CEILLI Exam Revision Guide

CEILLI Examination Revision
Learning & Development Department, Sales & Distribution Division (Life)
As at June 2011
CEILLI Overview
1. Introduction to Investment-Linked Life Insurance
2. Key Considerations In Investment

3. Types of Investment Assets
4. Investment-Linked Life Insurance Products - A World Scenario

5. Types of Investment-Linked Life Insurance Products
6. The Structure of Investment-Linked Life Insurance Funds
CEILLI Overview
7. How Investment-Linked Life Insurance Product Work ?
8. Benefits and Risk of Investing In Investments Linked Funds
9. Investment-Linked Life Insurance Product
10.Taxation And Law Covering Investment-Linked Life Insurance Product
11.Identifying And Establishing Customers Needs

12.Marketing And After Sales Service, Ethics And Code of Conduct
,
3
Chapter 1:
Introduction to
Investment-Linked Life Insurance
pay premium
Fund Managed
By Insurer

Protection
Capital Gain
Protection
Policyholder
Investment
Value of policy
Linked
Chosen Fund
Value
fluctuates
UNITS
Investment
Performance
Directly linked
Malaysia/ Singapore
/
UK
U.S.A.
/
Investment-Linked
Unit-Linked
Variable Life
Refers to the same thing
Chapter 2:
Key Considerations in Investment
Key Considerations in Investment :
2.1 Investment Objectives

2.2 Fund 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
3 fundamental characteristics of investment vehicle:
a. Safety
b. Income
c. Growth
10

3 fundamental characteristics of investment vehicle :
a.Safety
Returns are conservative
Help client to hedge against inflation
Example :i. Government bonds or sukuk bonds
ii. Treasury Bills or Fixed Deposit account
11

b. Income
Safest investment, lowest rate of income
RISK-RETURN
Example :
i. Fixed deposit account in bank
12

RISK-RETURN
RISK
BONDS/FD
/
EQUITY / SHARES
RETURNS
13

c. Growth
Realise capital gains
Hold the stock for a long time to derive profit from growth of
the investment
Example :
i. Blue chip stock
14

Education & up-bringing
Funds for dependents
Comfortable standard
of living
Pay expenses
& taxes upon death
Beyond financial
freedom
Other
Investment
Objectives
Improve financial
position
Hedging inflation
Liability cancellation
Retirement income
Achieving financial
freedom
15

What should I invest in? ?
Depends on the objectives
Income producing
instruments
Or
Growth weighted
instruments
16
2.2 Fund Available

The level of funds available will affect the investment decision, so
make sure:
1. Have a personal budget drawn out
Take control of spending
Find enough money to save and invest
2. Have to do a Cash Flow and Net Worth analysis
Have enough money to put aside for investments
17
2.2 Fund Available

A)Simple Monthly Cash Flow Analysis
No
Income (A)
RM
Expenditure (B)
5,000 Rental / Housing Loan Payments
RM
Salary
Rental
Commission
1,000 Childcare / Parents allowance
500
Other-
1,000 Education Expenses
250
500 Groceries and Utilities
1,000
750
Loans (Car, Credit Card etc)
Insurance Premiums
500
Savings
500
Misc
TOTAL
7,500
2000
1000
6,500
Thus, by this simple analysis we can identify that, this client

has RM1,000 a month as surplus fund an investment plan.
18
2.2 Fund Available

A)
(A)
(B)
RM
5,000 /
RM
1,000 /
500
1,000
250
1,000
500
750
(
,

500
500
1000
TOTAL
7,500
2000
6,500
RM1,000
,
19
2.2 Fund Available

A)Simple Networth Analysis
No
Assets (Present
Value)
Amount
Liabilities
Amount
220,000 Housing Loan Balance
200,000
House
Car
30,000 Car Loan Balance
EPF
20,000 Credit Card Balance
Saving Account
Ins.Cash Value
TOTAL
1,500 Personal Loan Balance

20,000 Others
291,500
35,000
5,500
10,000
15,000
265,500
Client have Positive Net Worth position by subtract

RM291,500-RM265,500=RM26,000
20
2.2 Fund Available

B)
(
)
220,000
200,000
30,000
35,000
20,000
1,500
TOTAL
20,000
291,500
5,500
10,000
15,000
265,500
RM291,500 RM265,500 = RM26,000
21
Warrant Buffet advises you need to first set

aside money for investment before thinking
about spend it.
Warren Buffet ,,
22

How to invest in the stock market
a) Know what kind of investor risk profile you have
Will be able to determine how best to allocate your

savings amongst various asset classes.
23

How to invest in the stock market
b) Whats your investment risk profile ? know yourself !
? !
BOTTOM LINE: there is a law that states that your
returns are directly proportional to the risk you take
:
The wider the fluctuations, the higher the risk
,
24
High risk /
Aggressive
Return
Higher Return
Risk
25
Low risk / Conservative
Stable Return
Return
Risk
26
2.4 Investment Horizon

1. The length of time a sum of money is expected to be
invested.
2. Total length of time an investment expects to hold a
security or portfolio.
3. Determine :
i.
Investors income needs
ii. Desired risk exposure
27
2.5 Accessibility of Funds

With regard to the use of funds, accessibility of funds has
3 components
1. Liquidity
Liquidity
1.
3. Exact
Exact amount
amount of
of
3.
moneythat
that isis
money
neededto
toset
set up
up
needed
theinvestment
investment
the
account and
andits
itscost
cost
account
2.
2. Cost
Cost or
orpenalty
penaltyto
to
pay
payifif exist
existearly
early
28
2.6 Taxation Treatment
Different types of
investment
The tax status of

investment Linked life
insurance is the same as
traditional plans
Different tax
treatment
More details in Chapter 10 10
29
2.7 Performance of the Investment

Regional & Global economic factors
Countrys
economic factors
Life cycle
of investment
Performance
depends on:
History of the invested

company
Competencies
& capabilities of
management
Team
Invested companys
level of costs
Invested companys
past experience
30
2.8 Diversification
Process of investing across different asset classes and across
different market segments
It reduces risk with small reductions in return
Putting
Puttingmoney
moneyunder
underseveral
severalcategories
categoriesof
of
investment,
investment, e.g.
e.g.share,
share,bonds,money
bonds,moneymarket
market
instrument
instrumentand
andreal
realestate
estateinvestment
investmenttrust
trust
(REITs)
(REITs),etc
,etc,
,,
,
,
,
Buying shares in different countries
Never Putting All Ones Buying shares in different countries
Eggs In One Basket
Choosing
Choosingdifferent
differenttype
typeof
ofshares
shares
31
Chapter 3:
Types of Investment Assets
Types of Investment Assets
3.1 Cash and Deposits

3.2 Fixed Income Securities
3.3 Shares
3.4 Unit Trust
3.5 Investment Trusts
3.6 Properties
3.7 Derivatives
3.8 Exchange Traded Fund (ETF)
3.9 SUKUK Bonds
3.10 Capital Guaranteed Fund (CGF)
33

Refers to all liquid instruments that carry little or no risk
Strictly speaking, cash Cannot be considered as an investment.

