CHAPTER OUTLINE

1. Components of Insurance Market

2. Other Market Components
3. Types of Insurance Companies
4. Types of Insurance Associations
5. Types of Insurance Institutions
 MAIN COMPONENTS OF INSURANCE
MARKET
• These are the people or
companies who need
insurance Intermediaries
• They include • These are the
individuals, business or companies who provide
public enterprises, insurance services
• These are the
associations and middlemen in insurance • They include private
societies market insurers, state insurer
and Syarikat Takaful
• They include agents and
Sdn. Bhd.
brokers
Buyers

Sellers
 Agents versus Brokers
Agent Broker

• A person who represents an insurance • An agent who represents policyholder

company • Brokers’ job is to advise clients on the most
• Agent may be authorized to find clients, suitable covers at the most economic cost,
collect premiums, and issue cover notes on help presenting claims and getting claims
behalf of an insurer settled

• Insurance agents are remunerated through • Insurance brokers are remunerated through
payment of commission by insurer payment of commission by insurer

• Bound with the terms of agency agreement • Brokers must have in-depth knowledge of
insurance thus are subject to profesional
liability
 OTHER MARKET COMPONENTS
1. SERVICE SPECIALISTS
Loss Adjusters
• These are independent parties appointed by insurer to survey any loss that
has occurred
• They investigate the cause and extent of the loss then report their findings
and recommendations to the insurer
• With the help of the findings and recommendations, the insurer will decide
whether the loss is covered and if so, the amount of compensation required
Loss Assessors
• These are independent parties employed by insured/client to assess the
extent of the loss and calculating loss settlement figures
• Usually used when it is difficult to assess the extent of the loss
• The assessor does not deal with claims
Engineers

• They are engineering firms appointed by insurer to report on risk

or claims on boilers, pressure vessels, lifts, cranes and etc

Marine and Cargo Surveyors

• They are specialists appointed by insurer to survey ships and

cargoes that have been damaged and to report on the cause and
extent of loss
2. REINSURERS
• Insurers frequently reinsure or “cede” all or part of the risks underwritten by them so that the
burden of paying claims, particularly those involving large amounts, will be shared by the
reinsurers.
• Reinsurance, therefore is the insurance when insurers purchased to cover risk underwritten
by them.
• An insurer can purchase reinsurance from the following:-
✓ A locally incorporated reinsurance company E.G. Malaysian nasional Reinsurance Berhad (MNRB)
✓ Local reinsurers who underwrite some insurance business together with direct business
✓ Foreign professional reinsurers
 The Channel Structure of The Insurance
Industry

Buying Insurance
Protection
Buyers of Insurers Reinsurers
Intermediaries
Insurance

Meeting buyers’ needs

 INSURANCE INDUSTRY
Insurance Companies Insurance Associations Insurance Institutions

• Proprietary Companies • Persatuan Insurans Am • Motor Insurers Bureau

• Mutual Companies Malaysia (PIAM) (MIB)
• Captive Insurance • Insurance Brokers • Insurance Mediation
Companies Association Malaysia Bureau (IMB)
• Specialist Companies (IBAM) • Unplaced Motor Pool
• Life Insurance • Association Of • The Malaysian
Companies Malaysian Loss Insurance Institute
Adjusters (AMLA) (MII)
• General Insurance
Companies • Life Insurance
Association Of Malaysia
• Composite Companies
(LIAM)
• The Government
 Types of Insurance Companies
1. PROPRIETARY COMPANIES
• They have authorized and issued share capital to which is original shareholders subscribed.
• The shareholders share the profits of the company by way of dividends and their liability is
limited to the value of their normal shares.
2. MUTUAL COMPANIES
• The policyholders who share any profits made own mutual companies.
• They do not share profits of the company by way of dividends but they enjoy lower
premiums/ higher life assurance bonuses.
3. CAPTIVE INSURANCE COMPANIES
• A parent company may form a subsidiary company to underwrite certain of its insurable risks.
• To obtain the full benefit of the group’s risk control technique by paying premiums based on
its own experience, of the direct insurer’s overheads and obtaining a lower overall risk
premium level by purchasing avoidance reinsurance at lower cost.
❖Reasons for performing captive insurance company:

• Instances when insurance cannot be purchased from commercial insurance

company for business risk.

