Basic Investment Linked Insurance - Takaful

REFERENCE FOR PARTICIPANT
Bank Negara Guidelines on
“INVESTMENT-LINKED BUSINESS’ BNM/RH/PD 029-36

– Issued on 11-Jan- 2019
– 77 pages
3
SESSION 1:
INTRODUCTION – ILP vs
TRADITIONAL
POLICY/CERTIFICATE
SESSION 1
OBJECTIVES
By the end of this session, the participant is able to :
 Have an overview of the new ILP structure
 Know the various types of ILP plans
 Understand the nature of various premiums/contributions
 Understand COI/Tabarru charges and other fees
 Be aware of the various funds and their risk profiles
 Relate the investment risks to customer risk profile and
impacts on their plans
6
INTRODUCTION : INVESTMENT-LINK PLANS
A short history
• 1997 – launched of SINGLE PREMIUM ILP by a LIAM
member company
• 1999 – launched of REGULAR PREMIUM ILP by the same
member and subsequent launches by other LIAM and MTA
members
7
OVERVIEW OF INVESTMENT-LINK PLANS
Overview of ILP
Funds
• Conventional
• Islamic
Premium / ALLOCATION
RATE Units
Contribution
• REGULAR • Regular* 60,60,60,80,80,80,95%... Unit-deducting for :

• SINGLE • Single* 95% • Cost of Insurance (COI)/
Tabarru Charge
• Charges/fees
Insurance
Premium/Contribution Paying Rider(s)
/Takaful
* Based on M.A.R. as different insurers/operators may offer more
8
TYPES OF INVESTMENT-LINK PLANS
Single Premium/Contribution ILP

• 1st Single Premium/Contribution – paid at policy inception
• Attracts a sum assured/sum covered of 105% to 125% of
the 1st single premium/contribution, with min RM5,000 death
benefit
• 105% is used for older ages and sub-standard lives
• 125% is used for standard lives
• E.g. Policyholder A paid a single premium of
RM10,000 at policy inception. Sum assured/covered is
RM12,500 if life is standard or RM10,500 for sub-
standard.
9

• Subsequent payment of Single Premiums/Contributions are
called AD-HOC TOP UP which DO NOT attract any death
benefits.
• E.g. in above Policyholder A who paid RM10,000 at
inception of policy, subsequently did an ad-hoc Top Up
2 months later for RM20,000, the sum
assured/covered is still at RM12,500 for standard or
RM10,500 for sub-standard lives. The RM20,000 top
up has no insurance coverage.
10

• The 1st Single Premium/Contribution cannot be segregated
into
o Single Premium/Contribution
o Ad-hoc Top Up
• The minimum amount of Ad-hoc Top Ups is decided by
individual life insurer or takaful operator, usually at RM500 or
RM1,000
11

• Allocation rate = 95% going into units of fund(s)
• Non-allocation rate/Front end charge = 5% in which
commission and over-riders are paid out from
• E.g. Policyholder A pays RM10,000 single premium at
inception. RM9,500 goes into units whereas RM500 into
costs which include commissions and over-riding.
12

• Upon death or maturity, the pay-out can be either
a) The higher of the Account Value or Sum
Assured/Covered or
b) The aggregate of both Account Value and Sum
Assured/Covered
e.g. If the Account Value = RM10,000 and the Sum
Assured/Covered = RM12,500
Upon death, some insurer/operator will pay RM12,500
based on method (a), whereas some insurer/operator pay
RM22,500 based on method (b).
13
Regular Premium/Contribution ILP

• Premiums/Contributions paid on a periodical basis i.e.
monthly, quarterly, half-yearly, annually
• Allocation rate into units, as per Guideline’s Minimum
Allocation Rate (MAR) for paying terms of 20 year & above:
Year of premium payment or MAR (% of annual premiums or
contribution contributions)
1–3 60 %
4–6 80 %
7 – 10 95 %
11 onwards 100 %
14

• Also have recurring-type of single premium/contribution (top-
up)
• In the form of a rider where
o Allocation rate is 95%
o Frequency of payment follows the basic regular
premium/contribution
• Purpose is to enhance the overall allocation rate for higher
number of units in the entire package for better value for the
policy/certificate holder.
15

