MY BASICS - Sales Compliance Training (Part 1) : AIA Premier Academy

AIA Premier Academy
Rev02 dated 01/10/2013

AIA confidential and proprietary information. Not for distribution.
Rev02 dated 01/10/2013
MY BASICS Sales Compliance Training
(Part 1)
Rev02 dated 01/10/2013
AIA Premier Academy (APAc)
SEED Program
MY BASICS
IMPORTANT NOTICE
MY BASICS section is part of the 4 main modules in SEED program.
This is a facilitator-assisted program. Training using this participant guidebook
must only be conducted by facilitators certified by AIA Premier Academy.
The contents of this guidebook is meant to be used as individual reference during
and after the classroom training. It is not intended to be used as part of group
visual presentation aids. Where applicable, the contents shall not be the absolute
reference on any subject related herein.
Thank you.
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MY BASICS
Modules cover for MY BASIC
Sales Compliance Training Part 1
Product Transparency and Disclosure
AIA Code of Ethics and Conduct
Anti Money Laundering and Counter Financing of Terrorism
Replacement of Policy (ROP)
Persistency
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Sales Compliance
Product Transparency and Disclosure
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Objectives of Product Transparency and Disclosure Guidelines
To establish a consistent and comprehensive disclosure regime aimed
at improving information disclosure on products and services offered by
Agent
Objectives of Product Transparency and Disclosure Guidelines:-
Promote consumers awareness and understanding
Facilitate consistency in disclosure of essential information on financial
products and services to enable comparison
Minimize mis-selling of financial products and services and ensure that financial
products and services sold are appropriate to the needs and resources of the
consumer
Promote informed decision-making by the consumer
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Product Disclosure for Ordinary
Life & Investment-Linked
Insurance Product
A
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Pre Contractual Stage
Disclosure by Agent to Customer
- licensed under the IA and regulated by Bank Negara Malaysia
- disclose the name and address of the intermediary and the Agent
- e.g Name of Agent, Name of Product & Date
Advising and Selling to Customer
- importance of providing sufficient and accurate information to
propose products that suit customers needs
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Product Features
FSP should provide the customer with a description of the life
insurance product, including:-
- Types and Purpose of Life Insurance Policy
ALL is a Regular Whole Life Non Par Plan with Investment element
- Brief explanation of types of bonuses payable and show the illustration
- General explanation on how the bonuses are determined
- Nature of investment, objectives of the fund and investment strategy
- Availability of top-up facility
A- Basic insurance cover age for investment-linked products
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Benefits Payable and Exclusions
The following information should be disclosed to the customer:-
i) Benefits payable
E.g, ALL covers - Death: RMxx
(e.g, basic sum assured plus investment value)
TPD : RMxx
Fund Chosen - AIA Equity Fund (xx%)
- AIA Fixed Fund (xx%)
(indicate any other additional cover provided such as rider)
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ii) Limitation on benefits and duration of the policy
ALL - maturing at age xx
iii) restrictions of benefits (including lien imposed on the policy)
and exclusions
iv) surrender value payable under the policy and whether it is
guaranteed or not guaranteed
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Premium Payments
Must provide customer the details of the premium payments
including:-
i) Amount of Premium
E.g, Estimated total premium : RM xx, annually/semi-annually/
quarterly/monthly
Premium duration : until age xx
Premium allocation : 1st year 40% allocated premium
(For investment-linked products only)
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ii) Premium rate is guaranteed or non guaranteed
iii) Fee and charges
E.g, Stamp Duty, Annual fund management charge, Fund
switching charge and etc
iv) Grace Period
Disclosure of Commission and Charges
- disclose and explain the nature, amount and frequency of the payment
- commission borne by the customer
- other fees and charges borne by customer which are not included in the premium
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At the Point of Entering Into a Contract
Contractual rights and obligations
- any significant condition or obligation which customer must meet
- duty of the customer to disclose all information material
- ensure the proposal form is completed accurately
- requirement for proof of age to be provided
- date of commencement, duration and maturity of policy
- consequences of failure to pay premiums
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Free-look Period
- 15 days cooling-off period
- return the premiums paid after deducted all the expenses incurred
Replacement of Policy
- warn customer the disadvantages of switching policy from one type
of life policy or from one FSP to another FSP
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During the Term of the Contract
Non-forfeiture Options
Must inform customer within 30 calendar days after the premium due
date :-
- Automatic Premium Loan (APL) that has been applied to keep the
policy in-force
- Loan amount will be deducted from the cash value