• Premium paid are deductible as business expense for tax purpose

• Can be obtained through the international reinsurance market at more

favorable premium at higher limits of coverage

• Investment return can be obtained directly on its invested capital

4. SPECIALIST COMPANIES
• Companies that underwrites one type of insurance business.E.G engineering insurance
companies.
5. LIFE INSURANCE COMPANIES
• Underwrite life insurance business only
6. GENERAL INSURANCE COMPANIES
• Underwrite non-life business
7. COMPOSITE COMPANIES
• Underwrite both life and general business
8. THE GOVERNMENT
• The government also acts as an insurer, as under the Employment Social Security Acts all
employed persons whose salary is below RM1,000 must contribute to the SOCSO Scheme.
 Types of Insurance Associations
1. PERSATUAN INSURANS AM MALAYSIA (PIAM)
• The PIAM is an association of general insurers (in accordance with the Insurance Act 1996) which has been approved for by the
Minister. Therefore, the membership of PIAM is compulsory for all general insurers in Malaysia.
• The main objectives of PIAM are:
• To establish a sound insurance structure in Malaysia
• To collect and circulate information and statistics relating to general insurance business and
• To make rules, regulations, tariffs and by-laws in consultation with the Director of General of Insurance for implementation by
the members.
2. INSURANCE BROKERS ASSOCIATION MALAYSIA (IBAM)
• The Insurance Brokers Association of Malaysia was formed to represent the brokers operating in Malaysia. It acts as a guide for its
members for practicing broking in a professional manner.
• The main objectives of IBAM are:
• To provide means to discuss members’ problem of common interests
• Negotiate with other insurance association, regulatory bodies and authorities
• To ensure the employee of members and professionally qualified with insurance law and practice
• To promote the healthy growth of insurance industry in line with national objectives
1. ASSOCIATION OF MALAYSIAN LOSS ADJUSTERS (AMLA)
• Was formed to manage those engaged in the profession of loss adjusting who are employed in insurance loss adjusters’
company licensed under the Insurance Act 1996.
• The main objectives of AMLA are:
• To advance the study and profession of Loss Adjusters
• To promote the profession by compelling the observance of strict rules of professional conduct by members of the
association
• To cooperate with other similar association in other parts of world

2. LIFE INSURANCE ASSOCIATION OF MALAYSIA (LIAM)

• The Association represents Life Insurance companies operating in Malaysia. It serves as a regulatory organization for trade as
well as a centre for interaction of views with its members.
• Life insurance association of Malaysia also associates itself with insurance education and represents the life assurance
companies for discussion with the government on insurance legislation and related matters.
• The main objectives of LIAM are:
• To promote public understanding and appreciation of life insurance
• To improve the image of life insurance industry through self regulations
• To give support to the regulatory authorities in developing a strong and healthy industries
3. Other Associations
• Actuarial Society of Malaysia
• National Association of Malaysia Life Insurance Agents
• Insurance Underwriting Agents Association of Malaysia (IUAAM)
• National Insurance Association of Malaysia (NIAM)
• Fire Protection Association of Malaysia
 Types of Insurance Institutions
1. MOTOR INSURERS BUREAU (MIB)
• The Road Transport Act 1987 requires vehicle users to be insured for liability for personal injuries to other road-
users.
• The intention is to ensure that all injured victims will get compensation from the negligent drivers.
• MIB has been established in 1967 by motor insurers to create a central fund maintained by motor insurers
whereby victims will get compensation.
• However, with effect from 1987, MIB has ceased paying compensation on hit and run cases.
2. INSURANCE MEDIATION BUREAU (IMB)
• The establishment of IMB in Malaysia has been initiated by Persatuan Insurance Malaysia (PIAM).
• The objective of IMB is to provide an alternative procedure to resolve dispute arising out of policies of personal
insurance.
• The IMB, however does not deal with third party claims.
• The bureau has the power to make awards up to RM100,000. Such award will be binding upon the
members against which it is made.
3. UNPLACED MOTOR POOL
• The main objectives of the Unplaced Motor Pool was to render a kind of social services by providing at a reasonable cost
insurance coverage to certain classes of vehicles which traditional insurance market was not willing to insure in view of its
adverse claims experience.
• Change the name to Malaysian Motor Insurance Pool on 1st October 1995.

4. THE MALAYSIAN INSURANCE INSTITUTE (MII)

• The Malaysian Insurance Institute conducts both basic and advanced level courses and examination in insurance industry.
• Some of the objectives of the institute are:-
• To provide and maintain a central organization for promotion of efficiency, progress and general development among
persons engaged or employed in the insurance industry.
• To encourage and assist in the study of any subjects relating to any aspect of insurance business
• To hold conference and meetings for the discussion of professional affairs, interest and duties related to insurance.
• To conduct classes or courses of education related to insurance.
• To collect classes or publish statistical or other information of services or interest to persons employed in insurance
business.
• To ascertain the law and practices relating to all things connected with insurance.
• To conduct professional insurance examination.
 ..END OF CHAPTER SIX..

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