• Non-allocation rate is the front end charge
• Used to meet insurer’s or operator’s expenses and
distribution cost
Premium/Contribution paying Total non-allocation rate
term (on basic plan and riders)
20 years or more 200 %
3 to 19 years Pro-rated on the 200% as per

formula
Less than 3 years Not more than 5% per
policy/certificate year
16

• Upon death or maturity, the pay-out can be either
• The higher of the Account Value or Sum
Assured/Covered or
• The aggregate of both Account Value and Sum
Assured/Covered
e.g. Account Value = RM5,000 and the Sum
Assured/Covered = RM100,000
Upon death, some insurer/operator will pay RM100,000
based on method (a), whereas some insurer/operator pay
RM105,000 based on method (b).
19
Overview of ILP
Funds
• Conventional
• Islamic
RATE Units
Contribution
• REGULAR • Regular 60,60,60,80,80,80,95%... Unit-deducting for :

• SINGLE • Single 95% • Cost of Insurance (COI)/
Tabarru Charge
• Charges/fees
Insurance
/Takaful
20
STRUCTURE OF INVESTMENT-LINK PLANS
Charges and Fees in ILP

a) Cost of Insurance (COI) / Tabarru Charge
b) Fund Management Charge
c) Fund Switching Charge
d) Policy/Certificate Fee, if any
e) Monthly Service Charge
f) Top-Up charge
g) (New) Surrender/Withdrawal Charge
21
Charges and Fees in ILP

• All the above can be changed by giving 3 months’ notice to
policy/certificate holder
• Charges and fees are imposed by deducting units from the
Account Value
22
Types of riders in ILP

For riders on an ILP, two types of payment :
1. Unit-Deducting Riders (this will affect sustainability)
2. Premium/Contribution Paying Riders (this will NOT affect
sustainability)
23
a) Nature of COI/Tabarru Charge

• Rate of COI/Tabarru Charges depends on
o Attained age
o Sex/Gender
o Occupation
o Smoking status
o Medical rating (if any)
24

• COI/Tabarru Charge changes by age over the tenure of the
policy/certificate – a reflection of higher mortality or morbidity
rate
• COI/Tabarru Charge grows sharply at older age (hence
affecting sustainability)
• Rate can be changed with 3 months notice to
policy/certificate holder
25

COI/Tabarru Charge
The rate grows sharply at older age
Age
26
b) Fund Management Charge
Type of fund Maximum Fund Management

Charge allowed
Funds invested fully in 1 % of NAV
• money-market instruments
• fixed income securities
Other funds 1.5 % of NAV
NAV = Net Asset Value is the value of the fund after deducting its liabilities
27
c) Fund Switching Charge

• Usually free for the first few switching, thereafter chargeable
• Amount is to cover administrative cost
28
d) Policy/Certificate fee (if any)

• A one time fee chargeable up front to cover initial
administrative cost such as the policy contract/certificate,
usually a small amount such as RM40.
• Most insurers/operators do not charge this fee.
29
e) Monthly Service Charge

• To cover administration and maintenance of the
policy/certificate in the system
• Usually ranging in RM6 to RM8 per month
30
f) Top Up Charge
• To cover administrative cost when an ad-hoc Top Up single
premium/contribution is paid in
• This is different from the front-end charge of 5% for Top Ups
• Usually a small flat amount e.g. RM25 + 6% SST regardless
of the top up amount.
31
g) (NEW) Surrender/Withdrawal Charge

• Sometimes called Exit Charge
• To recover some financing of upfront cost such as higher
allocation rate should the policy/certificate holder surrender
the policy in the first few years
32
Overview of ILP
Funds
• Conventional
• Islamic
RATE Units
Contribution
• REGULAR • Regular 60,60,60,80,80,80,95%... Unit-deducting for :

• SINGLE • Single 95% • Cost of Insurance (COI)/
Tabarru Charge
• Charges/fees
Insurance
/Takaful
47
FUNDS in INVESTMENT-LINK PLANS
Conventional Funds and Takaful Funds

