This document discusses the insurance industry and its components in Malaysia. It describes the key roles and functions of insurance agents, brokers, and various departments within insurance companies, including underwriting, claims, marketing, and actuarial. It also outlines some of the major organizations that regulate and represent different segments of the insurance sector in Malaysia, such as PIAM for general insurers, LIAM for life insurers, and MTA for takaful operators.

1. CHAPTER 4
INSURANCE
INDUSTRY
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2. Learning outcomes :
At the end of chapter, the students should
be able to :
Perform
engagement in independent
acquisition of new knowledge and skill in
understanding the nature of insurance
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3. Categorise insurance market in
Malaysia and explain its roles
A
–
market :
the facilities for buying and selling a
product
A
market is made up of
components
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4. Insurance market components
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5. Insurance market components
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6. Insurance Agent
 Sect.2
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(Ins. Act 1996) : a person who :
Solicits or obtains a proposal for insurance on behalf
of an insurer
Offers or assumes to act on behalf of an insurer in
negotiating a policy; or
Does any other act on behalf of an insurer in relation
to the issuance, renewal or continuance of a policy
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7. Classes of agent
 Special
agent
- One is appointed to do a specific act or transaction
 General agent
- One who may do anything for his principal within the limits of a
general authority conferred upon him
 Universal
agent
- One who has unlimited authority
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8. Duties of an agent
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To render accounts to the principal as required
Not to let his own interest conflict with his obligations to the
principal
Not to disclose confidential information obtained during the
course of his duties
Not to take any secret profit or bribe from any party with whom
he deals on behalf of the principal
Not to delegate his duties to a sub-agent without authority,
express or implied
To comply with his principal’s instructions and to notify him
when compliance become impossible
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9. Termination of agency
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By notice of revocation by the principal
By notice of renunciation by the agent
By completion of the transaction
By expiration of the period stipulated in the agency
contract
By mutual agreement
By death, lunacy or bankruptcy of agent or principal
By operation of any law
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10. Insurance Broker
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The broker's function is to:
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fully understand the client and the client's business
advise on those areas where insurance is required
negotiate insurance coverage within the chosen range of insurers
handle the servicing and administration of the insurance contracts
advise on changes in coverage and improvements in wordings as the
client's exposure develops or the insurance market changes
advise and guide the client on how best to manage its risk and prevent, to
the greatest extent possible, future losses
Additionally, the broker should act as an advocate on behalf of their
client with respect to issues surrounding the reporting of potential
claims to the insurers, and in the settlement of claims under the
insurance coverage.
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11. Organizational structure
 Insurance
companies may be categorised in
various ways :
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Departmentalization base
Functional base
When companies is organized by functions
performed, the departments commonly found are:
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12. The departments
ADMINISTRATION
EDP
INVESTMENT
ACCOUNTING
UNDERWRITING
INSURANCE
COMPANY
ACTUARIAL
CLAIMS
CUSTOMER
SERVICE
MARKETING
SALES
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13. Administration dept.
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Provides & handles services
commonly used by many
departments
Eg. Office services, building
services & personnel
administration
Responsible for matters relating
to the company’s employees
Formulates company policies with
respect to the hiring, training &
dismissal of employees,
determines salary scale with
labour unions, & ensures
compliance with relevant laws
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14. Electronic Data Processing dept.
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It serves other departments by
establishing procedures &
programs that enable them to
utilize the computer in their work
Underwriting & policy preparation,
performing calculations required
by accounting & investment dept.,
maintaining all kinds of company’s
records, preparation of financial
statements & management
information reports
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15. Accounting dept.
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Responsible for billing &
collecting premium
Company’s general accounting
records, prepare financial
statements, maintain budgetary
control over departmental
expenses
Comply relevant government
regulations and tax laws
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16. Sales / Agency dept.
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Identify field officers,
recruiting, agents’
contract, motivating &
supervising the sales
force
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17. Marketing dept.
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Provides support to
sales
Develop sales
promotion
programmes, literature
and kits
Training of the sales
force
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18. Underwriting dept.