Because the capital value of cash will not increase and will not
generate any additional income
It is of value Only as a medium of exchange
Example
Example
Treasury bills
Bank accounts
34

Treasury Bills
The Government is borrowing from its citizen
Short term government funding vehicles
Issued on a regular basis with repayment normally within a year
Issued by the Bank Negara Malaysia to the discount market
Safest type of investments

Consider to be of no risk except if the country is politically
unstable.
35

Bank Accounts
Time or fixed deposits placed with banks for fixed periods with
fixed interest rates for that period
The longer the deposit period, the higher the interest rate
There is very little risk of loss of principal and interest.
36

Savings
Account
Offshore
Account
Types of
Account
Time Deposit
Current
Account
Fixed Deposit
Investment
Account
37

Funds available
Duration of the funds

can be remained
Choices of
deposits
Emergency
withdrawals
Prevailing
market conditions
38

Perbadanan Insurance Deposit Malaysia (PIDM)
Established under the Akta Perbadanan Insurans Deposit

Malaysia 2005
2005
PIDM was set up to :
i. Protect Islamic and conventional deposits
ii. Provide incentives for promoting sound risk

management
iii. Promote and contribute to the stability of the financial
system in Malaysia
39

PIDMs Objectives :
Administer a deposit insurance system
Provide insurance against the loss of part or all of deposit of a

financial institution
Provide incentives for sound risk management in the financial

system
Promote and contribute to stability of the Malaysia financial

system
40

PIDMs main functions

Assess and collect premiums or fees from bank
Manage the Deposit Insurance Funds
Undertake resolution of non-viable banks
41

PIDMs main functions : (Cont )

Reimburse depositors should a bank become insolvent

Comply with Shariah principles in respect of islamic deposits
and funds
Conduct ongoing public awareness and education initiatives
42

What is Deposit Insurance?

A system that protects depositors against the loss of their
insured deposits in the event of a bank failure
Enhance the consumer protection framework
Promote financial stability

It is a Government sponsored scheme
43

The benefits to depositors are :

Deposit insurance protection is automatic
Protects depositors holding deposit with bank
No charge to depositors for deposit insurance protection
Should a bank fail, PIDM will promptly reimburse depositors

their deposit
44

The benefits to financial system are :

PIDM promotes public confidence in the Malaysia financial
system by protecting depositors against the loss of their deposit
PIDM reinforces and complements the existing regulatory and

supervisory framework by providing incentive for sound risk
management in the financial system
45

The benefits to financial system are : (Cont )

PIDM minimises costs to the financial system by finding least
solutions to resolve trouble banks
PIDM contributes to the stability of the financial system by

dealing with bank failures expeditiously and reimbursing
promptly
46

Offer a fixed periodic return.
IOUs issued by companies or government to raise funds
Stress on current income

Offer little or no opportunity for appreciation in value
47

y
r it
u
c
Se or ate
c
tifi
r
ce
Investors
Investors
Usually a company
or government
/
Lend money
Issuer
Issuer
In return for fixed interest income and

repayment of principal at maturity
48
Government
Bonds
Preference
Shares
Types of Fixed
Income
Securities
Corporate
Bonds
Money
Market
Instruments
49

Government Bonds
Safest little or no default or credit risk

Government guarantees to pay interest and repay principal
Fixed term and interest rate
The investor gets the interest and his capital back on maturity
Issued when government needs money to finance projects
50

Government Bonds
Advantages
Easily marketable
Income for future is guaranteed
Disadvantage
In times of high inflation, capital can be eroded
,
51

Government Bonds
Maturity Period
Short Term
Medium Term
Long term
Below 5 years
5
5 to 10 years
5 10
Above 15 years
15
52

Corporate Bonds
Bonds issued by companies :

a. Debenture stocks
b. Loan stocks
c. Convertible Stocks
53

Corporate Bonds
a. Debenture stocks
Effectively secured loan to a company
The security is either a fixed charge on the companys

property or some of its assets such as trading stock
Trustees are appointed, to supervise interest & capital

payment
Pay fixed interest rate for a fixed term at the end
54

Corporate Bonds
a. Debenture stocks
If company defaults on the loan, the investor can take over
and sell the property charged to get his money back
55

Corporate Bonds
a. Debenture stocks
How it differs from Government Bonds
a. Company can repay earlier if wishes
b. No government guarantee (risky)

()
c. Interest rate higher
56

Corporate Bonds
b. Loan stocks
Unsecured loans to a company
Interest rate and the term are fixed
The investor may or may not get back his capital depending
on the companys performance
Less secure
Carry a higher interest rate
57

Corporate Bonds
Risk-Return -
Risk
Debenture Stocks
Loan Stocks
Government Bonds
Return
58

Corporate Bonds
c. Convertible Stocks
Can be converted to ordinary shares of a company on a fixed
date
Become part owner and entitled to profits through dividends
declared
The decision to convert depends on whether dividend income
and capital appreciation in share price are better than the
fixed interest given.
59

Corporate Bonds
Advantages
Higher return
Disadvantages
More risky
More marketable
Can be sold for capital

gains
60
3.3 Shares
Shareholders
Company
Shareholder is a part owner of the company
A company is a separate legal person

,
Each share carries one vote at company meetings.
decide on major issues

vote in new directors
not liable for the debts
Each shareholder gets a share certificates
61
3.3 Shares
Company
Not listed on the Stock

