Ammetlife - Ceilli (Eng) - Mas 2014

The Certificate Examination in
Investment-Linked Life Insurance

(CEILLI) Training
Disclaimer:
All training materials which are produced by AmLife Business School in any forms/format are purely training tools for internal agency programmes of
AmLife Insurance Berhad. All or any part of the contents of these materials shall not be used directly or indirectly for soliciting of insurance businesses,
policy holder services and/or facilitating any form of communications with external party whatsoever. This information is correct as at 13st August 2014.
Investment-Linked Traditional Life
CONTENTS
CHAPTER 1 : Introduction to Investment-Linked Life Insurance
CHAPTER 2 : Key Considerations in Investment
CHAPTER 3 : Types of Investment Assets
CHAPTER 4 : Investment-Linked Life Insurance Products– A World Scenario
CHAPTER 5 : Types of Investment-Linked Life Insurance Products
CHAPTER 6 : Structure of Investment-Linked Fund

CONTENTS
CHAPTER 7 : How Investment-Linked Life Insurance Products Work
CHAPTER 8 : Benefit & Risk of Investing in Investment-Linked Fund
CHAPTER 9 : Comparison between Investment-Linked Life Insurance & Traditional with

Profit Life Insurance Products
CHAPTER 10 : Taxation & Law Covering Investment-Linked Life Insurance Products
CHAPTER 11 : Identifying & Establishing Customer Needs
CHAPTER 12 : Marketing & After Sales Service, Ethics and Code of Conduct
CHAPTER 1 : INTRODUCTION TO
INVESTMENT LINKED LIFE INSURANCE
• According to BNM’s DGI report 2009,

2009 1,403,562 policies
1990 498,338 policies
• Distribution of annual premiums for ILP insurance policies
2009 30.6%
2005 25.7%
• Policyholders are quite happy to buy investment-linked policies

because they can choose the amount of coverage needed and still
enjoy a sizeable return on their savings
5
Regular Premium / Single premium / Top-up
Allocated Premium
used to buy units from Unallocated
investment-linked Premium
funds at offer price
Surrender
Units which Life Office
Withdrawal belong to
policy owner (Marketing and
Set-up expenses)
Death claim
Cancel units
6
Policyholder
pay premium
Investment Return
Sum Assured
Fund Managed
By Insurer
Protection Investment
CHAPTER 2 : KEY CONSIDERATION IN
INVESTMENT
2.1 Investment Objective
2.2 Funds Available
2.3 Risk or Security
2.4 Investment Horizon
2.5 Accessibility of Funds
2.6 Taxation Treatment
2.7 Performance of the Investment
2.8 Diversification
8
CHAPTER 2.1: INVESTMENT OBJECTIVE
Safety
3
Fundamental Characteristics
Income Growth
9
Safety Income Growth
• close to • expect to see a • some investors

ultimate safety / steady stream seek growth in
low risk / may of income. their
have to forgo investments,
growth and such as
income stream. investing in
- for example, common
government stocks,
bond, sukuk commodities
bonds, treasury and other share
bills, FD. based
investment.
• Close to ultimate safety / low risk / may have to

forgo growth and income stream. - for example,
Safety government bond, sukuk bonds, treasury bills,
FD
Income • expect to see a steady stream of income.
• some investors seek growth in their investments,

Growth such as investing in common stocks,
commodities and other share based investment.
RISK
RETURN
BONDS/FD EQUITY/
SHARES
12
Achieving
A Comfortable Fund for Improvement
Financial
Standard Children On Financial
Freedom
of Living Position
Hedging (1) Liability

Inflation Other Cancellation
Investment
Objectives
Fund for Income for
Dependants Retirement
Fund for Expenses

Achieving a state –
& Taxes After
Death Beyond Financial Freedom
Regular Income vs. Capital Gain 13

CHAPTER 2.2: FUNDS AVAILABLE
The more funds an investor has,

the greater or wider is the choice of
investment available to the investor.
ie. Cash flow and Net Worth Analysis.
 Cash flow analysis: List down their income source and expenditure.
 Net worth analysis: List down their assets and liabilities.
CHAPTER 2.3: RISK/SECURITY
The first thing about learning how to invest in the stock market
is to know what kind of investor risk profile you have.
It has to do with volatility or how widely the price of a stock

or mutual fund fluctuates.
The wider the fluctuations, the higher the risk.
Age Family Situation
Risk
Profiling
Test
Strength of Income Current Financial Picture
Overall Tendencies &

Investment Disposition 15
CHAPTER 2.4: INVESTMENT HORIZON
Def:
(i) The length of time a sum of money is expected to be invested.
The shorter the investor’s horizon, less risk tolerance

to be accepted.
(ii) The total length of time that an investor expects to hold a

security or a portfolio
The investment horizon is used to determine the investor’s

income needs and desired risk exposure, which is then used
to aid security selection.
16
CHAPTER 2.5: ACCESSIBILITY OF
FUNDS
MATURITY PENALTY FOR EARLY EXITS
COST OF ENTERING
CHAPTER 2.6: TAXATION TREATMENT
2 factors:
i)The taxation of the investment vehicle itself
ii)The subsequent taxation liability of the investor
The tax status of Investment-Linked life insurance product

=
Traditional with profit life insurance product
18
CHAPTER 2.7: PERFORMANCE OF THE
INVESTMENT
Country’s
Economic
Life Cycle of the Regional & Global
Investment Economic
THE
History of the SEVEN Competencies &
Invested FACTORS Capability of the
Company Management Team
Performance The Invested

Depends on Past Company’s Level
Experience of Cost
19
CHAPTER 2.8: DIVERSIFICATION
Process of investing across different asset classes

and across different market environment.
Proven effective to reduce risk without sacrifice

return.
“NEVER PUT ALL EGGS IN ONE BASKET”
20
CHAPTER 2: ASSESSMENT
Exercises:
1. Three fundamental characteristic for investment objectives are
safety
_________, income growth
________and_________.
reducing risk without sacrificing

2. Diversification is proven effective in ________
return.
3. Before getting into any investment decisions, investors have to do a

Cash flow and Net
__________ worth analysis to understand their financial
_______________
condition.
21
Exercises:
country’s
4. The performance of an investment depends on economic factor
___________,
regional & global economic factor
______________________________and life cycle of the investment
__________________________.
5. The three components in determining the accessibility of funds are

Cost of penalty of realizing the
maturity period _____________________________
_____________, Initial cost
and _____________.
investment before materit\y
6. The investment horizon is used to determine the investor’s __________

income
needs and desired ___________

risk exposure, which is then used to aid in
security selection.
22
CHAPTER 3: TYPES OF INVESTMENT
ASSETS
3.1 Cash & Deposits
3.2 Fixed Income Securities
3.3 Shares
3.4 Unit Trust
3.5 Investment Trust
3.6 Properties
3.7 Derivatives
3.8 Commodities
23
CHAPTER 3: TYPES OF INVESTMENT
ASSETS
3.9 Life Insurance
3.10 Annuities
3.11 Exchange Traded Funds
3.12 Sukuk Bonds
3.13 Real Estate Investment Trusts
3.14 Capital Guaranteed Funds
24
CHAPTER 3.1: CASH & DEPOSITS
• Include short term debt instruments.

