Etiqa Insurance And Takaful: Social, Economic, And Ethical Contributions

Describe about the Malaysian insurance company Etiqa Insurance and Takaful and the social, economic and ethical contribution undertaken by the company?

This particular assignment is based on the Malaysian insurance company Etiqa Insurance and Takaful and the social, economic and ethical contribution undertaken by the company. A short introduction presents the contribution of the Malaysian Insurance companies on the local economy. A brief overview of the company background has been presented to familiarize about the company.

Discussions regarding the contribution of the company towards the local economy, through social, economical and ethical manner have been presented along with detailed discussion about the process as to how this particular company generates employment for the local people. Benefits and issues of the initiatives taken by the Malaysian government along with support from the Malaysian Insurance regulatory authority and the effect of supply side policies have also been discussed.

A detailed highlighting has been made on the process regarding how the company and the entire Insurance industry of Malaysia has the possibilities of improving contribution in financial, societal and ethical development along with generation of employment in the local economy in future.

Insurance sector has grown to be one of the most efficient contributors to the financial sector of all the countries of the world. Presently, this particular sector has been contributing about 3.5% of the total Gross National Income and nearly 15% of GDP of the country consists of premiums amounting to about RM 28 billion at the last quarter of the financial year 2015. With passage of every year, the entire work force of the Insurance Sector has grown to be nearly 90,000. This particular assignment will highlight about the contribution made by the chosen insurance organization in the domestic economy, in the social, ethical and economic norms.

The changes in the pattern of employment over the last five years, the benefits, and the issues that has risen despite the initiatives of the government and the supply side policies will be highlighted. The discussion will also depict the recommendations in order to bring improvements in the ethical, economic and social contribution of the company along with highlighting the process that will create employment opportunities in the up- coming years.

The chosen organization for this assignment is one of Malaysia’s most renowned Life and General Insurance providers Etiqa Insurance and Takaful. The detailed discussion on this chosen organization will be presented in the following paragraphs. .

This particular Insurance Company Etiqa and Takaful is the insurance and Takaful operations sector of the famous Malaysian Banking sector Maybank. This company was established in the year 2005 with the head office located at Dataran, Kuala Lumpur.The key offerings made by the company are “General Insurance, Life Insurance along with family and general Takaful products” to the customers effectively since its establishment. The company presently employs nearly 14, 000 insurance agents and operates through 30 branches and all dedicated branches of Maybank through the model of bancassurance.

Considered as one of the top insurance companies of the country, if measured from the context of gross premiums written, it presently occupies the Malaysian market with nearly 47 % and 21% in “General Insurance and Takaful shares” respectively for the households of the country. At present, the Revenue of the company is around RM 3.36 billion with Total assets worth around RM 19 billion and equity worth around RM 3 billion. The two wings of Etiqa Insurance are Etiqa Insurance Berhad and Etiqa Takaful Berhad. This particular company has been marked as A/Stable Insurer of the country from the perspective of financial strengths as per the ratings provided by Fitch during June 2015.

Chosen organization

Takaful business is the operations system of reimbursement or any repayment made in case of loss incurred by the customers (insurers) including individual as well as corporate houses concerning hazards or funds that are compensated out of agreed contributions made by the Takaful operators. The product specification of the chosen company is presented in the diagram below:

Figure 1: Products offered by Etiqa Insurance

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From the perspective of economic development, it can be stated that the organization has been playing a vital part in development of the economy by providing adequate financial support to the insurers. It is also undertaking the burden of payment for any unfavorable and potential risks to the insurers.After assessing the existing scenario of the Malaysian insurance sector, it has been revealed that the sector along with Etiqa is providing a strong support for the economic development by undertaking various responsibilities like:

Expansion of business- Etiqa Insurance has been assisting the local business organizations as well as upcoming business corporations through provision of financial assistance, in case the insured company fails to operate in a satisfactory pattern. Even at the time of recruiting new employees in a company, the insurance company provides the option of compensating the employees in case of any accident during the term of employment.

Obtaining finance- This insurance companies are also providing financial assistance to the individuals by providing finance for purchasing assets like house, motor vehicles as well as property. At the same time, the individuals or the insured persons are able to protect their assets from being damaged by any unfair incidents. Hence, financial assistance to people has been another significant contribution of the company towards economic development.

Claim settlement- It have been observed that The Malaysian insurance sectors settles policy claim of about RM 150 – 175 billion every year, including general and other benefits in times of accidents and other hazardous incidents. These additional funding assists the insured in recovering the lost amount and thereby maintains their flow of life and work in future. Protection of intellectual property, covering damages from unanticipated loses or liabilities are another significant contribution towards economic development.

The company further reinvests development funds- The premiums paid by the insured people and the companies in order to raise additional funds from the market. These particular investments are carried out for major development projects undertaken by government organizations or any other renowned public listed companies of the country. The company targets mainly commercial and retail investment funds and stocks, which enjoy growth in terms of prices. The insurance provider is also inclined towards purchasing debt securities from companies undertaking industrial projects or from companies investing in real investment projects.