Exchange
Private
Not available to ordinary
investors
Public
Share can be quoted on the Stock Exchange
Listed company share are thus easy to buy and sell through
stockbrokers
The value of share fluctuates according to the markets view of
the worth of the company

62
3.3 Shares
Ordinary Share
Preference Share
May or may not receive

dividends
Dividends are paid out of

the Companys profits
Have the right to receive

a fixed dividend provided
that enough profit has
been made
Ranks ahead of ordinary

shareholders when
company winds up
63
3.3 Shares
Advantages
Direct participate in the future
of the company
Disadvantages
Very risky
Shares provide good dividends

and capital appreciation
Very liquid
64
3.4 Unit Trust
Investment in Unit Trust will generate income in the form of:
a. Dividends
b. Interest
c. Capital gains
It is authorised and supervised by the Securities
Commission
65
3.4 Unit Trust

Pool of funds contributed by many investors kept in trust by a trustee and
managed by a professional fund manager
Investors
Trust Deed
Trustee
Ensure the fund managers adhere to the
provisions of the trust deed and at
generally to protect unit-holders
Fund Manager
Select and manage the
investment of the unit trust
66
3.4 Unit Trust
The trust deed set out

a. the fund managers investment powers;
b. the price structure;
c. the registration of unit-holders;
d. the remuneration of the fund managers;
e. the accounting and auditing rules
Examples: Amanah Saham National , Public Mutual Fund ,

Hwang DBS ,etc
:,,Hwang DBS
67
3.4 Unit Trust

Investors
Buy units
Offer Price
Sell units
Bid Price
Value of units based on performance of investment
68
3.4 Unit Trust

Advantages
Spread of investment open
to unit-holders
Lower risks
Professional investment
service
Income from dividend can be
reinvested
Disadvantages
The bewildering array of
funds
The extra cost or charges
69

The function similar to unit trusts
An investment trust is a company registered under Companies

Act
Investor is purchasing shares in that company
Examples: the listed Seacorp Schroders, ICapital.biz

Seacorp Schroders, ICapital.biz
70

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

shares in company
High Risk /High reward

compare with unit trust
Low Risk /Low reward

compare with investment
trust
71

Advantages
More flexible
Disadvantages
Greater risk exposures
Investor can borrow to

finance their purchases of
the investment trusts
72
3.6 Properties
3 types of real estate investment:

a. Agricultural property
b. Domestic property
c. Commercial/ industrial property
The price of an agricultural property depends on:
a. Quality of land
b. The location of the land
c. The value of the buildings on the land
73
3.6 Properties
Advantages
Advantages
Good capital appreciation
Steady flow of income
Disadvantages
Disadvantages
Difficult to be disposed
of during recession
,
Low risk
By mortgaging, capital can
be free
74
3.6 Properties
Real Estate Investment Trust (REITs)
Similar concept like unit trust
Invest, manage and distribute rental as dividend back to
investor
Trade in Bursa Kuala Lumpur with ease of buying and selling
back like a normal equity
Invest into high profile and high value properties for better
return
Long term retirement plan
75
3.6 Properties
Real Estate Investment Trust (REITs)
Advantages
Good capital appreciation
and steady flow of income
Low risk
By mortgaging the property,
capital can be freed
Disadvantages
During economic recession,
property could be difficult
to be disposed off
76
3.7 Derivatives
What are derivatives?
?
They are financial

instruments whose
values are linked to the
price of underlying
instruments in the cash
markets.
,
The two most

popular derivatives
are stock options
and financial
futures.
77
3.7 Derivatives
Derivatives
Derivatives
Options
Options
Warrants
Warrants
Futures
Futures
78
3.7 Derivatives
Options
Options
Investor can buy a right.

To purchase or sell the security at a future date.
Share option The investor has the right to buy or sell a

given number of shares of the underlying
stock at a fixed price within a specific time

period
79
3.7 Derivatives
Options
Options
Call option
The holder has the right to buy (or call away)

a particular stock at a specified price, or
premium, any time prior to the specified
expiration date
Note: Call options permit investor to speculate

on a rise in the price without buying the shares
itself
80
3.7 Derivatives
Options
Options
Put Option
The holder has the right to sell (or put away
of a particular stock at a specific price prior to a

specified expiration date
Note: Put option allow investor to speculate on a

decline in the share price without selling the
shares short
81
3.7 Derivatives
Options
Options
Advantages
Advantages
Disadvantages
Disadvantages
Potential
Potentialto
toboost
boostprofits
profitsfrom
from
share
shareprice
pricemovements
movements
Risky
Risky--an
aninvestor
investormust
must
be
beprepared
preparedto
tolose
loseall
allhis
his
money
money
--
82
3.7 Derivatives
Warrants
Warrants
(Transferable
(TransferableSubscription
SubscriptionRights
Rights[TSR])
[TSR])
Corporate-created option to purchase, within a specific time
period, a stated number of shares of the underlying stock at a
specified price
Often issued free

Can be detached from the loan stock
83
3.7 Derivatives
Warrants
Warrants
(Transferable
SubscriptionRights
Rights[TSR])
[TSR])
The holder opts to subscribe the shares in the company
a. at a pre-determined ratio (conversion ratio);
b. at a pre-determined subscription price (exercise price) ; and
c. within s specific time period. The life span of a warrant is

fixed at the beginning and cannot be varied.
84
3.7 Derivatives
Warrants
Warrants
(Transferable
SubscriptionRights
Rights[TSR])
[TSR])
Advantages
Without a large initial outlay
Buy the warrant, pay the exercise price at a later date

Convert to the underlying share
Disadvantages
On expiry, warrants which are not exercised lose their
value completely
Do not receive interest or dividend

Carry no voting privileges
85
3.7 Derivatives
Futures
Futures
Physical
commodities &
financial
instruments
Traded in cash
market
Cannot be
cancelled unless
both parties agree
Spot markets
Forward markets
Current market price of item

available for immediate delivery.
Price of an item for

deferred delivery
Future markets
86
3.7 Derivatives
Futures
Futures
Future
markets
Set price today for an

instrument that will be
delivered on a
specified future date
Futures exchange
Trader determines
determines
:
Contract size
Delivery date
Conditions
Obligation,
not an option
,
Price
Number of
contracts
E.g. Stock index

futures
.
87
3.7 Derivatives
Futures
Futures
Stock index futures

Delivery & cash payment in specific future date
Seller
Seller
Instrument
Instrument
Buyer
Buyer
Agree to take delivery and make payment at expiry date
88
3.7 Derivatives
Futures
Futures
Stock index futures