Category of Funds Types of funds
Conventional • Conventional funds ranging from equities to fixed
income securities.
• Shariah-approved funds ranging from equities to
fixed income securities. Such funds under
conventional plans DO NOT make the entire plan
as a Shariah-compliant plan.
Islamic/Takaful • Funds ranging from equities to Islamic fixed income

securities (sukuk) with are Shariah-approved.
• All funds within a plan which is also Shariah-
compliant.
48
Various type of funds vs Risk Profile

Fund Characteristic & Objective Risk Profile
a) Equities An open-ended fund invested in diversified Medium to
equities and equity-related securities, for High
mid to long term capital appreciation
Islamic Dana of this nature will be invested

in similar assets but Shariah-approved.
49

b) Bond/Sukuk An open-ended fund invested primarily in Low
fixed income securities, for a stable income
stream and for mid to long term capital
appreciation.

in similar assets such as sukuks and they
are Shariah-approved.
50

c) Managed or An open-ended fund invested in a mix of Medium
Balanced diversified equities, equity-related
securities, fixed income securities and
money market instruments for mid to long
term capital appreciation.

51

d) High growth An open-ended fund invested in shares of High
small and medium size companies with
potential high growth for mid to long term
superior capital appreciation.

52

e) Cash A fund invested in highly liquid money Low
market instruments for high level of liquidity
to meet cash flow requirements.

53

f) Equity Income An open-ended fund invested in diversified Mid to High
equities and equity-related securities which
distribute strong dividends regularly, for mid
to long term capital appreciation.

54

g) Regional e.g. An open-ended fund invested in diversified Mid to High
ASEAN, Greater equities and equity-related securities within
China, etc the identified region, for mid to long term
capital appreciation.

55

h) Shariah- Funds mirroring conventional funds with Low to High
approved (under similar characteristics and objectives but
Conventional with the key difference in that the funds are
ILPs) invested in Syariah-approved assets
Important note : A conventional ILP having Shariah-approved funds does not

make this ILP to be Islamic. Only the portion of the funds are Shariah-
approved. This need to be made clear to prospects.
56
RISK & IMPACTS in INVESTMENT-LINK PLANS
Impacts of various risks on customer risk profile

Risk taking
As a person gets older, he/she shall

take less financial risks
Age
57

• A younger person can take more financial risks because
o He/she has time to recover in case sometime goes
wrong
o The amount of money involved is relatively small
• Similarly, an older person shall take less risk for the
same reasons i.e. due to lack of time to recover and sum
involved is large.
58

Example A :
• Ali, age 25, a bank officer, earns RM3,000 a month,
recently bought a policy/certificate with exposure to
Dana Ekuiti, paying RM1,200 a year. He can take more
financial risks because
o He has time to recover in case sometime goes wrong
with Dana Ekuiti such as a bad market crash. Given
time, the equities market is likely to recover.
o The amount of money involved is relatively small.
Even if the entire fund is wiped off, Ali will NOT face a
financial disaster as his growing income can easily
rebuild this fund
59

Example B :
• Albert, age 55, a bank manager, earns RM10,000 a
month, bought a policy/certificate 20 years ago with
exposure to Dana Ekuiti, paying RM5,000 a year. He
CANNOT take more financial risks because
o Time to recover in case sometime goes wrong with
Dana Ekuiti such as a bad market crash is less.
o Amount of money involved is relatively large as the
Account Value is now large. If the Account Value is
devalued significantly, with higher COI/Tabarru
Charge deductions, sustainability can be a problem
60

• Hence, the job of the life insurance agent or financial
planner is to ensure
o The policy/certificate risk profile by age and ability to
take risk matches the fund portfolio in the
policy/certificate
o The availability of fund switching to be used to
gradually switch over from higher risk equities to
lower risk bonds/fixed income securities/cash
o Annual review is necessary for this purpose
61
SESSION 2:
DISCLOSURE of ILP
POLICY/CERTIFICATE
SESSION 2
OBJECTIVES
 Know what needs to be disclosed at the point of entering
into a contract
 Know what disclosures are needed during the term of the
contract
63
DISCLOSURES
At the point of entering into a contract