• serves as a medium of exchange.
Cash & Deposits:-
3.1.1 3.1.2
Treasury Bills Bank Accounts
• Refers to all liquid instruments

• Carry little or no risk of losing principal amount
• Cash
- Not an investment Capital value won’t increase
No additional income generated
- Only a medium of exchange
• Perbadanan Insurans Deposit Malaysia (PIDM)

- Objectives:
 Administer a deposit insurance system
 Provide insurance against the loss of part or all of deposits of a
financial institution
 Provide incentives for sound risk management in the financial system
 Promote and contribute to the stability of the Malaysian financial system
- Main functions:
 Assess & collect premiums or fees from banks
 Manage the Deposit Insurance Funds
 Undertake resolution of non-viable banks
 Reimburse depositors should a bank become insolvent
 Comply with Shariah principles (Islamic deposits & funds)
 Conduct ongoing public awareness & education initiatives
27
Deposit Insurance
A system that protects depositors against the loss of their insured deposits,
placed with banks in the unlikely event of a bank failure.
Benefits to Depositors Benefits to Financial System
 Deposit insurance protection is  Promote public confidence.

automatic.  Reinforces & complements the
 PIDM protects depositors existing regulatory &
holding deposits with banks. supervisory framework.
 No protection charge to  Minimize costs.
depositors.  Contribute to the stability of
 PIDM will reimburse depositors the financial system.
their deposits
28
CHAPTER 3.1.1: TREASURY BILLS
issued at
discount rate
Central Bank Institution

Government
discharged
at face value
No risk : guaranteed by Government

(unless politically unstable)
Short term : < 1 year

CHAPTER 3.1.2: BANK ACCOUNTS
TIME/FIXED DEPOSITS BAD INFLATION HEDGE
PIDM TO FURTHER
PENALTIES FOR EARLY STRENGTHEN THE
WITHDRAWAL CONFIDENCE LEVEL OF
DEPOSITORS
• Advantages: Low risk + Interest in return

• Disadvantages: Low return
CHAPTER 3.1.2: BANK ACCOUNTS
Funds
available for
investment
The duration
the funds
can remain
in the
account
Will there be Prevailing
emergency market
withdrawal conditions
CHAPTER 3.2: FIXED INCOME
SECURITIES
Pays fixed periodic interest income
Periodical fixed interest income
At maturity, repayment of principal
Companies or
government
Public
Public lends money to company or government
Invest principal by buying securities
Can be bought and sold

anytime before maturity
in secondary market
32
SECURITIES
MONEY
MARKET
INSTRUMENTS
(as discussed under
Cash & Deposits)
PREFERENCE TYPES OF
SHARES FIXED GOVERNMENT
(discussed under
Shares later in this INCOME BONDS
chapter) SECURITIES
CORPORATE
BONDS
33
CHAPTER 3.2: FIXED INCOME SECURITIES
– GOVERNMENT BONDS
• Safest – little or no default or credit risk

• Government guarantees to pay interest and repay principal
• Fixed interest rate
• Issued when government needs money to finance projects
Advantages Disadvantage
• Easily marketable • In times of high inflation,
capital can be eroded
• Low risk
• Income for future years
guaranteed
34
SECURITIES – GOVERNMENT BONDS
MATURITY PERIOD
SHORT TERM MEDIUM TERM LONG TERM

< 5 YEARS 5 – 10 YEARS > 15 YEARS
35
SECURITIES – CORPORATE BONDS
Debenture stocks Loan stocks
BONDS ISSUED BY COMPANIES
Convertible Stocks
Advantages Disadvantage
• Higher return than govt. bonds • More risky
• More marketable
• Potential for capital gains
36
SECURITIES – CORPORATE BONDS
CORPORATE BONDS
Debenture Stocks Loan Stocks Convertible Stocks
 Secured loans to a  Unsecured loans  Can be converted
company.  No collateral to ordinary shares
 Collateral on  Fixed interest rate
company’s assets. and term
 Trustee to supervise  Higher interest rate
performance.
37
CHAPTER 3.3: SHARES
• Shareholder is a part owner of the company.

• Not liable for company’s debt.
• Volatile share prices influenced by many factors.
ADVANTAGES DISADVANTAGES
• Investors participate directly in • High risk
the future of company
• Provides good dividends & capital
appreciation
• Very liquid
38
CHAPTER 3.3: SHARES
PRIORITY NO OWNERSHIP
RIGHT SECURE
OWNERSHIP INTEREST
PROFITS
HIGHER RETURN
39
CHAPTER 3.4: UNIT TRUSTS
Units can be sold back at

A three-way arrangement
anytime
Medium/Long term
investment Regulatory body :
Security Commission
(>3 years)
• Spread of investment. • Bewildering array of funds.
• Lower risk when compare to shares. • Extra cost or charges for switching
• Professional investment service. service.
40
CHAPTER 3.4: UNIT TRUSTS
A THREE WAY ARRANGEMENT
Invest
Capital
INVESTORS
TRUST DEED Hold pool of

money in
trust on
Select & behalf of
Manage Fund investors
FUND MANAGER TRUSTEE

41
CHAPTER 3.4: INVESTMENT TRUSTS
Invest in wide range of

Registered under Purchase shares
others equity
Companies Act instead of units
investment
Medium to long term E.G : SEACORP

(>3 years) SCHRODERS
Investor can borrow to finance their Can borrow to finance investment – greater
purchase risk
42
Look for own buyer Investor
Pool of Funds
(Closed-ended)
Fund size fixed
Fund Manager
43
How Pool of Fund in Investment Trust works

Manage by
specialist fund
manager
Invest
INVESTOR COMPANY WIDE RANGE OF
Purchase EQUITIES/OTHER
share INVESTMENT
LOSSES PROFITS
• Share reduce in • Increase value

value and price of funds and
of units fall also value of
investor share
INVESTMENT TRUST UNIT TRUST

Registered Under Companies’ Act Formed by Trust Deed
Purchasing shares in company Purchase units in trust, not shares

in company
Closed-end funds Open-ended fund
No asset disposals if large Disposes assets when large

numbers of investors cash-in numbers of investors cash-in
45
CHAPTER 3.5: PROPERTIES
– REAL ESTATE
PROPERTY AFFECTED BY
Agricultural Quality & profitability of crops, Location
and Value of Building
Commercial/Industry
Location & Types of building
Domestic
Good capital appreciation Difficult to disposed off

and steady flow of during recession
income
46
CHAPTER 3.5: PROPERTIES - REIT
Invest, manage & distribute

Similar to Unit Trust rental and pay dividend to
investor
Higher potential return than

Provide steady fixed income those low to moderate
investment instrument
47
CHAPTER 3.6: DERIVATIVES
What are Derivatives
Financial instrument whose

values are linked to price of
underlying instruments in
the cash market
Two popular
derivatives are stock
options and financial
futures
48
STOCK OPTIONS FINANCIAL FUTURES
Options
Futures
Call Put
Warrants
49
- OPTIONS
OPTIONS
• A right, not obligation
• Purchase or sell security within specified time
• Fixed price
• Duration 3, 6 or 9 months
CALL OPTIONS PUT OPTIONS