The settlement of the contracts is made in cash without the
actual delivery of the securities covered by the index
Profit = compare the original contract value with the contract

value at the time of settlement
=
89
3.7 Derivatives
Futures
Futures
Advantages
To protect the gains made in
the cash market
Shift the risk of price

fluctuation from participants
unwilling to assume such risk
to those who are
Price discovery
Disadvantages
Amount of gain or loss
that could result from any
change in the price of the
index futures contract
90

Also known as exchange-traded product (ETP)
ETF (ETP)
Is an Investment fund traded on stock exchanges, much like
stocks
An ETFs holds assets such as stocks or bonds and trades, at

proximately the same price as the net asset value of its
underlying assets, over the course of the trading day
ETF
Combines the valuation feature of a mutual fund or unit

investment trust
91

Index ETFs
ETFs
Commodity ETFs
or ETCs
ETFs or ETCs
Bond ETFs
ETFs
Leveraged ETFs
ETFs
Exchange-traded
grantor trusts
Types of ETFs
ETFs
Actively managed
ETFs
ETFs
Currency ETF or ETCs
ETF or ETCs
92
3.9 SUKUK Bonds

Islamic equivalent of bonds
Sukuk securities are comply with Islamic law
Its investment principles which prohibits the charging, or

playing of interest
93
3.9 SUKUK Bonds

Sukuk bonds characteristics :
1. Issued by pooled funds (Mutual fund)
()
2. Based on hard assets that generate steady income and
expectations
3. May be guaranteed or not by their originators
4. Investors receive a fee equal to the income of the underlying

assets
94
3.9 SUKUK Bonds

Sukuk bonds characteristics :
5. These securities are issued by Special Purpose Vehicles
(SPVs), often subsidiaries of banks or trusts called SPV
(Special Purpose Vehicles ),
, SPV
6. Mostly issue in dollars
7. Differ from conventional bonds because they are based on
tangible assets instead of being on the debts
,
8. Most used today are Sukuk Al ljara and Sukuk Almucharaka
Sukuk Al ljara Sukuk Almucharaka
95
Is an investment vehicles guarantees the investors

initial capital investment from lost
Example :
i. OSK-UOB Capital Guaranteed Fund Series
ii. RHB Unit Trust

iii. Hwangs-DBS Capital Guaranteed Fund
96

Features of Capital Guarantee Fund :
High asset allocation in guaranteed investments instrument
The risk slightly higher than FD
Investment horizon is 3-5 years
No more subscription accepted after the closing date of the

offer period
97

Value per unit starts at RM1.00

RM1.00
Minimum initial investment is RM5,000
RM5,000
Service charge is 1.5%
1.5%
Redemption fee before maturity - range from 0.3% to 1.5% of
NAV
- NAV0.3%1.5%
98

Capital preservation feature-guaranteed
If you missed the offer period, just have to wait for another
series to be launched
99
Chapter 4:
Investment-Linked Life Insurance Products
A World Scenario
In United Kingdom
Transacted for more than 30 years
The first contract was individual retirement annuity
Introduced by London & Manchester Assurance Co. Ltd. in 1957

1957
Similar to traditional endowment policies
Hambro Whole Life Plan introduced in 1977 was the first of
the new generation products
1977
101
In The United States of America

Commonly called Variable life insurance, started in 1976
1976
It was pioneered by the Equitable Life Assurance Society at
1976
1976Equitable Life Assurance Society
Under the Securities Exchange Act, 1934, the insurance
company must registered as Broker-dealer
1934
Agents and agency office employees must pass the exam and
register with NASD
102
In Singapore
1973
Started by NTUC income.

NTUC income
1992
1993
Prudential introduced single and regular premium

products.
Introduced Enhanced Investment Scheme (EIS) by the

Central Provident Fund (CPF)
(CPF)(EIS)
1997
Two existing investment schemes of the CPF merged to

form the Investment Scheme (IS)
(EIS) (BIS)
(IS)
103
In Malaysia
1985
1997
Syarikat Takaful Malaysia Berhad form a simplified

investment-linked life insurance product
Berjaya Prudential Ass. Bhd. became the first company

to launched the single-premium whole life insurance
product
104
In Malaysia (cont)
1997
Takaful Investment-Linked Insurance policies were

developed by the Takaful companies
They were developed as a response to the religious

principles and practices of the Muslims
Invested in stocks and other assets that comply with

requirements of Islamic law
105
Chapter 5:
Types of Investment-Linked
Life Insurance Products
How Do Investment-Linked Life Insurance Policies Work
Operate on similar principle as Unit Trusts
Investment
Used to purchase units in
fund managed by life
office
Mortality
Protection
PREMIUMS
107
How Do Investment-Linked Life Insurance Policies Work
Returns are not guaranteed

Linked to performance of investment fund
Price fluctuates as market prices rise and fall lacks

smoothing process.,
108
The fundamental differences between

Investment-linked
Potential for higher returns

but high risk
Policy charges and

investment content are more
identifiable
,
Traditional With-Profit Life

Insurance
Produce steady return

by smoothing out short
term market fluctuation
Charges are not specifically

detailed in the policy
109

Investment-linked

Insurance
Offers more choice of

investment funds
Choice of Investment
is Insurers discretion
Benefit & risks immediate

passes to policyowner
Most of risk passes

to insurer
110

Investment-linked

Insurance
Investment element is
made known to policyowner at
outset
Investment element is NOT made

known to policyowner at outset
Value of policy fluctuate

depends on value of units hold
Never reduce in value provided

life office is solvent
,
111
Definitions
Policy Fee
Administrative expenses of setting up the

policy
Annual Fund
Investment management charges
Management Fee
Deduction between 0.5% to 2% of the fund

each year 0.5%2%
Offer price
/
Selling price by the life office
112
Definitions
Bid price
/
The price at which the units are cashed when

the policy matured, surrendered or to pay
charges under the policy
Bid-Offer
Spread
Difference between offer price and bid price
Usually is between 5% to 6% of the offer

price 5%6%
113
Definitions
Reduction In
Allocation of Units
Unallocated
Premium
To meet marketing and setting-up

expenses of the policy
114
Definitions
Initial Units
The units allocated in the early years
Higher annual management charges. i.e.