As per BNM Guidelines on Investment-Linked Business
Section 16.1 :
“At the point of sale, a licensed person (life insurer or takaful
operator) must ensure that premiums/contributions are
priced at a level where an investment-linked
policy/certificate is expected to sustain its coverage until the
end of its contractual term.”
64
DISCLOSURES

As per BNM Guidelines on Investment-Linked Business
Section 1.6 (b) :
“introduction of standards of sustainability tests to ensure
proper management of long term persistency of investment-
linked policies/certificates”
65
DISCLOSURES

Standards of sustainability disclosure : educational material
66
DISCLOSURES

Standards of sustainability disclosure : educational material
• “Guide on Investment-linked Policy/Certificate Owners on
Insurance/Takaful Coverage”
• Above to be enclosed together with Sales
Illustration/Product Disclosure Sheet
• Agent to explain
o How an ILP works
o Scenarios affecting Sustainability
o Options available to have Sustainability till end of
contract period
67
DISCLOSURES

o How an ILP works, including :
 Allocation rates
 Deduction of various charges
 COI/Tabarru charge increases with age
68
DISCLOSURES
69
DISCLOSURES

70
DISCLOSURES

 Not paying due premium/contribution
 Poor investment returns in chosen fund(s)
 Making partial withdrawal
 Not increasing premium/contribution when
increasing coverage
 Not increasing premium/contribution nor doing top-
ups when insurer/takaful operator increase various
charges
71
DISCLOSURES

contract period
72
DISCLOSURES

contract period
 Increase regular premium/contribution
 Perform top-ups (either recurring or ad-hoc)
 Reduce coverage
73
DISCLOSURES

• Agent also to explain
o Product features
o Benefits & risks
o Fees & charges
o Contractual rights & obligation of policy/certificate
holder
74
DISCLOSURES

On ILP Funds, agent needs to explain that “the past
performances is not an indicative of future performances
and the performance of the fund is not guaranteed”
as boldly printed in the sales illustration.
75
DISCLOSURES
During the term of contract

To have regular sustainability tests :
• To assess if coverage is sustainable until the end of the
contractual term.
• To be done
o Annually (in Annual Statements) or
o When policy/certificate holder exercise an option or
make a change to the policy/certificate e.g. making a
partial withdrawal
77
DISCLOSURES

A regular sustainability test needs to be done when
policy/certificate holder exercise an option or make a
change to the policy/certificate such as making a:
• Premium holiday
• Partial withdrawal
• Increase in tenure of plan
• Increase in coverage in basic plan or rider(s)
Thereafter explaining to client the consequences and options
available so that client can make an informed decision.
78
DISCLOSURES

A sustainability test also needs to be done when a life insurer
or takaful operator increase COI/Tabarru charges in which
client is to be advised on options required in order to
sustain the policy/certificate to the end of the contractual
term.
Policies/Certificates sold before 1-Jan-2020 where unilateral

COI/Tabarru charge change is NOT allowed,
insurer/operator needs to inform client to top up.
79
DISCLOSURES

Actions that can be taken by client if the sustainability is poor
include, but not limited to the followings:
• Increase in regular premiums/contributions
• Do recurring or ad-hoc top-ups
• Reduce sum assured/covered of basic plan or rider(s)
• Removal of rider(s)
• Reducing the tenure of the cover
81
DISCLOSURES

Communication to policy/certificate holders on sustainability
test result must be
• Simple & not too detailed
• Clear on limitations such as assumptions used
• Indicated on variations of test if assumptions used
varies in actual experience
82
SESSION 3:
ILP SALES ILLUSTRATION &
ANNUAL STATEMENTS
SESSION 3
OBJECTIVES
 Be aware of changes w.e.f. 1-July-2019
 Understand the concept of “sustainability” and how to
manage it
 Understand the enhanced Annual Statement with
sustainability testing in it
84
OVERVIEW OF CHANGES
With effect from 1-July-2019 :

1. New Minimum Allocation Rate (MAR)
• 1-July-2019 for conventional ILP
• 1-July-2020 for takaful ILP
2. Minimum standards of Sustainability Tests
• by 1-Jan-2020
3. Enhanced Sales Illustration
• by 1-Jan-2020
85
NEW MINIMUM ALLOCATION RATE (MAR)