Bought in hope price increase. Bought in anticipating a decline in price.
Premium Premium
< Value of Shares in > Value of Shares in
+ +
the Market the Market
Fixed Price Fixed Price
Example: Example
Share Price = RM10,000 per lot Share Price = RM10,000 per lot
Price of Call Option = RM200 (expires after 6 Price of Put Option = RM300 (expires after 6
months) months)
January: Share Price = RM10,000 per lot January: Share Price = RM10,000 per lot
February: Share Price = RM11,000 per lot February: Share Price = RM9,000 per lot
50
Gain = RM1,000 - RM200 = RM800 Gain = RM1,000 - RM300 = RM700
- WARRANTS
Similar to Call Option

At pre-determined
ratio
Also known as Transferable (Conversion Ratio)
Subscription Rights (TSR)
Attach free with loan stock or

rights
At pre-determined
subscription price
Often issue free (Exercise Price)
Corporate-created options
Within a specified time
Holder has right to subscribe period
shares in the company: (Fixed at beginning)
- WARRANTS
Exchanging the loan stock Subscribing Ordinary Shares
Can be Exercised by:
Combination of both
- WARRANTS
On expiry, if warrant not

exercised lose value
completely
Small initial outlay – buy warrant, pay
exercise price later, and convert
warrant to the underlying share
No interest/dividends
Capital gains from sale of warrants Carry no voting rights

- FUTURES
Physical
commodities & Spot markets
financial instruments Current market price of item
available for immediate
delivery
Traded in cash
market Forward markets
Price of an item for

deferred delivery
Cannot be
cancelled
unless both
Future
parties agree markets
- FUTURES
Set price today for an instrument that will be

delivered on a specified future date
Physical commodities and financial instruments

typically are traded in Cash Market.
Future
Spot Market = Immediate Delivery
markets Forward Market = Deferred Delivery
Organized and standardized forward markets.
Index Future: Buy or sell a hypothetical portfolio of

stock at a currently determined price.
- FUTURES
Advantages
-Enable investors to protect their investments
(hedging)
-Shifts risk of price fluctuations to those who
are willing
-Price discovery – futures price reflects current
expectations
-Speculative trading – potential large gains
Disadvantages
High risk – may face huge losses if
wrongly speculated
CHAPTER 3.7: EXCHANGE TRADED
FUNDS (ETF)
Also known as Traded in stock Underlying asset. EG

Exchange-trade exchanges stocks, bonds, trades
Product (ETP)
Attractive:
Low cost EXCHANGE Traditionally an index
Tax efficiency TRADED FUNDS funds
Stock like features (ETF)
Combines the
An actively managed valuation feature of ETFs - USA since 1993
fund since 2008 mutual fund or unit - Europe since 1999
investment trust
57
CHAPTER 3.7: EXCHANGE TRADED
FUNDS (ETF)
Types of ETFs
• Index ETFs
• Commodity ETFs or ETCs
• Bond ETFs
• Currency ETFs or ETCs
• Actively managed ETFs
• Exchange-traded grantor trusts
• Leveraged ETFs
CHAPTER 3.8: SUKUK BONDS
WHAT IS SUKUK BONDS?
- An Arabic name equivalent of Bonds

- Structured to comply with Islamic Law and its investment
principles
- Over $ 1.2 Trillion of asset are managed according to the
Islamic Investment Principles
- Not a Bond because it isn’t based on debt
- Regards as commercial paper that give ownership to investor
59
CHAPTER 3.8: SUKUK BONDS
Based on hard
Investor receive a May be
assets that
Issued by pooled fee equal to the guaranteed or not
generate steady
funds income of the by their
income &
underlying assets originators
expectations
CHARACTERISTIC
14 types. Famous
Issued by Special
Most issued in Based on tangible is Sukuk Al Ijara &
Purpose Vehicles
dollars assets Sukuk Al
(SPVs)
Mucharaka
60
CHAPTER 3.9: CAPITAL GUARANTEED
FUND (CGF)
• Investment vehicle offered by certain institutions that guarantees the investor’s

initial capital investment from any losses, provided that:
- Don’t redeem your investment before maturity date
Features of CGF:
- High asset allocation in guaranteed investment instruments
- Benchmark comparison with Fixed Deposit Rate
- Investment horizon: Normally 3-5 years
- Normally are offered during offer period
- Normally the value per unit starts at RM1.00 for ease of return calculation
- Higher initial investment compared other unit trust fund (ie. RM5000)
- Average high entry fee. (Service charge in industry = 1.5%)
- Redemption fee before maturity (Range from 0.3-1.5% of NAV)
- Capital preservation feature – guaranteed
- No subscription after offer period
61
Exercises:
1. Loan stock is ____________
unsecured loan to a company, therefore carries a
____________
higher interest rate.
2. In Malaysia, unit trusts are authorised and supervised by the

Security commission
_____________________.
quality&profitability
3. The price of agricultural property depends on of____________,
crops
location
_____________ value of the building .
and ____________________
call
4. A ________ option gives the policy holder a right to purchase the security
at a future date.
62
Exercises:
Treasury bill
5. _______________ is a short term government funding vehicles.
6. Corporate bonds can be classified under three categories, which are

debenture stocks
_________________, loan stocks and convertible
____________ stocks
_________________.
fixed
7. The holder of a preference shares will receive ____________ dividend
provided enough profit has been made.
open-ended fund.
8. Unit trust is an ____________
9. Investment trust is a ____________

closed-ended fund.
63
CHAPTER 4: Investment-Linked Life
Insurance Products – A World Scenario
United Kingdom
United States of America
Singapore
Malaysia
64
United Kingdom
• Known as Unit-Linked.
• 1957 London & Manchester Assurance

- Individual Retirement Annuity for self-employed.
• 1977 Hambro Whole Life Plan

- Investment-Linked Whole Life Plan
- Sum assured guaranteed for a given investment of premium
for the first 10 years.
- Fixed SA per investment of premiums according to age of entry.
• 1979 Skandia Life UK

- Allowed policy owners to select whatever sum assured the
policy owners required within a given range of cover.
65
United States of America
• Variable life insurance was pioneered by Equitable Life Assurance Society.

• The Securities Act 1933
- Required that potential client be prospectus that among others discloses the identity
and nature of the insurer’s business, how the premiums going to be invested,
financial information of the insurer, chargeable fees and expenses rights of policy
owners.
• Securities Exchanges Act 1934

- Insurance company or sales company must register as a broker-dealer.
- Agents and agency office employees pass an examination in securities business and
registered with the National Association of Securities Dealers (NASD) and pass an
examination.
• The Investment Company Act 1940

- Regards entities that investment assets of variable life insurance policy owners as
investment companies and regulates the investment company’s management
and operation. 66
Singapore
• 1973 NTUC Income – First Single Premium Investment-Linked policy.
• 1992 Prudential – Single and regular premium.
• 1993 Central Provident Fund (CPF)

- Enhanced Investment Scheme (EIS) CPF members who have cash of at least
$50,000 in their Ordinary Account, to invest 80% of the excess in the
Ordinary Account above $50,000 in one or more eligible investment
instruments.
• 1997 Central Provident Fund (CPF)

- EIS merged with BIS (Basic Investment Scheme) to form Investment
Scheme (IS) CPF members retain at least the required minimum sum in
their CPF account, including the cash amount will be allowed to invest up
to 80% of their remaining CPF balance in all the eligible instruments,
including those which were previously reserve only for EIS scheme.
67
Malaysia
• 1985 Syarikat Takaful Malaysia Berhad

– Investment-Linked Life Insurance Product.
• 1997 Berjaya Prudential Assurance Bhd.