6% p.a. throughout the policy term.
6%
Initial units bear heavy discontinuance
charges
Cash value is much lower than their face
value for years
115
Definitions
Mortality
Charges
Dependent on age
It is funded by cancellation of units on a
regular basis
Surrender
Charges
Deducted from the value of units at

surrender
116
Characteristics of Investment-Linked Policies
a. Investment-linked life insurance policies can be used for

investments, regular savings and protection
+ +
b. Have a larger exposure to equity investments
Protection and Savings
Larger exposure to
equity
Investment
Life cover
TPD
PA benefit
Health
117
Characteristics of Investment-Linked Policies
c. The cash value and protection benefits are determined by the

investment performance of the underlying assets
d. The protection costs are generally met by explicit charges
e. Commissions and office expenses are also met by a variety of

explicit charges
f.
The cash value is normally the value of units allocate to the

policy owner, calculated at the bid price.
118
Types Of Investment-Linked Life Insurance Policies
Single
SinglePremium
PremiumInvestment-Linked
Investment-LinkedWhole
WholeLife
LifePlan
Plan
Regular
RegularPremium
WholeLife
LifePlan
Plan
Investment-Linked
Investment-LinkedIndividual
IndividualPension
PensionPlan
Plan
Investment-Linked
Investment-LinkedPermanent
PermanentHealth
HealthInsurance
Insurance
Investment-Linked
Investment-LinkedDread
DreadDisease
DiseaseInsurance
Insurance
Investment-Linked
Investment-LinkedEducation
EducationPlan
Plan
119
Single
SinglePremium
WholeLife
LifePlan
Plan
One-off premium contribution

Minimum premium is RM3,000 RM3,000
1st type of IL policies available
Protection is 125% of total single premium paid, subject to a

minimum of RM5,000.
125%, RM5,000
Emphasize on long-term savings and investment offers only
nominal life protection -
120
Regular
RegularPremium
WholeLife
LifePlan
Plan
Regular Premiums
Monthly
Quarterly
Annually
Features
Purpose
Premium holidays
Top-ups
Withdrawals
Surrenders
Life protection
Investment
121
Investment-Linked
Investment-LinkedIndividual
IndividualPension
PensionPlan
Plan
High allocation of the premium contributions to investments through

simply accumulating the fund to retirement
Conventionally
No life insurance cover
Only return of investment

fund on death
Opt to take up term policy

for life cover
Recent Dev.
Further Dev.
Life insurance cover

being funded by
cancellation of investments
of the pension plan
all or part of the funds can be

converted into a traditional
with-profit life insurance policy
as an alternative to switch into
other linked fund
122
Investment-Linked
Investment-LinkedPermanent
PermanentHealth
HealthInsurance
Insurance
Provides health coverage such as disability income.
Contains cash value unlike traditional health product that does

not have cash value
123
Investment-Linked
Investment-LinkedDread
DreadDisease
DiseaseInsurance
Insurance
Advance the whole of the face amount in the event of the

diagnosis of a heart attack, stroke, coronary artery bypass, end
stage renal failure or total permanent disablement
124
Investment-Linked
Investment-LinkedEducation
EducationPlan
Plan
To satisfy the educational needs of policyowners children
One of the main selling policies in almost all insurance

companies in Malaysia
125
Investment-Linked Takaful Policies

It is a family takaful plan that combines investment and
takaful cover
Contribution
(Tabarru)
Takaful fund
Includes death and disability

benefits
Investment fund
Shariah-approved
126

Takaful concept
Policyowner
Participant
Contribution
Tabarru
Contract
Aqad
Fee
Ujrah
127

Takaful concept
1. Participants will undertake a contract (aqad) by agreeing to
mutually help each other
(aqad),
2. If no claim during the takaful period, participant can share
the surplus in the takaful fund
,
128

Takaful concept
3. Takaful operate based on the concept of surplus sharing
according to pre-agreed ratio
,
4. The takaful operator receives a fee (ujrah) for its service
ujrah
129

Unique Features of Takaful
1. Flexibility to choose level of protection and investment
2. Vary the amount of contribution according to the changing

financial circumstances
130

Unique Features of Takaful
3. Switch your current fund to other type of investment fund
4. Redeem part of the investment-units anytime
5. Can choose from a variety of investment funds
131

Important considerations to choose the right plan
1.
Takaful cover
2.
Selection of investment fund
3.
Fees and charges
4.
Fund switching
5.
Cash value accumulation
6.
Bid and offer prices
7.
Cooling period
8.
Annual statement
132

What do you need to remember?
Understand the risk

money being tied-up
Risk and benefit
Read carefully
information provided
133
Loans and withdrawals

Cash value fluctuates on a daily basis
Loans may be limited to some percentage of the cash value
Partial surrender and withdrawal can be met by cashing the

sufficient units at the bid price
, ()
134
Risk-Based Capital Guidelines (RBC)
The framework aims :

To better align the regulatory capital requirements with the
underlying risk exposure of each individual insurer
Improve the transparency of prudential buffers
Allow greater flexibility to operate at different risk levels
135

Key objective :
To ensure that prudential buffers reflect the underlying
risk profiles of individual insurers.
This will help to manage business more effectively, by:
1
2
3
Identifying the sources of risk

Implementing the appropriate measure to mitigate
Manage or remove risks

136

Insurers Capital
Resources
Inject capital
Reduce
risk level
No
CAR** enough?
?
Yes
Monitor
Strategies or actions
**CAR= Capital Adequacy Ratios
137

The elements of investment strategy
1
Investment objectives, both at company and fund-specific levels
The risk and liability profile of insurers
Strategic asset allocation
The holding of certain types of assets is restricted or disallowed
The usage of derivatives and structured products
138