- Various non-forfeiture options available for customer
Cash/surrender value
Reduced Paid Up
Extended Term Insurance
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Product Disclosure for Medical
and Health Insurance (MHI)
A
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Disclosure by Agent to Customer
- licensed under the IA and regulated by Bank Negara Malaysia
- disclose the name and address of the intermediary and the Agent
- e.g Name of Agent, Name of Product & Date
Advising and Selling to Customer
- importance of providing sufficient and accurate information to
propose products that suit customers needs
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Product Features
FSP should provide the customer with a description of the life
insurance product, including:-
- Types and Purpose of MHI
E.g, ECP/MCP is for hospitalization and surgical expenses
- Details of benefits covered under MHI policy
E.g, HIS covers hospital accommodation and nursing expenses,
surgical
expenses and etc
- Details of riders attached
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Exclusions and Limitations of Benefits
- benefit exclusions and limitations, pre-existing conditions, specified
illnesses and qualifying/waiting period must be adequately disclosed
- inform the customer whether any cover ceases at pre-determined age
or policy anniversary
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Premium Payments
Must provide customer the details of the premium payments
including:-
i) Amount of Premium
E.g, Standard cover : RM xx, annually/semi-annually/
quarterly/monthly
Additional cover : RM xx
Total Estimated Premium : RM xx
Premium duration : until age xx
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ii) Possible conditions that would lead to the following
scenarios on policy renewals:
Renewed with a level premium
Renewed with an increased premium
Not renewed
iii) Agents right to revise the premiums on policy renewal
Disclosure of Commission and Charges
- commission borne by the customer
- other fees and charges borne by customer which are not included
in the premiums
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Contractual rights and obligations
- any significant condition or obligation which customer must meet
- duty of the customer to disclose all information material
- ensure the proposal form is completed accurately
- requirement for proof of age to be provided
- period of coverage
- consequences of failure to pay premiums
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Free-look Period
- 15 days cooling-off period
- return the premiums paid after deducted all the expenses incurred
Replacement of Policy
- warn customer the disadvantages of switching policy from one type
of life policy or from one Agent to another Agent
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During the Term of the Contract
Termination of Coverage
- issue a notice of the expiry of the existing policy to the customer,
at least 30 calendar days before the expiry date
Change to Benefits and Premiums
- notify the customer in writing of all changes to critical benefits and
premiums, at least 30 calendar days before the change is made
Change to Panel Hospitals/Clinics
- ensure that customer is informed of any change in its panel
hospitals/clinics at least of 30 calendar days prior to the effective
date of the change
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Sales Compliance
AIA Code of Ethics and Conduct
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An AIA Agent is
Productive
Participative
Professional
Positive
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Duties & Responsibilities
Obedience
Care and Skill
Personal Performance
Good Faith
Accounting for Money
Received
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Insurance Act 1996
Section 151
1. A person who is authorized by a licensed insurer to be its
insurance agent and who solicits or negotiates a contract of
insurance in that capacity shall be deemed, for the purpose of
the formation of the contract of insurance, to be the agent of
the licensed insurer and the knowledge of that insurance
agent shall be deemed to be the knowledge of the licensed
insurer
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Insurance Act 1996
Section 151
2. A statement made, or an act done, by the insurance agent
shall be deemed for the purpose of the formation of the
contract of insurance, to be a statement made, or act done, by
the licensed insurer notwithstanding the insurance agents
contravention of subsection 150(4) or any other provision of
this Act
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Insurance Act 1996
Section 151
3. Subsection (1) shall not apply :
a) where there is collusion or connivance between the
insurance agent and the proposer in the formation of the
contract, or
b) where a person has ceased being to be an insurance agent
of a licensed insurer and it has taken all reasonable steps to
inform, or bring to the knowledge of, potential policy owners
and the public in general of the fact of such cessation
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Insurance Act 1996
Section 150 (4)
No licensed insurer or insurance agent, in order to induce a person to enter into
or offer to enter into a contract of insurance with it or through him :
a) Shall make a statement which is misleading, false or deceptive, whether
fraudulent or otherwise;
b) Shall fraudulently conceal a material fact; or
c) In the case of an insurance agent, use sales brochure or sales illustration
not authorized by the licensed insurer
