysians being Malaysians, it’s very common to see customers throwing out loyalty out the window the moment they see the word ‘DISCOUNT’. In Malaysia, it’s easily one of the most emotional phrase after ‘FREE’. So, what is the authority’s policy on the compensation of businesses lost incurred directly on the once loyal sales force?
The next issue is about ethical and fairness. How is the agent able to compete fairly with the General Insurer? Imagine a supplier marketing their product directly to the consumers. What’s going to happen to the retailer? Okie, that might not be a good analogy, since you can always debate that the retailer who don’t add value should never have existed in the first place. But remember again, these retailers has been marketing the supplier’s product since the beginning of time. And suddenly the supplier just decided to cut into the scene, without any form of compensation and even offering rebates that will wipe off the entire retailer network. I can smell a commercial lawsuit coming up. The least these General Insurers could do is to offer the same pricing, without premium rebate and play the game like an ethical sportsman.
That’s my piece of mind. I think the General Insurers are taking these general insurance agents for a ride by providing double pricing and standards on their products, and BNM being the respected Regulatory Body should have taken more time before implementing this policy, ensuring it’s a win-win situation.
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Jacques
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Jayce
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imDavidLee