The risk management systems must cover the risk
associated with the investment activities that may
affect the coverage of:
i. Insurance liabilities and

ii. Capital positions
Market risks
Main risks
Credit risks
Liquidity risks
139

As part of good risk management practices, insurers are also
required:
1. To establish adequate internal controls, and in compliance
with legal, accounting and relevant risk management
requirements
2. To have in place rigorous audit procedures
3. To install effective procedures for monitoring and managing

the asset-liability position
140

required:
4. To put in place suitable plans mitigate the effects arising
from deteriorating market conditions
5. To undertake regular stress testing for a range of market

scenarios and changing investment and operating
conditions

141

required:
6. To ensure the key staff involved in investment activities
have the appropriate levels of skills, experience, expertise
and integrity.
142
Chapter 6:
Structure of Investment-Linked Funds
Introduction
t!
o
H
Investment-Linked
Investment-Linked
Funds
FundsStructure
Structure
Accumulation
Accumulation
Units
Units
The investment income of these

funds is ploughed back into the
fund. Therefore, the unit prices
will increase over the long term.
Distribution
Distribution
Units
Units
The investment income is used

to purchase additional units to be
distributed to the policy owner,
The price of the units remain
unchanged but gets more units
,
144
6.4 Type of Investment-Linked Funds
Cash
CashFunds
Funds
Balanced
Balanced
Funds
Funds
Equity
Equity
Funds
Funds
InvestmentInvestmentLinkedFunds
Funds
Linked
Managed
Managed
Funds
Funds
Bond
Bond
Funds
Funds
Property
Property
Funds
Funds
Specialised
Specialised
Funds
Funds
/
/
145
1. Cash Fund
Invest mainly in cash and other forms of bank deposits.
Low risk and safe
2. Equity Funds
Invest in equity assets such as stocks, shares, etc.
Higher risk in nature

Usually aim for capital appreciation
146
3. Bond Funds
Invest in government and corporate bond, and in other forms of
fixed income instruments.
Also known as income or fixed income funds.
4. Property Funds
Invest in properties, such as real estates and property shares.
Safer than equity funds and lower liquidity.
147
5. Specialised Funds
Normally segmented based on geographical regions or
particular industries.
Important to take note of the currency risk when investing in a
specialised fund invested overseas.
Geographical
region
ASEAN fund, the Emerging Markets Fund and

the International Bond Fund.
Country
China Fund, the US Fund
Industry
Commodities, mining, plantation, public utilities
148
6. Managed Funds
Invest in a wide variety of assets such as equities, bonds,
properties, cash, etc.
The asset allocation depends on the fund managers views
7. Balanced Funds
Invest in fixed proportion of specified assets.
Equity
70%
Fixed Securities
30%
149
Risk-Return Profile -
Risk
Equity Funds
Balanced Funds
Managed Funds
Cash Funds
Bonds Funds
Return
150
Switching
Allow to switch part or all investment from one fund to another
fund.
Switches between funds may

be offered free of charge, or
be offered free of charge for limited number of switches
within a given period and charges imposed for
subsequent switches, or
incur a specific charge for each and every switch.
o t!
151
Chapter 7:
How Investment-Linked Products Work?
7.2 The Working Of Investment-Linked Life Insurance
Each of the policy owners 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.
The value of the policy will therefore depend on two factors

:
t!
o
H
the value of each of the units; and

;
the number of units the policy has accumulated to date.
153
7.2 The Working Of Investment-Linked Life Insurance
Allocated premium
Units
Unitswhich
whichbelong
belong
to
topolicy
policyowner
owner
Unallocated
premium
Single
Singlepremium/
premium/top-up
top-up
/
/
Cancel Units
To pay mortality charge
& policy fee
Life
LifeOffice
Office
To meet marketing
and set-up
expenses
Surrender Claim (pay value of units)

()
Withdrawal (Pay value of units withdrawn)
()
Death Claim (Pay value of units and/or sum assured)
(/)
154
7.3 Top-Ups
Normally allow to top-up their policies at any time, subject to
minimum amount.
Top-up amount will be used in full to purchase additional units
which will be added to the existing units in the policy owners
account.
Additional
units
Can top-up
any time
Additional
units
Fund Value
155
7.4 Single Premium Policies Methods of Calculating Benefits

-

t!
o
H
Method
Method
Number
Numberof
ofUnits
Units
Cash
CashValue
Value
Single
Single
Pricing
Pricing
Method
Method
Dual
Dual
Pricing
Pricing
Method
Method
Single
Single
Pricing
Pricing
Method
Method
Dual
Dual
Pricing
Pricing
Method
Method
156

-

Number of Units
Single Pricing
= Premium paid Policy Charges

Unit Price
Dual Pricing
Premium paid
Offer Price
157

-

Example
Single Pricing
Dual Pricing
Premium = RM 4,000
Premium = RM 4,000
Charge = 5%
Offer price= RM1.00
Price per unit = RM1

Premium paid Policy Charges
Premium paid
Unit Price
Offer Price
= 4,000 (5%)
1.00
= 3,800 units
= 4,000
1.00
= 4,000 units
(No. of units purchase )
(No. of units purchase )

158

-

Example
If the policy owner cash in or claim under the policy, he will receive
:
No. of units purchase = RM4,000 RM1 =

4,000 units
Offer price = RM1.00
Bid-Offer Spread = 5%
Bid price = RM1 x (100% - 5%) = RM0.95
4,000 units x RM0.95 = RM3,800
159

-

Cash Value
Single Pricing
Number of units x Unit price (Mortality Charge+ Policy fee)

x
-(
+ )
Dual Pricing
Number of units x Bid price (Mortality Charge+ Policy fee)

x
-(
+ )
160

-

Example
Single Pricing
Dual Pricing
No. of units: 3,800

Mortality charge : 1%
Policy fee: RM100
Unit price : RM1.00
No. of units: 4,000

Policy fee: RM100
Bid price: RM0.95
Number of units x Unit price

(Mortality Charge+ Policy fee)
Number of units x Bid price (Mortality

Charge+ Policy fee)
x-( +
)
x-( + )
= (3,800 x RM1.00) (RM38+RM100)

= RM3,662
= (4,000 x RM0.95) (RM38+RM100)

= RM3,662
161

-

Annual Yield on Gross Premium
The return on gross must first be obtained, then only the

annual yield be tabulated
,
Return on
Gross
Premium
(RGP)
Ending Value Of Investment
t!
o
H
Beginning Value of Investment
1/n
The formula for Annual yield = (RGP)

n = the number of years
-1
162

-

Single Pricing
Using the previous example

Premium paid RM4,000
No. of units : 3,800
Policy fee : RM100
Unit price after 10 years : RM1.97
163

