Insurance Industry

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PRUDENTIAL ASSURANCE MALAYSIA BERHAD
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REPORT ON THE CURRENT INSURANCE INDUSTRY SITUATION AND EMPLOYMENT OPPORTUNITIES AVAILABLE IN THE INSURANCE INDUSTRY TERMS OF REFERENCE
To investigate the current industry situation and employment opportunities available in the insurance industry, specifically in Prudential Assurance Malaysia Berhad. -------------------------------------------------

PROCEDURE
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Research were done through discussion among team members and reading from the company website, Bank Negara Malaysia website, Jobstreet and newspaper. FINDINGS
1. The industry
2.1. Malaysia’s insurance industry has achieved significant progress in the last decade. Based on Bank Negara Malaysia report during the period from 1988 to 1999, key insurance indicators show that: • The market penetration increased significantly from 11.4% to 31%. • The total paid-up capital of the industry and average capitalisation per insurer increased by 532.4% and 476% respectively. • The industry’s trading ratio improved from 308.5% to 175.7%, indicating that insurers are much less highly geared. • The total insurance fund assets and average asset base per insurance fund increased by 545.9% and 521% respectively. • The technical reserves of general insurers strengthened from 122.6% of net premiums to 170.3%; and • The retention ratio of general insurance business rose from 75.6% to 87.8%. 2.2. The insurance industry in Malaysia is relatively small by international standards. However, with the projected economic growth, a large proportion of the population will reach levels of per capita income that will significantly increase the demand for risk and savings-type products. The ability of the domestic insurance industry to capture a share of this growth will depend on the ability of insurers to maintain their competitive positions both within the industry specifically, as well as the financial sector generally, in the face of new challenges and the changing financial and economic environment.

2.3. The major challenges facing the insurance industry going forward are: • Increasing competition from traditional players as global trends of consolidation and specialisation create international insurers that are larger, better skilled and more focused on core areas of competence; • Competition from new players such as asset managers, captive insurers (general insurance), and independent financial advisers. • Adapting to technological advances that have fundamentally changed the way business is conducted; and • Meeting the needs of more sophisticated and more informed consumers. 2.4. In light of these challenges, Malaysia’s insurance industry needs to progress further towards world best practice benchmarks in terms of efficiency, effectiveness and stability by: • Domestic players in the life and general insurance industries should improve further on economies of scale • Progress should be made towards the development of skills in areas of management, information technology and underwriting • Competition should be encouraged to reduce acquisition costs, especially in life insurance, and premiums charged in general insurance • Distribution channels such as independent financial advisers, banks, telephone, direct mail and the internet should be further developed • Measures should be taken to improve the productivity and quality of the agency force • The range of products available in the market should be expanded to include more sophisticated products.

2.5. As the borders between insurers, asset manager and banks continue to blur, and as banks and insurers increasingly begin to take advantage of the opportunities of bancassurance and of multi-product personal financial advisers, it will be increasingly important to ensure that regulation and supervision across the sectors are aligned.

2. The established corporate...
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