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Sets underwriting
guidelines & selection
criteria, selects risks &
determines premiums,
terms & conditions of
new businesses &
renewals
Fixes the amount for
insurer’s retention and
reinsurance
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19. Investment dept.
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Main function – to invest all available
funds in a manner which ensures
sufficient returns, satisfies the company’s
requirement for liquidity and security &
comply relevant regulations
Invest in various portfolio – government
securities, shares & debentures, fixed
deposits with banks, investment in land &
buildings
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20. Claims dept.
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Processes claims
Verify the validity of claims,
determine the benefits and
amount payable, and
authorize payment
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21. Customer Service dept.
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Provides assistance to the
company’s policyowners
and beneficiaries
Questions concerning policy
coverage, make changes
requested by the
policyowners – address,
beneficiaries designation,
mode of premium payment
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22. Actuarial dept.
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Mainly found in life
insurance companies
Design and pricing of
new life insurance
products, calculate
surrender values, paidup policy values, bonus
rates for participating
policies
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23. Centralise vs Decentralise
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Centralization
– When an insurance company organizes its
department on functional basis, the basic
functions and decision making tend to be
centralized at the head office
– The branches act as sales outlets
Decentralization
– When some functions are carried out at branches
and granted authority to make decision,
decentralization exists
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24. Centralisation
Head Office
Underwriting
Northern
Claims
Central
Branch Off.
Southern
Branch Off.
Agency
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Sales
Branch Off
Agency
Agency
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25. Decentralisation
Sales
Branch Off.
Claims
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Underwriting
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26. Centralise vs Decentralise
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27. Organizations Related to General
Insurance
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Persatuan Insurans Am Malaysia (PIAM)
Life Insurance Association of Malaysia (LIAM)
Malaysian Takaful Association (MTA)
Malaysian Insurance & Takaful Brokers Association
(MITBA)
Association of Malaysian Loss Adjusters (AMLA)
Malaysian Insurance Institute (MII)
Motor Insurers’ Bureau (MIB)
Insurance Mediation Bureau (IMB)
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28. PIAM
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Membership is compulsory on all general insurers
Its objectives are to:
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Establish a sound insurance structure in Malaysia
Collect and circulate information and statistics relating to
general insurance business
Make rules, regulations, tariffs and by-laws
Manage UMP and Fire Protection Association
Assist in whatever way within its capacity to reduce losses
and / or accidents and to prevent crime
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29. MIB
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RTA 1987 requires a motor vehicle user to be insured against
liability in respect of death or personal injuries to any person
caused by or arising out of the use of motor vehicle on a road
Compulsory motor insurance, to ensure compensation is paid
to the accident victim
Yet, an innocent victim may be still uncompensated because :
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The negligent driver is uninsured
His motor insurance is not valid
His insurer gone into liquidation
The negligent driver cannot be traced
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30. (LIAM)
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Established in 1974
Responsible for the registration of life insurance
agents
Its major objectives are to:
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Promote & represent the interests of the member
companies & the life insurance industry
Render service & assistance to member companies as may
be required
Circulate information likely to be of interests to members,
collate & publish statistics and other relevant information
relating to life insurance
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31. MTA
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The Association was established to foster
cooperation and mutual understanding amongst
its registered members, whilst furthering the
interests of the takaful concept in Malaysia by
any or all of the following means and by other
such means as deem expedient in the interests
of the Association
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32. MTA - objectives
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To promote the foundation of a sound takaful structure in Malaysia with
cooperation and consult from the Director-General of Takaful.
To promote and represent the interests of members registered or
connected to MTA by all means and methods that is consistent with
the laws and Constitution of Malaysia.
To render to members when possible, such advice or assistance may
be deemed necessary and expedient.
To take note of events, statements and expressions of opinion
affecting members, and advise them thereon and represent their
interests by expression of views thereon, on their behalf as deemed
necessary or expedient.
To constitute strategic alliances and co-operation with other similar
associations both locally and internationally.
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33. MTA - activities
 Public
Awareness Program - To embark on regular
promotional program and roadshow on public awareness
program
 Education
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and Training - To enhance professionalism
and productivity of staff and agency force through close
working relationship with Islamic Banking and Finance
Institute Malaysia (IBFIM) in evaluating industry’s training
needs.