Tax payment and Business Management- The insurance companies pay annual taxes in return of pursuing business. These taxes are one of the major sources of fund for the government of the country to reinvest in projects that assist the government in funding  programs that contribute towards assistance of people and undertake contributions in the development of education, defense and creates further scope for expansion of infrastructure in the country. Presently, this particular sector has been contributing about 3.5% of the total Gross National Income and nearly 15% of GDP of the country consists of premiums amounting nearly about RM 28 billion at the last quarter of the financial year 2015.

Brief overview of the company

Social contribution has been improving in Malaysia, through the contribution of the companies towards Social responsibilities by providing adequate financial security for the individuals, companies and the assets possessed by the individuals. Active participation in financial development and payment of taxes to the government are in the end is invested in the development of the society. Building infrastructures, enhancement of education system and effective implementation of poverty eradication programs have been significant contributions of the company. From the basis of individual commitment of the company, the wide customer base of Etiqa Insurance, the company has been securing the lives of the people in return for the premiums paid in favor of the company. At the same time, social contribution also counts for the company through effective participation in CSR activities by offering employment opportunities to youths and taking active participation in employment program generation.

Ethical contribution has been the ultimate viewpoint or expectations made by every individual from any sort of service providers. Insurance companies all over the world have been accused of conducting business in an unethical manner, especially delaying or neglecting customer queries of settling the claims of insured people. However, Etiqa Insurance has been successfully maintaining its ethical business process by settling the claims of the insured person or their assets effectively and most importantly in a timely manner. The company’s policy to have a clear and simple insurance policy is what the individuals prefer the most. Most importantly, the company takes initiative in providing proper facilities for those people availing medical insurance and covers their lives against all sorts of life threatening diseases. Hence, it can be said that this particular company has been successful in positively contributing towards social, economic development and also maintaining the ethical standards of the business.

Graph 1: Trends of Malaysian Insurance Sector

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Like any other financial industry sector of an economy, the Insurance sector has been the most effective sector in terms of employment. With increasing demand in creating insurance policies among the individuals as well as the corporate houses, there has been a trend of increase in employment in the industry over the last five years. More people are interested to develop their career trend in the sector of health, property, and medical insurance field and are interested in developing their careers as reinsurers, insurers, brokers, agents and individual business development officers.

From the reports published, the employment in the Insurance sector shows the prediction of growth at rate of 0.6% on annual basis. The domestic insurance companies and the international companies establishing their branches in Malaysia have been the provider of maximum employment. Etiqa Insurance has been contributing towards development of the workforce by providing adequate training programs for new employees to cope with the changing patterns of work. Detariffication in the Malaysian employment rate has created a competitive environment in the entire sector. Etiqa employs 14,000 general as well as life insurance agents in order to convey the message about the company’s products (insurance policies and Takaful offerings) to the maximum people possible.

Ethical, economic and social contribution of the company

As per the statistics provided by Fitch, the particular sector has all the possibilities to grow in the future. Hence, long – term employment opportunities are available in the upcoming days. Career prospects in the sector of Life Insurance provides adequate opportunities for fulfilling their financial needs and learn the technical aspects of being groomed professionally. With attractive pay packages and common benefits provided by the employers, people are more attracted towards creating better career prospects in this particular sector. Therefore suitable candidates possessing positive attitude, independent, well integrated, flexible, multilingual and having the tenacity to develop himself or herself are more likely to be successful in this sector.

The honorable Government of Malaysia has already initiated to take the responsibility of establishing Malaysia as the major center of Insurance and hence is in demand of highly skilled staffs in this sector. The Transformation program undertaken by the Government during the financial year (applicable for the next 10 years) highlights the fact that the people undertaking or planning to develop career in the Insurance sector can be assured about the security in the job. Candidates with more holistic education are more suitable to be selected for employment in the insurance sector. The Government associated by the Bank Negara Malaysia, the Insurance regulatory Authority of Malaysia has framed certain rules and regulations to ensure better functioning of the companies belonging to the sector. 

Graph 2: Supply- side Policies

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From the side of the government initiatives, the possibilities of employment in this sector will be facilitated in the upcoming years because of two major reasons: - Firstly, the government initiatives have created better employment securities in the future, that are quite effective to ensure better participation of the people to work in this particular sector. The other reason being the possibilities of the work force to earn a better way of living with higher rate of salary along with other benefits and opportunities to develop their personalities. The benefits of supply side policies are:

• Increased productivity potential or availability of various types of policies to suit the needs of the individuals and corporate houses
  
  
• The government breaks down labor market rigidities, as the government has taken initiatives to remove restrictive practices and promotion of better employment opportunities in the employment market. At the same time, the employees working in insurance sector as well as in other sectors are provided with better protection
  
  
• Better human resource development programs are to ensure the scope of skills development of the staffs working in the company.
  
  
• The government has also encouraged local pay bargaining, reflecting the local conditions of the country and decreasing the rate of labor mobility.
  
  
• Higher rate of Government investments will influence Insurance companies to hire more employees and feel intensified to launch newer kinds of insurance policies for public offering

The challenges of the government initiatives and supply- side policies are:

• Primarily, overcrowding in the Insurance sector is most likely to happen because with increasing number of job aspirants in the country, it would be quite difficult to manage the employment pressure in the upcoming years.
  