– First traditional insurance company to launch Investment-Linked
life insurance policies.
– Single Premium Whole Life Insurance Product.
****************************************************************
Takaful Investment-Linked Life Insurance policies by Takaful companies
- Developed as a response to religious principles and practices of Muslims.
- Invest in stocks and other assets that comply with the requirement of Islamic
law & principles.
68
CHAPTER 4: Assessment
Exercises:
1. The first investment linked life insurance in United Kingdom is introduced
by___________________________________________________
London&Manchester Assurance Company Limited in 1957.
2. In the United States of America, investment linked plan is known as

variable life .
____________
unit linked .
3. In the United Kingdom, investment linked plan is known as ___________
4. The first single premium investment linked policy introduced in Singapore

in 1973 is by _______________.
NTUC Income
69
CHAPTER 5: Types of Investment-Linked
Life Insurance Products
5.1 How do Investment-Linked Life Insurance

Policies Work?
5.2 Comparing Investment-Linked and Traditional
With-Profit Life Insurance
5.3 Definitions
5.4 Characteristics of Investment-Linked Life Insurance Policies
5.5 Types of Investment-Linked Life Insurance
Policies
5.6 Loans and Withdrawals
5.7 Risk Base Capital Guidelines
70
Introduction
Investment-Linked Insurance
 A major portion of premium used to
purchase units in investment-linked  Part of the premium will be
fund at unit price prevailing on allocated for mortality protection.
each investment date.
 Returns are not guaranteed.

 Lack the smoothening process of
traditional with-profit life policies
 Value fluctuate as market prices rise
and fall – it is possible to lose money.
71
Characteristics
Investment Regular Saving Protection
 Operate similar as  Premium allocated to  Death / TPD / Health

unit-trusts. units, to generate / Accident
 Larger exposure to return.  Charges vary with age
equity.
and coverage
 Cash value &
 Types & level of
protection benefits
charges stipulated
are determined by
openly (transparent)
investment
 Maybe more flexible
performance.
 Policy structure and
 Potential higher
Instrument content
return with higher
more identifiable.
risk
72
CHAPTER 5.1: How do Investment-Linked
Life Insurance Policies Work
Operate on similar Returns not Linked to performance

principle as Unit Trusts guaranteed of investment fund
Unit price depends on Value fluctuates as

net asset value of the market prices rise &
fund fall
73
Investment
Used to purchase units in fund Mortality
managed by life office Protection
PREMIUMS
74
Premium
Policyowner’s units Life office
Surrender Marketing &

Set-up Expenses
Withdrawals
Death Claim
Cancel units
Mortality charge
& policy fee
75
Traditional With-Profit Investment-Linked
Life Policies Life Insurance Policies
Similarity
Premium allocation 1) To provide insurance protection against death
2) To cover expenses & sales cost
3) To be invested
Differences
Investment strategy Produce steady return by Potential for higher returns but at
smoothening out market the expense of market volatility
fluctuation
Investment funds Limited Offer more choices
Flexibility - May or may not be more flexible
than traditional with-profit life
insurance policies
Transparency Charges are not specifically  Investment element is made known
detailed in policy terms to policy owner at the outset
Charges are stipulated openly
76
CHAPTER 5.2: Comparing Investment-Linked
and Traditional With - Profit Life Insurance
Traditional With-
Investment-linked
Profit Life Insurance
Potential for higher returns Produce steady return by smoothing
but higher risk (equity funds) out short term market fluctuation
Policy charges and investment content Charges not specifically detailed in the
are more identifiable policy
Choice of Investment is Insurer’s discretion

Offers more choice of investment funds
Benefit & risks immediately passed Most of risk passed to insurer

to policy owner
Investment element is made known to Investment element is NOT made known
policyowner at outset to policyowner at outset
Value of policy fluctuate depends on Never reduce in value provided life office is
value of units held solvent
77
CHAPTER 5.3: Definitions
REDUCTION IN
ANNUAL FUND BID-OFFER ALLOCATION OF
POLICY FEES
MANAGEMENT FEE SPREAD UNITS –
UNALLOCATED
PREMIUMS
CHARGES LEVIED ON
INVESTEMENT-LINKED LIFE
INSURANCE POLICIES
MORTALITY SURRENDER
INITIAL UNITS
CHARGES CHARGES
78
POLICY FEE
• Administrative expenses of setting up the policy
ANNUAL FUND MANAGEMENT FEE
• Investment management charges.

• Deduction of between 0.5% to 2% per year from fund accumulated
79
OFFER PRICE
• Selling price of units by the life office
BID PRICE
• Price at which the units are cashed when the policy matures, or
surrendered, or used to pay charges
• Bid price is always lower than offer price at the published date
80
Bid-Offer Spread
Offer price Minus (-) Bid Price
Bid-Offer Spread
Initial charge 5% to 6% on every premium made to cover

expenses in setting up the policy
81
REDUCTION IN ALLOCATION OF UNITS

– UNALLOCATED PREMIUMS
• Not all of a policyowner’s premium is allocated to buying investment units

• Unallocated premium used to meet marketing and setting-up expenses of
the policy
• Some insurers make nil allocation to units until expenses recouped
82
INITIAL UNITS
• All of a policyowner’s premium allocated to buy investment units

• Units allocated in early years known as “initial units” – have higher annual
management charges, e.g. 6% p.a., throughout term of the policy contract
• Bears heavy discontinuance charges
• Cash value much lower than face value for years
• Less common nowadays
83
MORTALITY CHARGES
• Dependent on age
• Covers mortality cost of the policy
• Can be a recurrent charge (e.g. monthly) – funded by cancellation of units on a regular
basis
• Allows policyowner to vary sum assured over time
84
SURRENDER CHARGES
• Charge deducted from value of units at surrender
• Represents initial expenses incurred but yet to be recovered
85
CHAPTER 5.4: Characteristics of
Investment-Linked Life Insurance Policies
Cash Value
Protection Benefits
Affects
Affects
Prices of the units
Reflects
Investment performance of underlying assets
86
Value of units allocated to

Cash Value policyowner, calculated at
bid price
87
• Protection costs are explicit

 Met by cancellation of units
 For single premium plan, met by flat initial charge
• Commission and office expenses are met explicitly

 May vary, but must give 6 months notice prior to change
88
CHAPTER 5.5: Types of Investment-Linked
Life Insurance Policies
1. Single Premium investment-Linked Whole Life Insurance Plan
2. Regular Premium Investment-linked Whole Life Plan
3. Investment-Linked Individual Pension Plan
4. Investment-linked Permanent Health Insurance
5. Investment-linked Dread Diseases Insurance
6. Investment-linked Education Insurance
7. Investment-linked Takaful Policies

1. Single Premium Investment-Linked

Whole Life Insurance Plan
Features Descriptions
Main Purpose Long term savings and Investment with nominal life
protection.
Minimum Single Premium RM3,000 with Top-Ups.
Insurance Protection As percentage of single premium (125%) at minimum of
RM5,000.
Investment Management 0.5% - 2%
Fee
Surrender Part or whole of the units for liquidity.
Charges Includes policy fee, other admin charges & mortality
charges.
90
2. Regular Premium Investment-Linked

Whole Life Insurance Plan
• Scope similar to Single Premium Policy.
Features Descriptions
Main Purpose Life protection and investment
Premium Regular premium
Characteristics  Premium holidays
 Top ups
 SA can be varied
* The higher the level of coverage, the more the mortality charges
* Consequently, the cash values will be lower and vice-versa
 Withdrawals & Surrender (after a few years)
91
3. Investment-Linked Individual Pension Plan
• Main Purpose: Retirement.