-

Single Pricing
Step 1
The Ending value of investment
= (No. of units x unit price) (mortality charge + policy fee)
x-( + )
= (3,800 units x RM1.97) ([3,800 units x RM1.97 x 1%] + RM100)
= RM7,486 (RM74.86 + RM100)
= RM7,311.14
The Beginning value of investment
= 4,000 units x RM1 = RM4,000
164

-

Step 2
The Return on gross premium
= Ending Value of Investment
= RM7,311.14
RM4.000.00
= RM1.828
Step 3
The Annual yield
1/n
= (RGP)
-1
1/10
= (1.828)
-1
= 0.062 or 6.2%
165

-

Dual Pricing
Premium paid RM4,000

No. of units : 4,000
Policy fee : RM100
Unit price after 10 years : RM1.97
166

-

Dual Pricing
Step 1
Bid Price
= Offer Price 5%
= RM1.97 0.0985
= RM1.8715
The Ending value of investment
= (No. of units x Bid price) (mortality charge + policy fee)
x -( + )
= (4000 X RM1.8715) [(4000 X RM1.8715 X 1%) + RM100]
= RM7,311.14
The Beginning value of investment
= RM4,000
167

-

Step 2
The Return on gross premium
= Ending Value of Investment
= RM7,311.14
RM 4.000.00
= RM1.828
Step 3
The Annual yield
1/n
= (RGP)
-1
= (1.828)1/10 -1
= 0.062 or 6.2%
168
7.5 Withdrawal Benefit

Withdrawal
Withdrawal
Number of Units
Single Pricing
No of units withdrawn x unit price
x
Dual Pricing
No of units withdrawn x bid price
x
Fixed Monetary
Amount
No of units to be canceled
Single Pricing
Amount withdrawn unit price

Dual Pricing
Amount withdrawn bid price

169
7.7 Death Benefit

Unit Value + Sum Assured
+
Single pricing method
=
(No of units x unit price) + sum
assured covered
(x) +
t!
o
H
Unit Value or Death Cover
Either the value of the units or

the death cover, whichever is
higher.
Dual pricing method

=
(No of units x bid price) + sum
assured covered
(x) +
170
7.7 Death Benefit
Unit Value + Sum Assured

+
Death Benefit
Value of Units
Death
cover
t!
o
H
Unit Value or Death Cover
Value of Units
Death
cover
171
7.8 Regular Premium Policies
Vary the sum assured
Flexibility
Top-ups
Premium holiday
Differences between regular premium

and single premium policies
Increase or reduce the

level of premium
Surrender
all units or partially
(withdrawal)
172

Scenario 1
Nam e
Age
Gender
Marital status
Salary
Tan Chor Seong
25
Male
Single
RM3000
Tans present situation Objective and Goals

1) Create a savings RM30,000 in 10 years
10RM30,000
2) To have a good cover for eventualities
3) Plan to get married at age 30

30
4) Planning to buy a car with monthly installments and car usage
RM700
,RM700
173

Scenario 1
Simple Cash Flow Analysis for Tan Chor Seong

No
1
Income
Salary
RM
RM
Travelling cost
300
Food
300
Clothes and accessories
200
Hand phone bill
150
PTPTN loan
350
Parents
250
Night out with friends
250
Miscellaneous Expenses
300
Total
3,000
Expenses
3,000
Total
2,100
174

1
RM
300
300
200
150
PTPTN
350
250
250
300
2,100
RM
3,000
3,000
175

Scenario 1
Agents Recommendation :
a) Advice Tan to buy a second hand car expected RM450 per month
b) Coverage :1) medical card, comprehensive personal accident,
36 Dread Diseases, death and total permanent
disability, waiver of rider
2) make sure that RM30,000 can be created in 10 years
c) Save some money for liquidity and emergency purpose
d) Suggest Investment-Linked plan
e) Total premium per month cannot exceed RM300,perform regular
top up every year as his salary increase
176

1
:
a)RM450
b) : 1) , , 36
,
2) 10RM30,000
c)
d)
e)RM300 ,
177

Scenario 2
Nam e
Liabilities
Alimudin Hamzah
(Husband )
Housing loan
personal loan
2 credit card payment
2
Norzakiah
(Wife )
Personal loan
1 credit card payment
1
Marital status
Salary
Married with 3
children
3
RM4,000
RM3,500
178

Scenario2
Alimudin and Norzakiahs present situation Objective and Goals

1)Set up education fun
2) Good insurance cover on death, total and permanent disability
3) Medical card for their children

4) Save RM25,000 in 10 years 10RM25,000
5) Start planning for their retirement
6)Both have insurance cover with company include PA ,Medical,
Term cover ,,
179

Scenario 2 Simple Cash Flow Analysis For Alumudin And Norzakiah
No
1
Income
Salary-Alimudin
RM
4,000
Expenses
RM
Car Running cost-Rorzakiah
300
Car loan and Maintenance
450
Salary Norzakiah
3,500
Food , Clothes and Accessories
Others (i.e pro-rated yearly bonus and

incentives)
1,000
Hand Phone Bill
150
Personal Loan (both)
700
Moms Medication and care
400
Family Holidays and Night outs
150
Credit Card (both settle in full)
1200
Maid , House Utilities and Maintenance
800
10
Housing loan
600
11
Tuition for kids
200
12
ASM /ASB (both)
800
13
Miscellaneous Expenses
500
No
Total
8,500
Total
1250
7,500
180

2
RM
4,000
RM
300
450
1250
3,500
()
1,000
150
()
700
400
150
(-)
1200
800
10
600
11
200
12
ASM /ASB ()
800
13
500
7,500
8,500
181

Scenario2
Agents Recommendation :
a) Medical card and an education Investment Linked policy for
each of children
a) Suggest 36 Dread Diseases rider for everyone with premium
waiver 36
c) Work out policies with RM800 a month and do the top-ups yearly
basis RM800,
d) Higher premium allocated to the older children
e) Have a saving of RM200 a month in bank for emergency use