Year of premium payment or MAR (% of annual premiums or

contribution contributions)
1–3 60 %
4–6 80 %
7 – 10 95 %
11 onwards 100 %
Above is for tenure of 20 years and above. Pro-rated if 3 to 19 years.
86
NEW MINIMUM ALLOCATION RATE (MAR)

• Purpose is to enhance the Account Value of the
policy/certificate owner in the early years
• Better value for the customer
87
MINIMUM STANDARDS OF SUSTAINABILITY TESTS
With effect from 1-July-2019, deadline 1-Jan-2020 :

2. Minimum standards on Sustainability Tests is managed by
a) One-off communication to all policy/certificate holders
whose plans may lapse in the next 12 months due to
short of units in Account Value
b) Annual Statement within one year thereafter to include
the latest sustainability test
Sustainability test to include
o How long more will the plan last based on the current Account
Value
o What options can be done to improve the sustainability of the
plan till maturity of contract
88
MINIMUM STANDARDS OF SUSTAINABILITY TESTS

2. Minimum standards on Sustainability Tests
Concept of Sustainability involves
o ensuring current cash flows are sufficient for plan to
last till maturity of contract
o If insufficient, to offer various options to the customer
o Options include
 Increasing in-flows : via increase in regular
premium/contribution, recurring or ad-hoc top-ups
 Reducing out-flows : via reduction in coverage
amount or scope of cover e.g, dropping of rider(s)
89
ENHANCED SALES ILLUSTRATION

3. Enhanced Sales Illustration includes
a) More conservative returns projections of funds
b) Inclusion of educational material for the public
90
3 (a) More conservative returns projections :

FUND OLD NEW
Equity Low : 2 % Low : 2 %

High : 1st 20 years = 9 % High : 1st 20 years = 10-year Bursa average
> 20 years = 6 % > 20 years = 5 %
Managed Low : 3 % Low : 2 %

st
High : 1 20 years = 8 % High : 1st 20 years = 5 %
> 20 years = 5.5 % > 20 years = 5 %
Bond Low : 4 % Low : 2 %

High : 1st 20 years = 7 % High : 1st 20 years = 5 %
> 20 years = 5 % > 20 years = 5 %
• All returns here are based on gross i.e. before tax and charges
• Equity Funds refer to funds investing in equities in more than 80% of its NAV
91
3 (a) More conservative returns projections :

• With a more conservative projection on returns,
customers are expected to focus more on
PROTECTION than on INVESTMENT RETURNS
• This is properly to manage CUSTOMER
EXPECTATIONS on the key reason for purchasing a
policy or certificate
92
3 (b) Education material for the public :

• Using this education material, the agent or financial
planner will need to explain the workings of the ILP
including
o The workings of the cash flows
o Factors affecting fund value
o What the customer can do to improve sustainability
94
SESSION 4:
GENERAL REQUIREMENTS
ON MARKETING of ILP
SESSION 4
OBJECTIVES
 Know what are the sales materials required in marketing
ILPs
 Be aware of the standard communication material on
sustainability to the public
 Locate the relevant ILP-related reports and updates
 Perform the standards of professional conduct in the
marketing of ILPs
96
GENERAL REQUIREMENTS IN MARKETING ILPs
Materials needed at the Point-Of-Sale :

1. Sales Illustration (SI)
2. Product Disclosure Sheets (PDS)
3. Education Material for the public : “Guide on Investment-
linked Policy/Certificate Owners on Insurance/Takaful
Coverage”
4. Product Literature
5. Fund fact sheet
97
Materials needed after the Point-Of-Sale :

1. Annual Statement to policy/certificate holders
2. Fund Performance Report
3. Publication of unit price
98

2. Product Disclosure Sheets (PDS)
3. Education Material for the public : “Guide on Investment-
linked Policy/Certificate Owners on Insurance/Takaful
Coverage”
The above items are usually generated in the same Sales
Illustration. The agent needs to go through them with the
customer especially on the possible movement of CASH
FLOWS and IMPACT of fees/charges on Account Value.
99

100

101

102

• For unit-deducting riders, charges must be clearly
separated from the basic plan.
• Period of illustration up to maturity of chosen period
presented
o Yearly up till Year 10
o Year 15
o 10-year intervals from Year 20 onwards till maturity
103