• No life insurance cover unless funded by cancellation of investment.
• Convertible to a traditional with-profit life insurance policy.
4. Investment-Linked Permanent Health Plan
Cash Value + Health Coverage

e. g. Disability Income
92
5. Investment-Linked Dread Disease Insurance
• Life insurance policy which advances the face amount upon

diagnosis of dread disease.
• Risk cost is reviewed on a regular basis.
6. Investment-Linked Education Insurance
• Capitalized on the tax relief of RM3000.

• To satisfy the educational needs of the policy owner’s children.
93
7. Investment-Linked Takaful Policies
• Combines investment and Takaful cover.
Takaful Concept:
Takaful Fund
(‘Tabarru’) – Participative contribution
Aqad
Participants (contract)
Purchase investment-linked units
•
* By agreeing to mutually help each other
* No claims – entitled to share the surplus in the Takaful fund at pre-agreed ratio
* Surplus – purchase additional investment linked units
• Takaful Operator
- Acts as manager, to oversee the management of investment fund
- Receives fee (ujrah)
94
Loans & Withdrawals
Loans
• Some investment-linked life insurance policies grant loans to

policy owners.
• However, a loan of the entire cash value could leave the life office
without security. Thus, it is limited to some percentage of the cash
value.
Partial surrender (Withdrawal)
• Will be met by cashing the sufficient units at the bid price.
95
Risk Base Capital Guidelines
•Effective: 1 January 2009.
• Aims :
 To better align the regulatory capital requirements with the underlying
risk exposure of each individual insurer.
 To improve the transparency of prudential buffers.
 Allow greater flexibility for insurers to operate at different risk level.
96
Requirements :
- More explicit quantification of various risks inherent in the insurance

business.
- Capital adequacy requirements are more granular and risk-sensitive.
- Higher Capital Adequacy Ratio (CAR).
- Valuation rules on realistic basis.
- Balanced investment strategies in response to prevailing market
conditions.
- Improved operational risk management and corporate governance.
- Greater emphasis on product design and pricing.
- Enhancement of insurers’ technical expertise.
97
• Investment and Risk Management Policy:
- Greater investment flexibility

- Overall investment strategy, at least:
(i) Investment Objectives (at company and fund-specific levels);

(ii) Risk & Liability profile of the insurer;
(iii) Strategic Asset Allocation;
(iv) The Extent to which the holding of certain Types of Assets is restricted;
(v) Overall Policy on the usage of derivatives & structured products
98
• Risk Management Systems:
- Main risks: market, credit and liquidity risks.
- Good risk management practices required:

(i) Establish adequate internal controls;
(ii) To have in place rigorous audit procedures;
(iii) Effective procedures in monitoring & managing asset-liability
position;
(iv) Suitable plans to mitigate adverse market conditions;
(v) Undertake regular stress testing;
(vi) Ensure the competency of staffs
99
Chapter 5:Conclusion
CONTRACTS EASIER TO
CHARGES MORE TRANSPARENT
UNDERSTAND
PERFORMANCE OF FUND CAN

MUCH MORE FLEXIBLE BE MONITORED IN DAILY
NEWSPAPERS
100
Exercises:
Policy fee
1. ____________ is administrative expenses of setting up a policy.
Bid price
2. ____________ is the price that investors sell their units.
3. An investment-linked takaful is a family takaful plan that combines

__________
investment and _______________.
Takaful cover
Offer price
4. ____________: the price that investors buy the units.
101
CHAPTER 6: Structure of Investment-Linked
Funds
Accumulation Units
Distribution Units
Types of Investment-Linked Funds
Risk-Return Profile
Switching
102
CHAPTER 6: Structure of
Investment-Linked Funds
Accumulation Units
• Income is ploughed back into the fund.

• Unit Price increases over long term.
Before After
Investment Value RM1,000 RM1,100
Unit Price RM1.00 RM1.10
No. of Units 1,000 1,000
Distribution Units
• Income is distributed to policy owner as additional units.

• Unit Price unchanged, number of units increased.
Before After
Investment Value RM1,000 RM1,100
Unit Price RM1.00 RM1.00
No. of Units 1,000 1,100
103
Funds
Types of Investment-Linked Funds
Fund Type Areas of Investment Risk Involved

Cash Funds - Cash, Bank deposits - Lowest Risk
Equity Funds - Stocks, Shares - Highest risk
- Capital returns
Bond/Income Funds - Government / Corporate - Lower risk than
(Fixed Income Funds) bonds equity funds
Property Funds - Real estate, property shares - Lower risk than
- Defer redemption of units equity funds
for up to 12 months - Lower liquidity
Specialised Funds - Segmented based on geographical - Currency risk
regions or particular industries.
Managed Funds - Wide variety of assets allocation
depends on fund manager’s views
of the future prospects of financial
markets.
Balanced Funds - Fixed proportion of specified assets.
104
Funds
Risk-Return Profile
• The risk and return graph below shows that higher return
normally comes with higher risk.
Risk
Managed Funds
Equity Funds
Bond Funds
Balanced Funds
Cash Funds
Return
105
Funds
Switching
• Allows the policy owner to switch part or all of his investment from
one fund to another.
• Switching between funds may:
(i) be offered free of charge
(ii) be offered free of charge for a limited number of switches within a
given period (normally a year) and charges imposed for subsequent
switches
(iii) Incur a specific charges
• Switching facility is very useful for the purpose of financial planning.
106
Exercises:
financial planning
1. Switching facility is very useful for the purpose of __________________.
Equity
2. _________fund invests in equity assets such as shares or stocks.
Property fund invests in real estates and property shares.

3. _________
4. Specialized
__________ fund segmented based on geographical regions or particular
industries.
107
CHAPTER 7: How Investment-Linked
Insurance Products Work
The Working of Investment-Linked Life Insurance
Calculation of Single Premium Policies
Single Pricing Method

Dual Pricing Method
Annual Yield on Gross Premium
Surrender
Withdrawal
Death Benefit
108
The Working of Investment-Linked Life Insurance
• Insurance companies offer policy owner a range of investment-linked funds.