  
• Despite of having the prospects of a better future in this sector still there are no such schemes that indulges the employees to stay in the company, the rate of retention is lower in Malaysian insurance companies
  
  
• With increased rate of competition among the insurance providing companies of the country, unethical business processes might be undertaken and most importantly regarding non repayment of policy claims and settling medical and motor insurance claims.
  
  
• Despite of government initiatives, the effect of recession in the global economy as well as in the Malaysian economy, people of the country did not opt to make any sort of financial savings or insure their lives. Exceptions were for the asset holders, but as far as in late 2014, with gradual increase in car prices and decreasing pattern of sales, the general insurance market kept on declining

After conducting the entire study on the Malaysian Insurance sector and the recent trends of development of the sector in the upcoming years, it can be stated that despite the bright prospects of growth and certainty of development along with assurance of the government to bring improvements, there are still several areas that need improvement. Starting from the areas of contributing towards the society till making positive contribution towards economic development in provision of employment opportunities are to be improved.  The areas and scope of development are stated as follows:

From the societal point of view, there is still scope of improvement regarding making contributions towards the society. Primarily, the company needs to liberalize the policies of the companies, especially regarding understanding the terms and conditions of the policy matters for easing the process of trusting the companies. Policies should be framed wisely so that the insurance companies are intended towards providing sufficient financial benefits to the policy -holders. The company must undertake active CSR activities for conveying the message about their concern regarding the present condition of the people of the society and their internal development. The ethical way of conducting business must include:

• Ensuring confidentiality of the dealings between the company and the customers especially regarding the information about the client’s financial status or any sort of hazardous habits possessed by the client. Even details about the client’s business operations are to be kept secret from disclosure.
  
  
• The insurance companies must opt to provide better options regarding making return to the insurance holders and must evaluate the insured properties in the best possible manner
  
  
• As common people are financially supported by the company, it becomes the natural responsibility of the company to provide unbiased and appropriate valuation of the policies.
  
  
• Unfair advertising or marketing practices should not be conducted by the insurance companies, must not confuse common people regarding the actual meaning of the policy clause, and are not supposed to misrepresent any information or clause of policies.
  
  
• Ethical business dealing also includes offering products that are sanctioned by the Insurance regulatory corporations of the company
  
  
• Even if the company is operating through any agency or has appointed any individual for gathering policies or collection of premiums, it must be officially confirmed by the organization, so that no customer is cheated by any agent or company representative.

Improving the future of the Insurance Industry in Malaysia

Viewing the financial responsibilities of the companies, it is a well - known fact that insurance companies take financial responsibilities of the customers. Insuring the individuals and the companies are the major importance of the companies and the only mode to offer financial support. These companies can provide additional financial assistance to different welfare organizations like schools, colleges or human resource development institutes for better future development. These are generally in a part of investment that is made by the company in government or high profile private projects. Infrastructure development and provision of short - term financial assistance can be another remarkable form of providing financial support to the people of the country. Covering majority of people under Takaful scheme is another financial assistance that needs to be redeemed. Even natural disasters should be brought under financial coverage to ensure that the policy – holders (especially the people with insured properties like houses, shops, etc) are able to recover some part of their invested money.

Recent trends have revealed that the rate of employment has been towards a higher rate in recent times. With joint initiatives of the government and the Insurance regulatory authority of Malaysia, the employment perspective of the industry has been on the higher rate. Some of the common ways of increasing the rate of employment are stated as follows:

• Generate training and development opportunities for the job aspirants starting from the grass root levels, most importantly when the candidates are pursuing college or university level study courses.
  
  
• Create separate workforce for separate insurance sectors that means the company can hire separate employees for all the departments of the organization, starting from health insurance, general insurance, medical insurance and other services
  
  
• More local people should be considered for employment in the organization so that the employment rate of the country develops significantly.
  
  
• Separate agency functions should be introduced in the company so that the source of income are distributed among the local residents of the country
  
  
• Arbitration experts, field officers, development officers are to be recruited separately, at the same time, part time employees for undertaking the responsibilities of business development are to be induced
  
  
• Even opportunities to be self - employed are to be provided by the company to ensure that women or financially backward people obtain financial assistance. This could be another form of self employment process
  
  
• Therefore, insurance agents, sales officer and business development officers are primarily the target positions that might be provided in plenty by the insurance company.

Conclusion

After carrying out the entire study, it is revealed that the Malaysian insurance company Etiqa Insurance Company has been making positive and regular contributions in the economical and societal aspects. Another important feature of the chosen company is providing basic employment opportunities to the people of the country. Most importantly, the company runs the business in the most ethical manner, and offers wider range of financial coverage in case of any financial emergency of the policy holders.

After discussing about the benefits and challenges of the government initiatives regarding upliftment of the insurance sector and applicability of supply side policies for better employment generation, it is revealed that certain factors are still a matter of concern. Certain suggestions (recommendations) have been provided to the company regarding better generation of employment and providing better economic, social and ethical contribution towards the society.

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