Penalty : RM1,000,000
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Insurance Act 1996
Section 148
1. A policy owner, within 15 days after the delivery of a life policy of any
description to him or to a person who resides at his residence, may
return the life policy to the licensed life insurer and it shall
immediately refund any premium which has been paid in respect of
the life policy and the life policy shall be cancelled subject only to the
deduction of expenses incurred for the medical examination of the
life insured
Penalty : RM500,000
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Insurance Act 1996
Section 148
2. Subsection (1) shall not apply to a life policy insuring 3 or more
persons
3. For the purpose of subsection (1), a life policy shall be deemed to
be returned to a licensed life insurer on the date the life policy is
received by it or posted to it by registered post
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Ethics
Ethical traits:
Integrity
Competency
Personal Responsibility
Continuous Service
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Agents/Prospect Communication
Truthful
avoid misrepresentation
use needs analysis
Complete
give all information
present pluses & minus
Straight forward
communicate clearly
make sure they understand
repeat major points
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Agents/Prospect Communication
Use Plain Language
Educate & help client to
understand what is
insurance
Use proper terms. Avoid
jargons
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Code Of Ethics
Rebating
Practice of sharing an agents
commission with the policyholder.
Constitutes discrimination.
Twisting
Persuading a policyholder to
discontinue or lapse a present
policy in order to buy a new policy
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Code Of Ethics
Misrepresentation
Telling something that is not true
Insurer Agent Prospect
Prospect Company
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Code Of Ethics
Attitude Towards Competition
Enthusiastic
Open-mind
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Compliance & Market Conduct
The agent shall :
1) Make known to prospective policyholder that he is an agent of
AIA and produce his Registered Intermediary Authorization
Card to identify himself
2) Ensure that the policy proposed is suitable to the needs and
affordability of the client
3) Give advice only on those matters in which he is competent to
deal with
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Compliance & Market Conduct - cont.
4) Treat all information of prospective policyholder as completely
confidential to himself
5) If comparison is being carried out, make clear the different
characteristics of each policy / investment
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6) Policy
Explain all the essential provisions of the contract
Draw attention to any restrictions
Draw attention to the long term nature of the
policy and to the consequent effects of early
discontinuance and surrender
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6.1) Policy Explanations
For participating policy, descriptions of the benefits shall
distinguish between fixed and projected benefits
Any assumption in the projected benefits should be made clear
Shall use the whole illustration in respect of the contract which
he is discussing with the prospective policyholder
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7) Disclosure of Underwriting Information
Answers and statements are the proposers own responsibility
Consequences of non-disclosure and inaccuracies are pointed
out
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8) Maintain Proper Account
All monies received by agents in connection with an insurance
policy shall be distinguished from the premium from any other
payment included in the monies
Agent should forward to the company without delay any money
received for life insurance
9) Provide continuous service to the policyholder
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Sales Compliance
Anti Money Laundering &
Counter Financing of Terrorism 2001
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Anti-Money Laundering
Definition
Money laundering is any activity or procedure intended to
change the identity of illegally obtained money so that it
appears to have originated from legitimate source
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Stages of Money Laundering
Step 1: Placement
The physical disposal of cash proceeds derived from illegal activity into
the financial system e.g. the payment of premium for policies, including
top-ups, especially for single premium policies
Step 2: Layering
Separate illicit proceeds from their source by creating complex layers of
financial transactions designed to disguise the audit trail and provide
anonymity. Layering can include: Borrowing against insurance policies,
termination of policies or sales of unit in investment-linked policies
Step3: Integration
The turning of criminally derived wealth into legitimate funds
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Counter Financing of Terrorism
Definition
Carrying out transaction involving funds that may or may
not be owned by terrorist, or that have been, or are intended
to be, use to assist in the commission of terrorism
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Financing of Terrorism
Includes:
a. Providing or collecting property for carrying out an act of terrorism;
b. Providing services for terrorism purposes;
c. Arranging for retention or control of terrorist property; or
d. Dealing with terrorist property.