• No reserve is held. Policy owner take full impact of the changes in investment
conditions.
• Premium will be used to purchase units. The number of units purchased being
calculated as the amount of the premium divided by the price of each unit.
• Top-ups are allowed at any time to increase the fund units.
• The value of the policy will therefore depend on two factors:
i. The value of each of the units.
ii. The number of units the policy has accumulated to date.
109
Single Pricing Method Dual Pricing Method

 There is only one price quoted  The policyholder buys the units at
whether the policyholder is the offer price and sells the units
buying or selling the units. at the bid price.
• The difference between offer price and bid price is called bid-offer spread.
• Bid price always lower than offer price.
• Both pricing method will derived to the same policy value.
110
• There are two methods to calculate the number of units and cash value
of an investment:
(1) SINGLE PRICING METHOD
Offer Price = Bid Price
Single Premium = RM 4,000
Unit Price = RM 1.00
Charges = 5%
Policy Fee = RM 100
Mortality Charge = 1%
Balance Premium = RM 4,000 – ( RM 4,000 x 5% )
= RM 3,800 / RM 1.00
Number of Units = 3,800 units
111
(1) SINGLE PRICING METHOD
Cash Value = ( Number of units x Unit Price ) –

( Mortality Charge + Policy Fee )
= ( 3,800 units x RM 1.00) –

[ ( 3,800 units x RM 1.00 x 1% ) + RM100 ]
= RM 3,800 – RM 138
= RM 3,662.
112
(2) DUAL PRICING METHOD

Offer Price > Bid Price
Single Premium = RM 4,000

Unit Price = RM 1.00
Charges = 5%
Policy Fee = RM 100
Balance Premium = RM 4,000 / RM 1.00
113
(2) DUAL PRICING METHOD

Offer Price Bid Price Value of Policy
(when p/h cash-in or claim)
RM 1.00 RM 1.00 x ( 100% - 5% ) 4,000 units x RM 0.95
= RM 0.95 = RM 3,800
RM 1.20 RM 1.20 x ( 100% - 5% ) 4,000 units x RM 1.14
= RM 1.14 = RM 4,560
Cash Value = ( Number of Units x Bid Price ) –

( Mortality Charge + Policy Fee )
= ( 4,000 units x RM0.95 )
[ (4,000 units x RM0.95 x 1% ) + RM100 ]
= RM 3,662
114
Annual Yield on Gross Premium

= (Return on Gross Premium, (RGP)1/n – 1, where n= no. of years
RGP = Ending Value of Investment
Beginning Value of Investment
Annual Yield on Gross Investment

SINGLE PRICING METHOD

Current Unit Price = RM 1.97
Policy Fee = RM 100
115
Ending Value of Investment

= ( Number of Units x Unit Price ) – ( Mortality Charges + Policy Fee )
= ( 3,800 units x RM 1.97 ) – [ ( 3,800 units x RM 1.97 x 1% ) + RM100 ]
= RM 7,486 – RM 174.86
= RM 7,311.14
= 4,000 units x RM 1.00
= RM4,000
RGP = RM 7,311.14 / RM 4,000
= RM 1.828
The Annual Yield = ( RM 1.828 )1/10 – 1
= 1.062 – 1
= 0.062 or 6.2%
116
Annual Yield on Gross Investment

DUAL PRICING METHOD
Current Unit Price = RM 1.97
Bid Price = RM 1.97 x ( 100% - 5% )
= RM 1.8715
Policy Fee = RM 100
117
Ending Value of Investment

= ( Number of Units x Bid Price ) – ( Mortality Charges + Policy Fee )
= ( 4,000 units x RM 1.8715 ) – [ (4,000 units x RM1.8715 x 1%) + RM100 ]
= RM 7,486 – RM 174.86
= RM 7,311.14
= 4,000 units x RM 1.00
= RM 4,000
RGP = RM 7,311.14 / RM 4,000
= RM 1.828
The Annual Yield = ( RM1.828 )1/10 – 1
= 1.062 – 1
= 0.062 or 6.2%
118
Calculation of Withdrawal / Surrender
Two methods:
1. Number of Units
If policyholder withdraws 2,000 units at unit price of RM1.50, he will receive:

Single Pricing: 2,000 x RM1.50 = RM3,000
Dual Pricing: 2,000 x (RM1.50 X 95%) = RM2,850
2. Fixed Monetary Amount
If policyholder withdraws RM2,000 (Fixed Monetary Amount), how many

units that have to be cancelled:
Single Pricing: RM2,000 / RM1.50 = 1,333.33 units
Dual Pricing: RM2,000 / RM1.425 = 1,403.5 units
119
Death Benefits
Death Benefits
×c Value of Units
× 1
c0
b1
b0
Death Cover
Time t0 a0 Time t1 a0
SA + FV At Time t0: Death Benefit = a0 + b0 = c0

At Time t1: Death Benefit = a0 + b1 = c1
Value of Units
c×
a b
Time t0
× Time t1
× Time t2
Death Cover
SA or FV At Time t0: Death Benefit = a

(Whichever higher) At Time t1: Death Benefit = b
At Time t2: Death Benefit = c 120
Exercises:
Single
1. ________ pricing method is only one price quoted whether the
policyholder is buying or selling the units.
2. Under dual pricing method, the difference between offer price and bid
price is called ________________.
bid offer spread
value of unit
3. The policy value is depends on two factors, namely _______________
and _________________.
number of units
121
CHAPTER 8: Benefits & Risks of Investing
Benefits
Risks
122
Benefits
Pooling or Diversification Flexibility
 Access to pooled or diversified

 Change level of premium and sum
portfolio of investment.
assured.
 Funds consists of wide range of
 Take premium holidays.
equity stocks and fixed income
 Top-ups.
securities.
 Withdrawals.
 Funds has better risk
characteristics.  Switching between funds.
123
Benefits
Expertise Access Administration
 Can access to well-  Relieved of

diversified administration of
 Funds are managed
investment-linked investment.
by professional fund
fund with small sum  Keep track thru unit
manager.
of initial investment statement / financial
of RM 4,000 pages of major
newspaper.
124
Risks
Investment Risks Charges
 Value of units is not guaranteed.

 Fees are not guaranteed.
 Maturity values will rise and fall
 Subject to regular review – can be
dependent on performance of
change by insurance co. after
the
giving
assets of the fund.
a written notice over a specific
 Not suitable for those with risk-
period (ie. 3 months).
averse and needs high protection.
125
Exercises:
1. List out the benefits of purchasing investment linked policy.
i. _______________
Pooling & diversification
ii. _______________
Flexibility
iii. _______________
Expertise
iv. _______________
Access
v. _______________
Administration
2. List out the risk of purchasing investment linked policy.

i. Investment risks
_______________
Charges
ii. _______________
126
CHAPTER 9: Comparison Between Investment-
Linked Life Insurance & Traditional with Profit Life
Insurance Product
Traditional Guaranteed Without-Profit Life Insurance