• Materials providing enhanced info to the customer
• Such as announcements, promotional materials,
telemarketing scripts, advertisements, etc.
• Including colorful paper brochures produced by life
insurers or takaful operators or pages in their
websites on products
• The agent is NOT allowed to produce their own
product literatures
104

• In all the materials, under BNM Guidelines Section
28.3, the following statement must be clearly visible :
“This is an insurance (or takaful) product that is tied to

the performance of the underlying assets and not a
pure investment product such as unit trust”
105

5. Fund fact sheet
• Outlining the key points
o Name of fund
o Objective and strategy
o Asset allocation
o Performance benchmark
o Fund manager running this fund
o Fund management charge and other fees
106

• Annual statement, sent out at least once a year,
describing the Account Value of the policy/certificate
• Must be sent out within 2 months after financial year
end closing of the insurer/operator
• Details of each transaction within the year must be
outlined
107

• Most importantly, statement indicates LATEST
sustainability of the plan.
• If not sustainable due to any particular reason, to
offer OPTIONS on what the policy/certificate owner
can do to rectify it
108

2. Fund Performance Report
• Must be sent out to policy/certificate holders at least
once a year, within 4 months from the financial year
end of the insurer/operator
• Indicate performance of funds with audited financial
statements
109

3. Publication of unit price
• Must publish the latest NAV per unit of each fund on
its official website DAILY
• Also publish in hardcopy newspaper (for those
without internet access) on the last day of the month,
in a major English and a major Bahasa Malaysia
national paper
• Agent must inform customer where to look for such
pricings
110
PROFESSIONAL CONDUCT IN MARKETING ILPs
Professional conduct expected :

• A life insurance agent or financial planner is EXPECTED to
conduct himself or herself in the most ethical and
compliance manner
• All new requirements in relation to the new ILP guidelines
must be adhered to
111
PROFESSIONAL CONDUCT IN MARKETING ILPs
Avoiding mis-representation :
• DO NOT use the word “whole life policy” or present it
similar to a “whole life policy” in marketing the ILP as there
is no guarantee that this ILP can cover to a ripe old age.
• DO NOT present ILP similar to Unit Trust or a bank saving
plan
• Strictly to use only life insurer/takaful operator approved
sales materials
112
SESSION 5:
HOW ILP BLENDS INTO
SOUND PERSONAL
FINANCIAL PLANNING for
MALAYSIANS
SESSION 5
OBJECTIVES
 Understand the various LIFE STAGES of a person
 Identify the coverage needs for different stages of life
 Use ILP and its riders to meet changing financial needs of
a person
 Do periodical review to ensure good sustainability in a
customer’s policy/certificate
114
SOUND PERSONAL FINANCIAL PLANNING
Life Stages :
A normal Malaysian’s life is divided into a few stages :
Married
Newly
Single with Retirement
married
children
115
Life Stages : SINGLE

• A working single person has no dependent
• Coverage need : Protection for the benefit of self and
parents
• Coverage solution : Basic plan + medical/CI cover
• Budget : Small for a starter plan
Married
Newly
Single married
with Retirement
children
116
Life Stages : SINGLE - Example

Encik Ahmad, age 24, works as a bank officer, earns RM3,000
per month, gives RM500 per month to his aging parents. He
bought an ILP as follows :
• Coverage need : Protection on death+TPD+CI+Medical
• Coverage solution : Basic : RM200,000 with CI rider
RM200,000 and H&S 150 (R&B plan). A RM200,000 death
payout, at 3% rate, will generate RM500 per month.
• Budget : RM3,000 pa
Married
Newly
Single married
with Retirement
children
117
Life Stages : NEWLY MARRIED

• A newly married has spouse as the new dependent
• Coverage need : Protection for the benefit of spouse
• Coverage solution : Basic plan + medical/CI cover for both
spouses
• Budget : Average for a larger plan
Newly Married
married children
118
Life Stages : NEWLY MARRIED - Example