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Know Your Customer Policy
What to verify ?
The agent is required to verify details such as the customers name,
place of residence, legal capacity, occupation or business purpose
How to verify?
These may be obtained from the customer e.g. customers identity
card/passport/birth certificate or memorandum and articles of
association (where the customer is a company or trust deed ( where the
customer is a trustee)
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Know Your Customer Policy
When to verify?
Details of a customer must be verified when:
- Establishing or conducting business relations e.g. accepting new
policy
- Entering into any fiduciary transaction
- Performing any cash transaction of suspicious nature
Why verify?
- To ensure the company does not authorize the acceptance of an
anonymous policyholder or a policyholder with a fictitious / false /
incorrect name
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Aliases
If a customer is known by more than one name,
no acceptance of another policy under such
other name unless such other name has
previously been disclosed
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Suspicious Transactions
- An unusual or disadvantageous early redemption of an insurance
policy
- An unusual employment of an intermediary in the course of some
usual transaction or financial activity. Such as payment of claims or
high commission to an unusual intermediary
- An unusual method of payment
- The customer attempts to purchase an insurance policy or to
make an investment in an amount that is beyond his apparent
means, that has no obvious purpose or where the source or
nature of the funds to be used is suspicious or unclear.
- The customer wishes to buy an insurance or investment product
but is less interested in long-terms.
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Suspicious Indicators
- The customers wishes to make purchases or investments using large
amounts of cash or by making top-up payments with cash
- The customer purchases an insurance policy and thereafter seeks to
borrow the maximum cash value
- The customer uses a check that has been withdrawn on an account
other that his own or pays with checks drawn on different accounts
- The customer makes a payment with numerous money orders, travels
checks or cashiers purchased from different selling locations or at
different times
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Offences under Anti Money Laundering &
Counter Financing of Terrorism Act 2001
Laundering
Money
(RM 5 Mil max. &/or
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Accepting Business
from A Designated
Terrorist Under the Act
(RM 1 Mil max &/or
Jail Max. 1 years)
Not Co-operating
with Regulators
(RM 1mil max &/or
jail max. 1 year)
Jail Max. 5 years) Not Reporting
Suspicious Transactions
(RM 250k max)
Tipping off to
money launderers
(RM 1 Mil max &/or
Jail Max. 1 years)
Not Comply with Record
Retention Requirements
(RM 1 Mil max &/or
Jail Max. years)
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My Basics
BNMs Definition of Policy Replacement
Your client
purchase new
policy from you
Today
Upon buying the
new policy
12 months before
12 months after
Your client have an existing policy that has been:
a) Lapsed, surrendered, partially surrendered or forfeited
b) Changed or modified into paid-up insurance policy, continued as extended term insurance or placed under automatic
premium loan for a continuous period of 6 months, or under another form of non-forfeiture benefits or otherwise
reduced in value by the use of non-forfeiture benefits, dividend accumulations, dividend cash values or other cash
values or
c) Changed or modified so as to effect a reduction in the amount of premiums of more than 25% arising from the
reduction of sums insured and/or reduction of rider or removal of rider, or in the period of time the existing life
insurance will continue in force.
However, this excludes any withdrawal or utilization of cash bonus to pay premium for the existing life insurance
policies.
Replacement of Policy means
Any transaction involving the purchase of a life insurance policy is construed as a replacement of policy if within 12 months before
or after a new policy is effected, an existing life insurance policy has been:
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My Basics
AIA Scope of Replacement of Policy
ROP shall cover Basic Term (P) or Son policies, WSM plans, Telemarketing plans, Bancassurance,
Investment - linked plans, and Family Takaful.