To organize international conference on takaful and its
related discipline in collaboration with IBFIM and relevant
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authorities.

34. MTA - activities
 Self-Regulation
Program - To formulate guidelines,
rules and practices on agency and staff
 Collaboration
Effort - To collaborate with other
insurance related associations and authorities towards
areas concerning the industry.
 Dialogues
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and Meetings - To conduct association’s
Annual General Meeting and monthly Management
Committee meeting
To hold dialogue with regulators and authorities to study,
review and implement policy regulations to the industry
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35. MITBA
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previously known as The Insurance Brokers
Association of Malaysia (IBAM)
the only national body of Insurance and Takaful
brokers
was registered with the Registrar of Societies on 3rd
December, 1974.
MITBA is the collective voice of the industry advising members, the regulator, consumers, trade
association and other stakeholders on key insurance
issues.
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36. MITBA
 provides
training, technical advice, guidance
on regulation and business support.
 its role is to elevate the status of insurance
and takaful brokers through professional
development and by establishing improved
standards of qualification and ethical
practice.
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37. MITBA
 The
members embrace strict standards of
conduct, professionalism, and practice
 To ensure that they maintain the highest
ethical standards and the utmost good faith,
the foundation of insurance business, in all
activities in which they are engaged.
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38. MITBA
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The Executive Committee, consists of nine (9)
elected representatives who are elected every 2
years during the AGM from its membership, meets
monthly to provide direction and ideas.
Sub-committees and Special Task Force are
established to look into a wide range of interests and
allow members to discuss relevant topics with their
peers, discover more about issues of importance
and formulate business plans and strategies to
further promote healthy market practices.
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39. AMLA
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Its objectives are to :
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Promote the establishment of a sound loss adjusting structure in
cooperation and consultation with the authority
Promote & represent the interests of its members by all means &
methods consistent with the laws
Cooperate with other similar associations elsewhere in the world
Circulate information likely to be of interests to members, collate &
publish statistics and other relevant information relating to loss
adjusting
Work in conjunction with any legal body or association appointed
for consideration, framing, amendment or alteration of any law
relating to loss adjusting
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40. MII
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Established in 1964
Promote human resource development in the insurance
industry through examination, training, informing, exchange and
ideation
Its objectives are to :
– Provide & maintain a central organization for promotion of
efficiency, progress & general development among persons
engaged or employed in the insurance industry
– Encourage & assist in the study of any subjects relating to
any aspect of insurance business
– Publish any newspaper, journals & leaflets desirable for the
promotion of the objectives of the institute
– Establish a library for the purpose of the institute
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41. MII (cont.)
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Offer money or prizes for essays or research in any subject
relating to insurance
Organize & conduct courses, seminars, conferences &
workshops relating to insurance & the management of
insurance institutions
Undertake research in the fields of insurance & other
related subjects
Establish & operate trust funds for the purpose of promoting
the development of the insurance industry
Conduct insurance & insurance related examination &
award certificates, diploma, scholarship & prizes
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42. MIB
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Established in 1967
Main function : to provide
compensations to accident
victims where the uninsured
driver are unable to meet their
liability from their own personal
resources
Making ex-gratia
compensation to victims or
their dependents of hit and run
cases, which ceased in 1984
Funds accumulated from
levies imposed on its members
(motor insurers)
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43. IMB
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Its objective is to provide an
alternative procedure to
resolve disputes arising out of
policies of personal insurance
It does not deal with third party
claims
The bureau has the power to
make awards up to
RM100,000.
The award binds the members
However, the policyholder is
not bind with it. They may seek
remedy in a court of law if they
are dissatisfied
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44. Organizations Related to Life
Assurance
 Life
Insurance Association of Malaysia
(LIAM)
 National Association of Malaysian Life
Insurance Agents (NAMLIA)
 The Actuarial Society of Malaysia (ASM)
 The Malaysian Insurance Institute (MII)
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45. NAMLIA
 Set
up in 1978
 Life insurance agents & their supervisors
 Safeguarding the interests of those engaged
in life insurance selling & sales management
 Promote professionalism among its members
through collaboration with similar
organizations
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