Podcast: Compliance in the Insurance Sector Across APAC

podcast

Podcast: Compliance in the Insurance Sector Across APAC

joshua-heiliczer
Josh
Welcome to Protiviti Podcast. This is Josh Heiliczer. I'm the managing director of risk and compliance for Greater China, Hong Kong and China and the financial crime compliance leader for Asia here at Protiviti. I'm grateful to have Zac Ezekiel with me from Manulife. He is the Asia Chief Compliance Officer and really interested to hear what he has to say about overall compliance in the insurance industry as well as sales practices. Hi, Zac, really great to have you with us today. First of all, thanks a lot of coming onto the podcast. We really appreciate it.
Zac
Zac
Thanks for having me.
joshua-heiliczer
Josh
This part of our series here at Protiviti and so we’re trying to now branch out and meet with some insurance professionals as well. I appreciate your experience over at Manulife, and one of the things I think that a lot of people listening to the podcast would be interested in as there are a lot of compliance professionals is your career journey. So, how you got to be the chief privacy officer or working at a Canadian bank to out here in Asia with Manulife, and now their chief compliance officer for Asia.
Zac
Zac
Yes, sure. I mean I had spent some time in Asia earlier in my career actually. I met my wife out in Asia and spent a really fun three years in different countries and in a different industry actually. After awhile with the bank in Canada, my wife and I were kind of missing the action over out in Asia and it was a good time in my career to try and change it up. So, I did want to make sure that I ended up with a company that had a sound compliance culture and I knew some folks from Manulife, so I had a couple of conversations and eventually I had a compliance role in Singapore came up. So, my wife and I sold our stuff and packed our bags and moved to Singapore in 2014, and from there just sort of progressed to the compliance organization within Manulife.
joshua-heiliczer
Josh
Wow. It’s interesting. I know, when I moved out here, selling all the stuff, you get everything on the boat coming out here so it’s definitely an experience moving out here. So, one of the things that we’re discussing is that you’re really focused now in looking into sales conduct risk, sales practices. A number of financial services firms are looking at that, specifically for the insurance sector. What are the risks around that?
Zac
Zac
Sure. I mean, I think it’s useful to sort of step back and think about why financial services companies are putting the focus onto - including insurance, are putting their focus onto sales conduct risk that they are, and I think there’s kind of, as in many things, a bit of a carrot and a stick happening. The stick is, as you know, there have been some big scandals with banks that were selling products to customers that didn’t even appreciate that they were buying the products, opening accounts, credit cards, things like that. I think the fear for any financial services company is that your sales aren’t real, that your customers aren’t buying what they think that they're buying. So, we all want to make sure that we’ve got the best possible experience for customers. But there’s also I think a carrot aspect to that, which is all of us, insurance, the modern life insurance industry is about 250 years old. We have been, traditionally, pretty set in our ways, pretty paper-based, pretty in love with our own way of doing business, and I think companies are focusing more on getting closed to the customer and ensuring that there’s a good customer experience. So, I think what you're seeing now is a great marriage between the focus on the customer and legitimate concern about misconduct and wanting to make sure that we don’t have any of that in our environment.
joshua-heiliczer
Josh
I mean, one of the things with life insurance I guess, historically, as well is that you used to just buy a term policy. It’s term policy, you pay your premium. If something happens then you get the benefit or your family gets the benefit. Now, in the world of annuities and returns and investment linkages, you have situations where, for any insurance firm, because you’ve got a massive amount of agents, distributors out there, they might have customers hearing about promises that might not come true.
Zac
Zac
Yes, absolutely. I mean certainly you're right, the products have gotten more complex and that puts a challenge on advisers to make sure that they're taking the customer through a needs analysis, making sure the customer understands what they're buying. Yes, I mean sales people can be under pressure just like anybody else, and occasionally, they can either not explain the product properly just through errors or omissions, or you can actually end up with some conduct that isn't what the life insurer wants. So, definitely, we want to make sure that we have controls in place to detect that when it happens.
joshua-heiliczer
Josh
What are some of the major ways you detect it, because I guess from an insurance perspective, if you're an agent, broker or whatever you might be, you are commission-based, so you're only eating what you kill, and so while 95% of them are probably going to be great, you're going to have some of them that will have an incentive to try to drive up their commission maybe unnecessarily. So, how would you monitor for that?
Zac
Zac