Comparison between:
1. Investment Returns
and Risk
Traditional With-Profit Life Insurance 2. Premium Computation
3. Death Benefit
4. Surrender Value
5. Option to Top-up
127
Insurance Product
TRADITIONAL LIFE INSURANCE PRODUCTS INVESTMENT-LINKED
LIFE INSURANCE
Without Profit With Profit PRODUCTS
 Guarantee a fixed rate
of return.  Part of company’s surplus is
allocated to policy owners  Returns vary according
 Does not depend on the in the form of bonus from to the asset value of
investment performance its reserve fund every year. individual funds.
Investment of company.
Return and  Three types of bonuses:  Risk and returns are
Risk  No investment risk. - Cash bonus transferred to policy
- Reversionary bonus owner.
 Risk of insolvency of - Terminal bonus
insurance company.
 Premium payments
 Premium is fixed at
 Premium is fixed at are flexible.
inception based on sum
inception based on
assured and expected
sum assured.  Premium holiday, top-
Premium bonus(es) payable.
up are allowable.
Computation
 Sum-assured driven.
 Sum-assured driven. 128
 Account driven.
Insurance Product
TRADITIONAL LIFE INSURANCE PRODUCTS INVESTMENT-LINKED
LIFE INSURANCE
Without Profit With Profit PRODUCTS
 Sum assured is  Single Premium

determined - Min SA + FV @
Death  Sum assured is - Min SA/FV
and fixed at inception.
Benefit determined and fixed at
inception.  Regular Premium
 Bonuses (if any) will be - SA+FV
payable. - SA@FV
 Single pricing policy

 No payment for Term.
 Includes net cash - Market price x no. of units
Surrender surrender value of
 Payable for Endowment  Dual pricing policy
Value reversionary bonus.
and Whole Life policy.
- Bid price x no. of units
Option to  SA can be increased each  Can top-up anytime

year by a set percentage  Normally not allowed. without effecting a new
Top-up of the original SA. policy. 129
Exercises:
1. Investment linked life insurance policy allows policyholders to buy

without taking a new policy.
additional number of units _________
2. Under traditional without profit life insurance, premium is ______

fixed at
inception based on the sum assured.
death
3. Reversionary bonus will be paid upon _________ maturity of the
or _________
policy.
130
CHAPTER 10: Taxation & Law Covering
Investment-Linked Life Insurance Products
Taxation of
Bank Negara Malaysia Guidelines

for Investment-Linked Business
131
Taxation
TAX RELIEF ALLOWABLE
Life Insurance Premium on

• Individual’s Life
EPF Maximum
• Spouse’s Life
RM 6,000
• Joint Lives
(Individual + Spouse)
Life Insurance Premium on Maximum

Education and/or Medical policies RM 3,000
132
Taxation
 On Company
8% TAX ON CHARGEABLE INCOME +

REALISED CAPITAL GAIN of a life fund
 On Policy owner
TAX-FREE on:
• Disposal of units
• Policy matures
• The occurrence of an insured event
• Cancellation / surrendering the policy
133
Law Covering Investment-Linked Life Insurance
The main purposes of regulation include:
 The protection of public interest

 The promotion of fairness and equity
 The fostering of competence
 The playing of a developmental role
134
BNM Guidelines
Applicable to insurance companies based on the Insurance Act 1996:
Definition of Investment-Linked Life Business:

- The effecting and carrying out a contract of insurance on human life
or annuity.
- where the benefits are, wholly or partly , to be determined by reference
to the value of,
- the income from, property of any description or by reference to
fluctuations in, or in an index of, the value of property of any description.
135
BNM Guidelines
Applicable to insurance companies based on the Insurance Act 1996 :
1. Prior Written Approval from BNM
2. Maintain Separate Fund in respect of each Investment-Linked fund
3. Investment Limits
Securities 5% total value of fund’s asset
5% investee company’s paid up capital

Loans and Debentures
5% total value of the fund’s assets
136
BNM Guidelines
Applicable to insurance companies based on the Insurance Act 1996 :

4. Frequent Valuation of Assets
5. Annual Valuation of Liabilities to
1.to provide
Prior accurate
Written unit from
Approval pricesBNM
certify the level of reserves
and benefits
2. Maintain Separate Fund in respect of each Investment-Linked fund

6. Policyowner > 18 years old 7. Free-look Provision > 15 days
3. Investment Limits
5% total value of fund’s asset
8. Minimum Death Benefits
Securities
RM
5% 5,000 company’s paid up capital
investee
The higher of:-
125% of single premium
Loans and Debentures 5% total value of the fund’s assets
137
BNM Guidelines
9. Minimum single premium payment of RM 3,000
10. Marketed by Qualified agents only
11. Disclosure of information in:-

 Sales Materials / Illustration
 Statement on performance and status
 Fund performance Report
138
Exercises:
1. The minimum entry age for policy holder under investment linked life
18
insurance is ______ years old.
2. Minimum single premium payment is _________.

RM3,000
3. Tax relief allowable for life insurance and EPF is _________.

RM6,000
4. Tax relief allowable for education and medical policies is _________.

RM3,000
139
CHAPTER 11: Identifying & Establishing
Customer Needs
Establishing Relationship With The Client
Gathering All Relevant Financial Data
Establishing Current Financial Position & Goals
Developing Plans & Strategies To Meet The Goals
Discuss Possible Recommendations
Implementation Of The Agreed Recommendations
Monitoring The Portfolio

140
Customer Needs
• Establishing Relationship with a Client

Important because this is where the agent will be able to do a preliminary screening
of the client’s financial objectives and goals.
• Gathering All Relevant Financial Data

a) Customer’s Personal and Dependents details
b) Life and Financial Priorities and Goals
c) Risk Profile Fact-Finding
d) Net Worth Analysis
e) Cash Flow Analysis
f) Recommendations and Record of Advice
• Establishing Current Financial Position and Goals

Important because this will allow the agent to come up with a blue print that will
finally be recommended to the client and put in motion.
141
Customer Needs
• Developing Plans and Strategies to Meet the Goals

a) Adequate insurance coverage for liability cancellation, basic protection
on medical cover, disability cover, dread diseases cover etc.
b) Planning for children’s education
c) Retirement Planning
d) Asset Accumulation
Fact-Finding
e) Estate Planning
• Discuss Possible Recommendations

• Implementation of the Agreed Recommendations
• Monitoring the Portfolio
142
Exercises:
1. List out the process in satisfying the customers’ needs:

i. Establish relationship with the client
_____________________________________________
ii. _____________________________________________
Gathering all relevant financial data
iii. Establishing current financial position and goals
_____________________________________________
iv. _____________________________________________
Developing plans and strategies to meets the goals
v. Discuss possible recommendations

_____________________________________________
vi. _____________________________________________
Implementation of the agreed recommendations
Monitoring the portfolio
vii. _____________________________________________
143
CHAPTER 12: Marketing & After-Sales
Services, Ethics & Code of Conduct
Marketing
Sales Oriented
Market Oriented
Customer Buying Decision Process
The Selling Process
After Sales Service
Ethics & Conduct

144
Marketing
The management process responsible for identifying,

anticipating and satisfying customers requirements profitably.
Sales Oriented
Hard sales, techniques are used to stimulate customer’s interest

in the company’s products.
145
Market Oriented
• Determine and satisfy customers’ needs by developing and

distributing appropriate products.
• Functions of Market-Oriented company:
- Planning and Control
- Market Identification
- Product Development
- Pricing
- Selection of Distribution Channel
- Promotion
• To ensure its marketing efforts, a market-oriented insurance company must be
complemented with a market-oriented agency force.
146
Market Oriented Agent
A market-oriented agent would be one who distribute policies with the

objective of satisfying customers’ requirements and needs, and at the same
time earn an income for himself.
Sales Plan Personal Selling requires :
• Sales goal  Product Knowledge

