Friday, January 11, 2019

The politics of insuring the people

First of all, I have not really been agreeable to the concept of forcing the foreign insurance companies to part with 30% of their shares to locals. Think of it, usually the local organizations that can afford to take up sizeable stakes are those like EPF, KWAP, LTAT. The price for insurers the size of Great Eastern Life, AIG would be high when they sell these 30% stake to our locals. Perhaps the good part is EPF will have additional options to invest into. When we put up conditions like this, it often scares companies from doing business in Malaysia as we now can put up conditions as and when we sees fit.

Pushing these insurance to sell with a dateline is even harder as valuation where both parties can come to agreement is not going to be easy. Anyway, when the government tells us that in Malaysia 80% of the insurance business is controlled by foreign companies, that is also a cause for concern. Besides banks, size matters even more in insurance business. Many large risks are not able to be taken up by smaller business as they sometimes cannot swallow the risks.

However, I am concerned over government working with the insurance companies to cover the B40 group for some level of coverage. First question is, what about M40 and the rests?

Insurance thrives on scale and masses. I would like to think that government is of enough scale to provide the coverage. The taxes and revenues that it collects is supposed to provide the coverage to a target group be it the less  able etc. This public private partnership concept may sound good for the B40s but if we look at it through a larger picture, there are many questions than answers. Always when you get something, you forgo something else. This does not sound like win-win.

The question is when Great Eastern (GE) is willing to allocate RM2 billion for coverage for the B40s, is that the price it is willing to pay for it not to dilute its stake. This means that there is a price one can pay to opt out for something. Great Eastern is the largest life insurer in Malaysia. What is the price Prudential Malaysia is willing to pay to get itself off the hook assuming it is smaller than GE, for example?

What about Tokio Marine, AIG, MSIGs of Malaysia assuming they have not met the 30% local ownership threshold?

Then, my other question is whether is this another form of votes buying? We had concerns over BRIMs before as it only targets certain groups. Previously, I thought the message was that focus is more towards the handicaps, less able group while we are going to teach the "able" B40s how to fish rather than giving them the fish. That has been partly what we have been voting for - now there seems there is a change in approach but similar in style.

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