Existing policies under automatic premium loan (APL) for a continuous period of six (6) months and
above.
Existing ROP rules for single premium products shall remain unchanged. ROP rules shall apply if a
single premiumpolicy is replaced by another single premiumpolicy within three (3) Months (Refer to
Agency Circular: 14/02/2008)
The latest implementation includes the following: -
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My Basics
Disadvantages of ROP
In the event of ROP is applied:
Your client and you
will lose more since:
Your client or you have to pay for:
Termination charges of existing policy
Entry charges for the replacement of policy
Administrative costs
Agents commission and production affected
Policyholder may also stand to lose certain benefits such as a bonus credit/ dividends
under the existing policy
Policyholder may not get a new policy due to deteriorating health conditions or pays
higher premiumrates.
All contestable clauses and health insurance waiting period begins.
If cash values of one policy are used to pay premiums on a new policy; the values
used may not be sufficient to support the new policy in future years, and this may
result in the need to make additional premium payments to keep the insurance in
force.
Policyholder may not have immediate access to his/her money in a new policy. He/
She may have to wait a considerable period of time to access the cash value in the
policy.
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My Basics
If ROP happened within AIA
Your client
Control Mechanism in place to detect Internal Replacement of Policy
Policy owner indicates in the proposal form on whether he/she
intends to replace or has replaced the existing policy/rider.
Policy owner indicates in the Confidential Personal Financial Review
(CPFR) booklet the reasons for replacement.
Upon submission of the new policy and if a Replacement of Policy has
been detected, a letter known as Replacement of Policy Letter
would be issued and sent to policy owner and agent to explain on:
a) Disadvantages and limitations of Replacement of Policy.
b) Asking the policy owner to respond by answering whether
he/she accepts the new policy or not; and return the letter
to us 30 days fromthe date of the letter.
Financial Health Review (FHR)
Form
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My Basics
Letter to Policy Owner on Discovery of Replacement
If the policy owner
responds, the Company
shall proceed with the
option requested
accordingly.
Agents are urged to advise policy owner on policy conservation. Policy owner is
required to return the letter to the company within 30 days from date of the
letter confirming his/ her choice of option provided.
If the policy owner does not
respond to the ROP letter, the
Company shall proceed to
process the new application, and
ROP rules shall apply accordingly.
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My Basics
Production & Commission Adjustments
Reinstatement of the existing policy,
Repayment of APL,
Increase of the gross premium equivalent to the original level or higher, due
to addition of rider sum assured and/or inclusion of riders
Waiver category (*) (Refer to Appendix 1)
FYP production, FYC, renewal commissions, overriding commissions and other overriding
benefits shall be credited upon the occurrence of the following: -
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My Basics
Waiver Category (*)
ROP will be waived if Policy owner confirms placing a new policy by signing and returning the ROP letter
to Conservation Unit (under POS Dept) for the following types of replacement (Kindly refer to Agency
Circular: 155/11/2006):
An existing policy is changed or modified into a RPU, ETI or placed under APL
for a continuous period of 6 months, or under another form of non-forfeiture
benefits or otherwise reduced in value by the use of non-forfeiture benefits,
dividend accumulations, dividend cash values or other cash values.
An existing policy is changed or modified as to effect a reduction in the
amount of premiums of more than 25%.
However, where a replacement is due to an existing policy being lapsed, cash surrendered,
the normal appeal via Conservation Unit shall apply.
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My Basics
Appealing Channel
Requests must be documented in official writing to Conservation Unit. Conservation Unit will vet,
review and co-ordinate the necessary actions. In order to consider waiver of ROP, Conservation Unit
would require the following:
1. ROP Appeal Form (To be obtained from ALPP)
2. Any other document(s) / evidence(s) in supporting your appeal case
(Log in to ALPP -> Resources -> Forms Library -> AIA Service)
Even all the evidences/documents are obtained, waiver of ROP is not guaranteed. The
ultimate decision rests with the Company. Once a decision is finalized; Conservation Unit will
inform appealer via memo. Conservation Unit will revert to agent within 30 days upon
receiving the complete document(s) / evidence(s).