Encik Ahmad, age 30, newly married, now earns RM5,000 per
month, bought an ILP on his wife. On his own ILP, he
increased his protection as his income and liabilities are
higher, as follows :
• Coverage need : Higher protection on
death+TPD+CI+Medical
• Coverage solution : Basic : RM600,000 with CI rider
RM600,000 and H&S 150 (R&B plan).
Newly Married
married children
119
Life Stages : MARRIED with CHILDREN

• Has children as the new dependent and also liabilities
• Coverage need : Protection on the children + education
savings
• Coverage solution : Small basic plan + adequate
medical/CI cover for each child + education plans
• Budget : Larger for plans to cover entire family
Married
Newly
Single
married with Retirement
children
120
Life Stages : MARRIED with CHILDREN - Example

Encik Ahmad, now age 40, has 2 children age 9 and 10. He
now earns RM8,000 per month. He bought an education ILP for
each of his children. On his own ILP, he increased the
protection, as follows :
• Coverage need : Higher on death+TPD+CI+Medical
• Coverage solution : Basic : RM1,000,000 with CI rider
RM1,000,000 and H&S 200 (R&B plan) and Waiver of
Premium/Contribution rider.
Married
Newly with
Single Retirement
married
children
121
Life Stages : RETIREMENT

• Children leaving the nest
• Coverage need : Long term care + estate planning
• Coverage solution : Adequate comprehensive medical/CI
cover and a large basic cover
• Budget : Large for plans to sustain till a ripe old age
Married
Newly
married
children
122
Life Stages : RETIREMENT - Example

Encik Ahmad, now age 55, as a bank manager, earns
RM15,000 per month, started to enjoy his golden years. His
children are now all working. He needs to modify his ILP as
follows :
• Coverage need : Minimal Death/TPD but keeping CI/Medical
• Coverage solution : Reduce basic to RM100,000. Add
recurring single premium/contribution rider. Others
maintained.
Married
Newly
married
children
123
Changing Sum Assured/Covered by age

Sum Assured/Covered
Grown children
Having children
Married
Single Retirement
Empty nest
Age
124
Plan to cover various Life Stages

To be able to do this, the ILP plan is most suitable because it
can work on the following flexibilities:
• Premium/Contribution – can be increased or reduced
• Sum Assured/Covered – can be increased or reduced
• Saving/Investment – can be built up using recurring or ad-
hoc Single Premiums/Contributions Top-Ups
Married
Newly
married
children
125

The ILP plan is also able to meet:
• Risk profile changes – by fund switching
Life Line
Younger age : More aggressive Older age : More conservative

e.g. more equities, for long term e.g. more bonds, for regular
capital growth incomes with capital preservation
Married
Newly
married
children
126

• Coverage changes – by dropping some covers, e.g. Reduction
in basic sum assured/covered for better sustainability
Life Line
Younger age : Comprehensive cover Older age : More living benefits,

Both death benefits and living less death benefits (unless for
benefits legacy planning)
Married
Newly
married
children
127

• Coverage efficiency – using COI/Tabarru charges
Life Line
Younger age : High Cover but low Older age : High COI/Tabarru
COI/Tabarru charges – overall charges but low cover – overall
cheaper cheaper
Married
Newly
married
children
128
PERIODICAL REVIEWS FOR BETTER PLANNING
Periodical Reviews :
• Agent/Planner is to review a client’s protection programme
regularly, at least yearly
• Purpose is to review
o if any covers need to be modified as per latest
current needs e.g. tenure extension
o If current cover can be sustained from the current
Account Value amount
o If not sustainable, what are the options available and
to discuss with client for the BEST OPTION
129
PERIODICAL REVIEWS FOR BETTER PLANNING
Periodical Reviews :
• In summary, an Agent/Planner’s job is NOT complete
until the coverage/solution programme has completed its
role in protecting the client.
• A flexible product such as ILP where client needs to
make informed decisions from time to time requires high
standard of governance from the agent.
130
SESSION 8:
REVIEW & LEARNING
ASSESSMENT
SESSION 8: REVIEW & LEARNING ASSESSMENT
 Self Evaluation : Professional Knowledge, Skills and
Abilities
 20 Assessment Questions
141
REVIEW - LEARNING OUTCOME
Low to High
• Able to understand the types of ILPs 1. 2. 3. 4. 5.
• Understand the nature of premiums/contributions 1. 2. 3. 4. 5.
• Understand the nature of charges and fees 1. 2. 3. 4. 5.
• Knowledge of fund and customer profile risks 1. 2. 3. 4. 5.
• Aware of disclosures at the point of sales 1. 2. 3. 4. 5.
• Aware of disclosures during the term of contract 1. 2. 3. 4. 5.
• Understand the concept of Sustainability 1. 2. 3. 4. 5.
• Understand the enhanced Annual Statement with
sustainability testing 1. 2. 3. 4. 5.
• Able to list out marketing materials for ILP 1. 2. 3. 4. 5.
• Able to explain the ILP Education Material for public 1. 2. 3. 4. 5.
• Able to execute a professional conduct in selling ILP 1. 2. 3. 4. 5.
• Understand life stages and its insurance needs 1. 2. 3. 4. 5.
• How ILP can meet the needs of various life stages 1. 2. 3. 4. 5.
• How periodical reviews help in long term sustainability 1. 2. 3. 4. 5.
142
Review & Learning Assessment
 Participant, You have 20 minutes to complete the