I mean, you're absolutely right that with a commission-based sales force you do need to monitor but I think you're also absolutely right that I think for the vast majority of insurance agents they're fantastic advocates for our customers. I mean you certainly see in the claims process and even in the underwriting processes that agents will do a lot for the customers. In terms of detecting misconduct, there’s kind of the traditional sort of old school ways and then there’s sort of a new school that’s emerging with new technologies. So, the old school stuff was very kind of complaint based. So, if a customer called you up and said that they had a concern, you would sort of record it and you would do an investigation. Talk to them, talk to the agent, collect the evidence, do a report. I think all of us monitor metrics like persistency or replacement of policies, which is kind of our sort of insurance version of churning. I think, certainly, Manulife puts a lot of attention into making sure that we get the right advisors. We talk about premium agencies, so making sure that we do the right due diligence on our agents but also the other distributors that we use like brokers and banks.
Overtime, I think, certainly we have and other life insurers are as well added to that. So, you're seeing - we’re putting a lot of energy right now into post sales calling so at least for high risk products or vulnerable customers, making sure that we contact them and asking them how the sales process went and did it meet their expectation. Do they understand the product that they bought? A lot of firms are experimenting with mystery shopping or also different kinds of post-sales testing, looking at incentives. So, you talk about eat what you kill and there is that overarching incentive to make sure that you feed yourself and feed your family, but I think companies can really kind of influence that a little and they can make it worse or they can make it better through their incentive structure. So, we have a pretty robust process for looking for that with our senior sales officers. The really unique thing with sort of the emergence of analytics technologies is the ability to take all of these data points and focusing on particular distributors that are problematic or particular products that are problematic. So, if there’s a lot of confusion around a particular product, do you need to improve the training that you provide to your distributors on that product or even different classes of customers? So, that’s I think kind of the next wave of improving our analytic approach to sales conduct.
joshua-heiliczer
Josh
I mean, how do you get all the data? I mean is it readily available or is that sort of a challenge now as well in terms of just getting everything you need to feed the analytics?
Zac
Zac
I think a lot of it was always there and that’s kind of the beauty of the analytics revolution, if you will, is realizing that all the stuff that you were collecting for other purposes can be used and aggregated to spread out outliers and things like that. So, a lot of it we always had. There are new points of references like as we’ve added post-sales calling. That’s a new indicator that we can feed in there but I think not just in sales conduct but I think a lot of us in financial services are realizing that just the power of the information that we have.
joshua-heiliczer
Josh
How do you just in terms of different countries, I assume, you're looking at various things across the board throughout Asia, globally, as well. I mean you mentioned through the churning surrounding replacing policies, you look at certain distributors, you look at the post-sales calls process. Are there things that are localized for each of the different countries? You're operating in a lot of countries here in Asia that you need to concern yourself with. So, sort of in addition sort of to the generalized, overall risk, bespoke monitoring for various countries.
Zac
Zac
Yes. I hope this doesn’t sound like a commercial but I think I feel it’s true about Manulife that we’ve always had as kind of core principles and they're actually in our value statement. Do the right thing and obsess about customers. So, we’ve always been pretty focused on that. So, that means that we are very interested in kind of an overall baseline framework and standard that we’re going to hold ourselves to and our distributors to in all the markets that we operate, even in cases where there might not be regulatory requirement around it. In some of the countries where we operate, insurance is very new. People have not had a long tradition of insurance for example in countries like Cambodia or Myanmar.
We want to make sure that we get off on the right foot and set up a great reputation for our product that we think is really useful. So, to answer your question, I think we do look at it fairly uniformly across markets and want similar things. Obviously, there are different kinds of products that are popular in different kinds of markets. So, for example, some of these mandatory national savings programs, like in Singapore and in Hong Kong have unique challenges around regulatory requirements that you need to follow. Particular kinds of fraud that are more prevalent in these sorts of pensions businesses and in other kinds of businesses that you need to watch and monitor for. That’s one of the reasons, for example, that we put focus on monitoring sales mix. If people are selling a lot of these products relative to other kinds of products, we want to know and we want to understand that.
joshua-heiliczer
Josh
Great. Zac, we really appreciate you joining us for the podcast and I think there are a lot of great insightful points for our audience and looking forward to maybe having you back again next time.
Zac
Zac
Thanks a lot. Thanks for having me.
 
 
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