Any consideration of appeal must be forwarded to Conservation Unit within three (3)
Months from the date of ROP letter. Failure of notification may result in non-credit of the
above.
Conservation Unit Policyowner Service Department (POS)
Level 8, Menara AIA
No: 99 Jalan Ampang
50450 Kuala Lumpur
Email: MY.Conservation@aia.com
Fax: 03-20563891
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My Basics
If ROP happened between different insurance company
External Replacement of Policy (between different insurers)
BNM/LIAMdoes not handle complaints fromagents directly.
Should an agent would like to feedback regarding an External ROP; he/ she may
forward themin writing directly to Conservation Unit.
Conservation Unit Policyowner Service Department (POS)
Level 8, Menara AIA
99 Jalan Ampang
50450 Kuala Lumpur
Email: MY.Conservation@aia.com
Fax: 03-20563891
(1) Details can be accessed through Policy Details - ALPP
Insured Name
IC Number
Effective Date
Paid To Date / Terminated Date
Premium Amount & Mode of Payment
Policy Number
Plan Name
Plan Type (ie. Medical / Endowment / Life)
Payment Mode
Your Contact Number (Conservation Unit will call you where necessary)
The agent will need to provide the following details to facilitate in the External Replacement of Policies investigation:
(2) Details of other life insurer(s)
Name of Insurer/Life Insurance Company
Agent of other insurer (Optional)
Policy No of other insurer (Optional)
Evidence(s). Example: Policy Contract
(Optional)
(Kindly refer to Agency Circular: 07/01/2007)
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My Basics
BNM/LIAMS Resolution
FYP, FYC, Renewal Commissions & Overriding Benefit
When a policy is detected as an (internal replacement); FYP, FYC, all subsequent
renewal commissions, overriding commissions and other overriding benefits will
NOT be credited.
In instances where an agent or agency leader has been or is involved in the
replacement of a policy or policies from one company to another (external
replacement); the insurer shall be required to undertake the following action:
Cease payment of all commissions, including overriding commissions and bonuses
on all policies replaced and re-booked in the new company and if any payment has
been made, the new company shall claw back all payments made.
Enforcement Action A
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My Basics
BNM/LIAMS Resolution
Disciplinary Actions
If an agent is found to be repeatedly involved in the practice of replacement of policies:
Insurers may also exercise one or more of the following disciplinary actions:
i. Deferment of promotion for one year together with a warning letter (after 5 instances of
replacement of policies);
ii. Demotion and a warning letter (after 10 instances of replacement of policies)
iii. Termination (after 15 instances of replacement of policies). An agent who has been terminated
under (iii) shall be placed under the Referred Listing of LIAM.
Enforcement Action B
Any member company involved in any instances of replacement of policies that FAIL
to enforce the actions as stated in above A & B would be fined.
The quantum of fine shall be up to a multiple of 10 times the premiums of each new
policy that has been replaced, subject to a maximum of RM200,000.
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My Basics
Conservation on Policy Replacement
1. Taking out a new policy in addition
to existing policy if the intention is
merely to increase the sum insured
or extend the scope of their
insurance coverage.
2. Convert a whole
life policy into
an endowment
policy.
3. Shorten or extend
the term of the
policy.
4. Add riders to
existing
policy.
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My Basics
ROP System Enhancements in ALPP & AIA DashBoard
ROP Detection Search Engine
A search engine on potential ROP is made available for agents reference and this will be based on real time checking. The result of
this potential ROP search will depend on the info keyed in by agent. For more accuracy, agents are encouraged to input more info in
this search engine where possible.
ROP Enquiry Tool
For pre-Single License JRC
policy and post Single License
AIA policy (at the moment)
ROP Enquiry Tool
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My Basics
Can select what to search, New
/ Old IC, Passport, Birth Cert,
click Submit.
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Adequate
information is
provided as per
screen.
My Basics
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Potential ROP
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Potential ROP
For pre-Single License AIA policy only
My Basics
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74
Another window will pop
out, key in EITHER New IC or
Old IC or Birth Cert No.