20 Assessment Questions
 Participant must answer correctly at least 15 of the
20 Assessment Questions
 Failing which, Participant will re-sit the assessment.
 Participant will be awarded the Compulsory 5 CPD
Hours only when he/she has completed the
assessment successfully
Begin: ___:___ End: ___:___

143
THANK YOU FOR
YOUR
PARTICIPATION
145

Basic Investment Linked Insurance - Takaful

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Basic Investment Linked Insurance - Takaful

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REFERENCE FOR PARTICIPANT

Bank Negara Guidelines on

“INVESTMENT-LINKED BUSINESS’ BNM/RH/PD 029-36

• REGULAR • Regular* 60,60,60,80,80,80,95%... Unit-deducting for :

Single Premium/Contribution ILP

Single Premium/Contribution ILP

Single Premium/Contribution ILP

Single Premium/Contribution ILP

Single Premium/Contribution ILP

Regular Premium/Contribution ILP

Regular Premium/Contribution ILP

Regular Premium/Contribution ILP

3 to 19 years Pro-rated on the 200% as per

Regular Premium/Contribution ILP

• REGULAR • Regular 60,60,60,80,80,80,95%... Unit-deducting for :

Charges and Fees in ILP

Charges and Fees in ILP

Types of riders in ILP

a) Nature of COI/Tabarru Charge

a) Nature of COI/Tabarru Charge

a) Nature of COI/Tabarru Charge

The rate grows sharply at older age

b) Fund Management Charge

Type of fund Maximum Fund Management

Other funds 1.5 % of NAV

c) Fund Switching Charge

d) Policy/Certificate fee (if any)

e) Monthly Service Charge

g) (NEW) Surrender/Withdrawal Charge

• REGULAR • Regular 60,60,60,80,80,80,95%... Unit-deducting for :

Conventional Funds and Takaful Funds

Islamic/Takaful • Funds ranging from equities to Islamic fixed income

Various type of funds vs Risk Profile

Islamic Dana of this nature will be invested

Various type of funds vs Risk Profile

Islamic Dana of this nature will be invested

Various type of funds vs Risk Profile

Islamic Dana of this nature will be invested

Various type of funds vs Risk Profile

Islamic Dana of this nature will be invested

Various type of funds vs Risk Profile

Islamic Dana of this nature will be invested

Various type of funds vs Risk Profile

Islamic Dana of this nature will be invested

Various type of funds vs Risk Profile

Islamic Dana of this nature will be invested

Various type of funds vs Risk Profile

Important note : A conventional ILP having Shariah-approved funds does not

Impacts of various risks on customer risk profile

As a person gets older, he/she shall

Impacts of various risks on customer risk profile

Impacts of various risks on customer risk profile

Impacts of various risks on customer risk profile

Impacts of various risks on customer risk profile

At the point of entering into a contract

At the point of entering into a contract

At the point of entering into a contract

At the point of entering into a contract

At the point of entering into a contract

At the point of entering into a contract

At the point of entering into a contract

At the point of entering into a contract

At the point of entering into a contract

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