 Market Knowledge
• Objectives
 Knowledge of buying process
• Sales Strategy
 Knowledge of selling process
• Implementation & Control  Selling Techniques
147
Consumer Buying Decision Process
1. Problem recognition
2. Information search
3. Evaluation of alternative policies
4. Purchase
5. Post-purchase evaluation
Selling Process
1. Locating the prospecting customer

2. Creating a sales presentation
3. Conducting the sales interview
4. Handling objections
5. Closing the sales
148
After Sales Service
• Follow-up stage helps ensure that the customers remain satisfied with
the purchase.
• Also helps in reducing customers’ cognitive dissonance.
• Cognitive Dissonance?
A psychological state in which customers feel uncertain and often
question whether:
- They should have purchased a product at all.
- They should have purchased an alternative brand or another product.
• Delivery of a policy can dispel customer’s cognitive dissonance by reassuring
policy owner and the family members about their decision to buy the policy.
149
Ethics & Conduct
Behaving with Complete Integrity in an Insurance Agent’s Professional Life
Complying with the Law and with the Best Principles and Practice
v
relating to Financial Advice
Behaving in a Professional and Honorable Manner towards

Those with Whom the Insurance v Agent is in Contact in Business
v
Observing and Applying the Relevant Codes of Good Practices
150
LIAM Guidelines on the Code of Conduct
PART I – GUIDELINE ON THE CODE OF CONDUCT

This part deals with the following aspects concerning the Code of Conduct:
• Statement of philosophy
• Coverage
• Monitoring devices
• Seven principles of the guidelines
i. To avoid conflict
ii. To avoid misuse of position
iii. To prevent misuse of information
iv. To ensure completeness and accuracy of relevant records
v. To ensure confidentially of communications and transactions
vi. To ensure fair and equitable treatment of all policyowners
vii. To conduct business with the utmost good faith and integrity
• Code of Conduct – as a guide
151
PART II – LIFE INSURANCE SELLING

This part deals with the following aspects relating to selling of life insurance:
• Introduction
• General Sales Principles
The intermediary shall
i. Introduce himself as an agent of the represented company
ii. Propose suitable policy to meet the policyowner’s needs
iii. Advise on matters in which he is competent
iv. Treat policyowner’s information confidentially
v. Make clear the different characteristics of each policy
vi. Render continuous service to the policyowner
152
The intermediary shall not

i. Make inaccurate or unfair criticism of any insurers
ii. Persuade a prospective policy owner to cancel any existing policies
unless these are clearly unsuited to the policy owner’s needs
“Twisting” – a form of misrepresentation in which a policy owner is induced
to discontinue an insurance policy or made paid-up in order to
purchase a new policy to earn more income for the agent.
• Explanation of the contract
• Disclosure of underwriting information
• Accounts and financial aspects
153
PART III – STATEMENT OF LIFE INSURANCE PRACTICE

This part deals with the following aspects:
• Introduction
• Claim - Insurer may not unreasonably reject a claim exceptions to those
circumstances mentioned in the policy provisions or the provisions
of the Insurance Act 1996 and Regulations.
- Time limit for notification of a claim.
- Genuine claim has to be settled without undue delay.
- No claim processing fees will be collected.
154
• Proposal forms
- Statement on disclosure of material fact and consequences
of non-disclosure
- Intermediary to have a copy of the proposal form
• Policy and accompanying documents
• Sales materials / Advertisements
155
Exercises:
1. List out the steps of consumer buying decision process:
i. Problem recognition
_____________________
ii. Information search
_____________________
iii. Evaluation of alternative policies
_____________________
Purchase
iv. _____________________
v. Post purchase evaluation
_____________________
Twisting
2. _____________ is a form of misrepresentation in which a policy owner is
induced to discontinue an insurance policy or made paid-up in order to
purchase a new policy to earn income for the agent.
156
157
• Number of question = 60
• Time = 1 hour 30 minutes
• Passing mark = 80%
THANK YOU
Disclaimer:
All training materials which are produced by AmLife Business School in any forms/format are purely training tools for internal agency programmes of
AmLife Insurance Berhad. All or any part of the contents of these materials shall not be used directly or indirectly for soliciting of insurance businesses,
policy holder services and/or facilitating any form of communications with external party whatsoever. This information is correct as at 13st August 2014

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The Certificate Examination in

Investment-Linked Life Insurance

CHAPTER 1 : Introduction to Investment-Linked Life Insurance

CHAPTER 2 : Key Considerations in Investment

CHAPTER 3 : Types of Investment Assets

CHAPTER 4 : Investment-Linked Life Insurance Products– A World Scenario

CHAPTER 5 : Types of Investment-Linked Life Insurance Products

CHAPTER 6 : Structure of Investment-Linked Fund

CHAPTER 7 : How Investment-Linked Life Insurance Products Work

CHAPTER 8 : Benefit & Risk of Investing in Investment-Linked Fund

CHAPTER 9 : Comparison between Investment-Linked Life Insurance & Traditional with

CHAPTER 10 : Taxation & Law Covering Investment-Linked Life Insurance Products

CHAPTER 11 : Identifying & Establishing Customer Needs

• According to BNM’s DGI report 2009,

1990 498,338 policies

• Distribution of annual premiums for ILP insurance policies

• Policyholders are quite happy to buy investment-linked policies

Regular Premium / Single premium / Top-up

2.1 Investment Objective

2.2 Funds Available

2.3 Risk or Security

2.4 Investment Horizon

2.5 Accessibility of Funds

2.6 Taxation Treatment

2.7 Performance of the Investment

Safety Income Growth

• close to • expect to see a • some investors

• Close to ultimate safety / low risk / may have to

Income • expect to see a steady stream of income.

• some investors seek growth in their investments,

Hedging (1) Liability

Fund for Expenses

Regular Income vs. Capital Gain 13

The more funds an investor has,

It has to do with volatility or how widely the price of a stock

Age Family Situation

Overall Tendencies &

The shorter the investor’s horizon, less risk tolerance

(ii) The total length of time that an investor expects to hold a

The investment horizon is used to determine the investor’s

MATURITY PENALTY FOR EARLY EXITS

i)The taxation of the investment vehicle itself

ii)The subsequent taxation liability of the investor

The tax status of Investment-Linked life insurance product

Performance The Invested

Process of investing across different asset classes

Proven effective to reduce risk without sacrifice

“NEVER PUT ALL EGGS IN ONE BASKET”

reducing risk without sacrificing

3. Before getting into any investment decisions, investors have to do a

5. The three components in determining the accessibility of funds are

6. The investment horizon is used to determine the investor’s __________

needs and desired ___________

3.1 Cash & Deposits

3.2 Fixed Income Securities

3.4 Unit Trust

3.5 Investment Trust

3.9 Life Insurance

3.11 Exchange Traded Funds

3.12 Sukuk Bonds

3.13 Real Estate Investment Trusts

3.14 Capital Guaranteed Funds

• Include short term debt instruments.