My Basics
Rev02 dated 01/10/2013
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75
If there is potential ROP, then message
Potential ROP detected will prompt,
else No Record Found will prompt.
My Basics
Rev02 dated 01/10/2013
SEED Program
Persistency
Sales Compliance
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Persistency is the percentage of an agents existing policies
remaining in force, without lapsing or being replaced by
policies of own company or other insurers.
Its no good to anyone if they dont keep it. A life insurance
policy, as part of a program designed to meet an insureds
financial need, is of no value if its not there when its
needed.
Persistency is the key to developing and building a
successful sales practice. What an agent will say and do
before, during and after the sale to get the business and
keep it requires a religious use of a process that will foster
superior policy persistency.
My Basics
Persistency
Understanding Persistency
What is Persistency?
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My Basics
Persistency
Improving Your Persistency
There are several actions the agent can take to improve persistency to top-notch,
money making, service-after-the-sale persistency. Lets see some of them:
Be professional
Think about persistency up front
Use a fact-finder and sell needs
In-Person delivery
Stay In Touch
Provide Value-added Services
Keep the coverage up-to-date
Know the competition
Implement a Policy Conservation Plan
Reinstate whenever possible
Measure it yourself
Finding qualified prospects
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My Basics
Persistency
How to improve Quality of Business?
Look for quality prospects
Sell on a needs basis
Sell appropriate policies at proper amounts
Try for annual or automatic premium payments
Get payment with the application
Resell the policy on delivery
Follow-up when second or third premiums are due
Keep in touch with your policy owners and be a
professional.
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My Basics
Persistency
Types of Persistency Measurement
2 Types of Persistency Measurement
DGI Persistency
(Government Std)
Persistency
Bonus
LIMRA 19
Months
(Company Std)
Contests,
Awards,
Conventions
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My Basics
Persistency
LIMRA 19 Months Persistency
LIMRA 19 is the 19 months persistency rate which analyses the lapse performance within the
previous 12 months.
Life span of a policy < 19 months
Policy
Date
19 months
Critical Period
All contests, conventions & awards are based on Past 12 months (P12M) Case
Count
Average Persistency is derived from Past 12 months Case Count
Son policies, WSM* & Single Premium are excluded
Refer to EB8 report or AIA Direct
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My Basics
Persistency
LIMRA 19 Months
Persistency
Factors Affecting Persistency
New Business (Father
Policy Only)
Past 12 Month lapses
To Improve Persistency
Increase New Business (Counted 3
months later)
Reinstate ALL lapsed cases
Focus on FL (First Year Lapse) and
RL (Renewal Lapse)(EB8 report)
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My Basics
Persistency
Definitions of Terms
First Year Lapse (FL) = policies lapsed due to 2nd to 13th month premium being unpaid.
Renewal Lapse (RL) = policies lapsed due to 14th to 19th month premium being unpaid.
First Year Reinstatement (FR) = reinstatements of policies lapsed due to 2
nd
to 13th month premium being unpaid.
Renewal Reinstatement (RR) = reinstatements of policies lapsed due to 14th to 19th month premium being unpaid.
Grace Period (GP) = policies under grace period due to 2nd to 19th month premium being unpaid.
Current Month Exposure = past 3rd to 20th Months New Business / 18
Current Month Lapse = policies lapsed in current month due to the 19th months premium or prior premium being unpaid.
