FOR decades, general insurers in the main sounded quite confident and sanguine when it came to making business forecasts.
These days however, even as the majority no longer dare to assume such a stance, given the exorbitant rise in reinsurance costs coupled with declining returns from investment returns, there are some noteworthy exceptions.
Jerneh Insurance Bhd is one of the few large local general insurers that is sort of better equipped to meet the twin problems head-on and this ability is due largely to a host of factors related to its restructuring programme implemented recently.
Its chief executive officer Ralph Liew Seng Loong said in an interview: While we saw the reinsurance cost issue coming some time ago, we also had to deal with the question of low returns.
We therefore put a number of strategic actions in place which we believe will help us keep profits almost intact while providing services without any excess charge.
While agreeing in general that passing on insurance costs is the inevitable solution to rising reinsurance costs, Liew pointed out that such action was not always possible or desirable.
An all-lines general insurer, Jerneh has adopted the policy of underwriting for profit and not mere cashflow.
While some insurance companies are tempted to accept business for premiums and rely on investment income for profits, the primary objective of many is to obtain a profit from purely insurance operations, Liew said.
He agreed that with the low investment returns from the de- pressed stock market, general insurers could not afford to write business without adequate premiums.
One way of dealing with the issue of rising reinsurance costs and low returns, Liew believes, is to fully maximise a companys proven strengths.
Our single most important forte lies in the area of risk management and it has been greatly enhanced by the deployment of a highly skilled team of engineers who are trained in risk surveys and loss prevention, Liew said.
And, to prove that the company is truly customer-friendly in its business approach, Jerneh provides such valuable services free of charge to its clients.
Another key strategy adopted by the company to ensure its competitiveness is to settle all legitimate claims on time and avoid at all costs delay in such matters.
We have recognised that the longer we take to settle a claim, the more difficult it is for us to meet the discerning demands of our customers who have the option of other competitors in the general insurance market, Liew said.
Having a good track record of early and prompt settlement of claims has given Jerneh a high standing among domestic reinsurers, an advantage it hopes to capitalise on in the coming months and years.
Liew said the company also had the support of the highest rated reinsurers in the world and this was largely due to its professional management and good underwriting results.
He said that while settlement of customers claims and ability to meet insurance costs were crucial in doing business, the company also had a good track record when it came to working with foreign specialists in various fields, including management of some of the largest risks in the country.
Asked how this would stand the company in good stead vis-à-vis reinsurers, Liew said: Reinsurance corporations are shifting to quality insurers that are not only established, but have the ability to take on large business projects. Our ability to handle large risks over the years has given us an edge over many others, a fact that keeps us high on the list of reinsurance companies.
As Jerneh keeps a keen eye on its corporate strategies, it is also mindful of the kind of productivity it expects of its salaried employees. Management expenses of insurance companies are capped by the insurance authorities, and staff salaries and benefits make up a whopping 50% of an insurance companys operational costs.
Jerneh has come out with a plan of its own which it believes will help check rising management expenses and excess staff engagement.
We have taken the approach that productivity is best gauged by individual performance and incentives, rather than fixed remuneration. Such a move should in the long run prove to be more conducive to the overall prosperity of the whole company and diligent employees, Liew said.
Certain criteria have been set in place for the respective categories of employees that will from time to time be reviewed and upgraded to meet the changing business and customers demands.
On the corporate business side, the company is to monitor more closely the outstanding premium situation, given that under the law for non-motor business, any premium not paid within 60 days of inception is deemed as bad debt and companies must make provisions in their books.
It is part of the companys policy to pay greater attention to its book-keeping practices and that is why we have introduced strict controls and monitoring systems to ensure that certain provisions are made to avoid late settlements, Liew said.
Greater competition for Jerneh means it will also have to tackle the question of training and re-training and the man is particularly specific about what needs to be done.
There is a need to constantly train and re-train staff to perform at optimum levels while maintaining right mental attitudes, he said.
Recognising that leadership will have to play a key complementary part in this respect, the company is also focusing its attention on the technological aspects of business management and what they entail.
As a result, Jerneh is setting aside greater financial allocations for the purpose of giving the company a technology-based image that is both customer-friendly as well as state-of-the-art.
The company is in the process of investing nearly RM10mil in a new IT system to keep pace with advances taking place in the industry. It is also centralising its key processes and functions while outsourcing areas that are not its core competencies, Liew said.
The whole objective of the many actions taken by Jerneh, according to Liew, is to have a company that is a lean operator, one that in the end delivers affordable services and settles customers claims promptly: twin trademarks of any highly successful insurance enterprise.