Current Month Lapse Rate = Current Month Lapse X 100 %
Current Month Exposure
Current Month Persistency Rate = 100 % - Current Month Lapse Rate %
Past-12-month Exposure = Total of exposure for the past-12-months up to the current report month
Past-12-month Lapse = Total of lapse for the past-12-month up to the current report month
Past-12-month Lapse Rate = Past-12-month Lapse X 100 %
Past-12-month Exposure
Past-12-month Persistency Rate = 100 % Past-12-month Lapse Rate %
Average Persistency = Total Monthly P12M Persistency in Qualification Period
Months in Qualification Period
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My Basics
Persistency
SURVEY Findings:
The longer a policy is in force, the more commission it
generates for the agent
An agent with 95% persistency will earn 20% more
than an agent who has 85% persistency
of all lapses are never contacted in an attempt to
conserve the business
The cost of reinstatement; clerical, postage materials
& phone calls equaled approximately 1% of the
premiumthat was saved
Nearly 50% of lapsed policies can be reinstated with
personal contact
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My Basics
Persistency
DGI Persistency
AGENTS PERSISTENCY BONUS:
In the year following determination of persistency by the Company, a monthly
Persistency Bonus of 5% shall be paid as follows:
YEAR BONUS
1
ST
Year 5% of 2
nd
Year Renewal Premiums
2
nd
Year 5% of 3
rd
Year Renewal Premiums
Payment subjected to persistency requirement as specified by Bank Negara Malaysia
and the Company from time to time. Persistency requirement shall be defined in the
DGIs Guidelines on Operating Costs of Life Insurance Business
[JPI/GPI 6 (Revised)]
As stated in AIAs Agents Schedule of Commissions:
D1
D1 measures 1st Year Persistency
FULL FYP must be collected on or before policy
anniversary date
Meaning policy must be in force at least 12 months
If D1 > 90%: 5% will be paid on the 2nd Year
Renewal Premium(2RP)
D2
D2 measures 2nd Year Persistency
Full 2RP must be collected on or before the next policy
anniversary date
Meaning a policy must be in force at least 24 months
If D2 > 80%: 5% will be paid on the 3rd Year Renewal
Premium(3RP)
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My Basics
Persistency
DGI Persistency
D persistency is weighted by Annualized Premiums
If a policy is lapsed, D Persistency of the policy is = 0
If a lapsed policy is reinstated within the anniversary date or the premium is decreased, D
persistency of the policy remains = 100%
D Persistency is computed at January 15 in calendar year
Father & Son Policy (Basic Term) affects D Persistency
Riders are excluded from D Persistency Count
2 agents sharing a policy - calculated on a pro-rated basis
Reinstatement by another agent:
a) Included in the original agent as LAPSED
b) b) Included in the new agent using the original effective date
D1 = B1
A1
A1 = Total Annualized FYP (base)
B1 = FULLY Collected FYP
D2 = B2
A2
A2 = Total Annualized RP (base)
B2 = FULLY Collected 2RP
1
st
Year Persistency: Premium on new policies sold which remain inforced at the end of the 1st policy year
2
nd
Year Persistency: Premium on new policies sold which remain inforced at the end of the 2
nd
policy year
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My Basics
Persistency
Commission Statement
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SEED Program
NO LIMRA 19 M D PERSISTENCY
1. Case Count Premium Count
2. Reinstate 19M Lapsed
Cases (FL & RL)
4. EB8
Contests, Awards, Conventions
EDD
Persistency Bonus
Cases must reinstate within policy anniversary date
D1 - 12 months
D2 - 24 months
3. Son policy will not
affect persistency
Son policy affects persistency
(Basic Term)
LIMRA Persistency vs DGI
Persistency
My Basics
Persistency
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SEED Program
You have completed the Persistency module
and ready to be a qualifier for Quality Business Awards!
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Quality Business Awards (Refer to your Club Membership Guidelines)
Objective
To give recognition to Agency members who are both persistent and quality conscious in their business
Eligibility
Agents/Leaders
Qualifying Period
Past 24 months of Average Persistency (ending November)
Category
Average 24months
EB8 Persistency
Min FYP (Life Only)
Qualifying Year
Rewards
Agent 95% 100,000
*Cash rewards:
DM&UM = RM600
Agent = RM200
*Certificate
Unit Manager 90% 280,000
District Manager 90% 400,000
My Basics
Persistency
Quality of Business
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Recognition: Club Membership Guidelines
Ranking: Credited FYP
Benefits: Conventions, Contract Maintenance, Group Benefits etc
Income: Renewal Commission, Persistency Bonus, Quality Business Award, Career Benefit
etc
Why monitor your Persistency?
My Basics
Persistency
Quality of Business

MY BASICS - Sales Compliance Training (Part 1) : AIA Premier Academy

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