RM200
182
Chapter 8:
Benefits and Risks of Investing
In Investments Linked Funds
8.1 Benefits
Flexibility
Pooling/
Diversification
Expertise
Benefits
Access
Administration
184
8.1 Benefits
Pooling or Diversification
Offer an access to a pooled or diversified portfolio of
investments.
The fund normally consist of wide range of equity stocks and

fixed income securities.
A well-diversified investment-linked fund has better risk

characteristics than a less-diversified one.
185
8.1 Benefits
t!
o
H
Flexibility
em
r
p
Premium holiday
m
iu
Change level of
premium payment
Flexibility
Flexibility
Switch between funds
Single premium topups
Withdrawals
Change level of sum assured
186
8.1 Benefits
Expertise
Managed by professional fund managers
Access
Gain access to well diversified investment-linked funds, simply
buying an investment-linked life insurance policy with an initial
investment, at as low as RM4,000.
(RM 4,000)
187
8.1 Benefits
Administration
Relieved of the day-to-day administration of investment.
Keep track of investment through the unit statement provided

regularly and the unit price published in financial pages of
major newspaper.
188
8.2 Risks of Investing In Investment-Linked Funds
Investment Risks
The sum assured is always guaranteed but the value of units is
not guaranteed.
The policy is only suitable for a policy owner who can tolerate
the risks of short-term fluctuations in his cash value
189
8.2 Risks of Investing In Investment-Linked Funds
Charges
The administration fee, insurance charge, fund management fee
are usually not guaranteed.
Subject to regular review and can be changed by giving a written

notice over a specific period e.g. 3 months

190
Chapter 9:
Comparison Between
Investment-Linked Life Insurance
and Traditional With Profit Life Insurance
Product
Investment Returns and Risks

Traditional
Without Profit
Traditional
With Profit
No investment
risk
Allocation of bonus
is not directly linked to
life office investment
Sum assured
fixed at inception
of policy
Bonus/dividend in
addition to sum
assured fixed at
inception of policy
Investment-Linked
Policy value linked

to value of
underlying assets
192
Premium Computation
Traditional
Without Profit
Fixed at inception
of policy
Traditional
With Profit
Investment-Linked
Fixed at inception
Flexibility in
of policy
1. Premium amount
2. Premium holiday
3. Single premium top

Life office may not
up
alter without policyowner
Life office may not

alter without
policyowner agreement agreement

193
Death Benefit
Traditional
Without Profit
Fixed at inception
of policy
Traditional
With Profit
Fixed at inception
of policy
Single Premium
Min. SA or value of units
units at bid price, whichever is
higher
Min. SA Plus value of

units at bid price
Life office may not

alter without Policyowner
agreement
Regular Premium
SA* or value of units at bid price,

whichever is higher
SA* Plus value of units at bid

price
Life office may not

alter without
Policyowner
agreement
Investment-Linked
* chosen by life assured
194
Surrender Value
Traditional
Without Profit
Traditional
With Profit
Permanent policies, e.g

endowment and whole
life will have surrender
value except term
insurance less than 20
year
20
It includes reversionary
Bonus up to date of
surrender
Investment-Linked
Single Pricing
Market price x no. of

unit
x
Dual Pricing
Bid price x No. of

units
x
195
Option To Top Up
Traditional
Without Profit
Traditional
With Profit
Investment-Linked
Some policy SA
increased each year
Some policy SA
Policyowner is allowed
increased each year
to buy additional
number of units
Some short term

policy can be renewed
at higher amount
Some short term policy

can be renewed at
higher amount
196
Chapter 10:
Taxation And Law Covering
Investment-Linked Life Insurance Product
Introduction
t!
o
H
Taxation aspects are treated in the

same manner as other Insurance policies
Investment-linked business is governed by
Common
Law of agency
Contract
Act 1950
1950
Insurance
Act 1996
1996
Companies
Act 1965
1965
198
Taxation of Investment-Linked Life Insurance
Income Tax Act, 1967

The principal legal document regulating income tax in Malaysia
Premium Relief
Is allowed when the life insurance or deferred annuity is
a. on the individuals life

b. on the life of the spouse of the individual
c. on the joint lives of the individual and his/ her spouse
199
Premium Relief (cont)

All insurance on the life of an individual or his/her spouse and
on contribution to approved provident funds in a basis year is
RM6,000
RM6,000
An extra tax deduction of RM3,000 under Section 49(1B) of
the Income Tax Act, 1967 can be used for education and
medical insurance premium.
1967(1B) RM3,000
200
The main purposes of regulation include

The protection of public interest
The promotion of fairness and equity
The fostering of competence
The playing a developmental role
201
Definition of Investment-Linked Insurance Business
Section 7(2)(b) of the Insurance Act, 1996 7(2)(b)
Definition
Definition
The effecting and carrying out of 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, or 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.
202
Requirement For Approval

Section 7(1)(b) of the Insurance Act, 1996
7(1)(b)
No licensed insurer shall carry on investment-linked life
insurance business.
Except with the prior written approval of Bank Negara Malaysia

(BNM)
t!
o
H
203
Separate Funds
Insurers are required to maintain separate funds.
The assets of each investment-linked fund must be kept

separate from all other assets of the insurer.
Each fund must have sufficient assets to meet its liabilities.
204
Investment Limits
t!
o
H
Investment in securities in any one

investee should not exceed
,
5% of the total value of the

fund assets
< 5%
OR
5% of the paid up capital of

the investee Company
< 5%
whichever is lower
205
Investment Limits
t!
o
H
Investment in loans or debentures to any one

borrower should not exceed
,
5% of the total value of the fund assets

5%
206
Age Limit of Policy Owners
The policy owner of an investment-linked life insurance policy

must be at least 18 years old.
18
Free-Look Provision
Policyowner may cancel the policy and shall be immediately

refunded any premium paid within 15 days after delivery of
policy
15,
207
Minimum Death Benefit

Must have a minimum death benefit of RM5,000 or 125% of the
single premium whichever is higher.
RM 5,000
125
Minimum Premium Payment

Single premium policies must at least have a minimum
premium of RM3,000
RM3,000
t!
o
H
208
Disclosure of Information
A.
A. Sales
SalesMaterials/
Materials/Illustrations
Illustrations/
/
Information that need to be contained:
i.
General description of the investment policy and objective

of the fund and the manner in which investment income will be
distributed to policy owners;
ii.
Policy benefits will be based on the performance of the funds

and the factors affecting the policy benefits
209
A.
A. Sales
SalesMaterials/
Illustrations/
/
iii.
Policy owners must be clearly informed that the investment

risks under the policy are to be borne solely by the policy
owners;
iv.
Maximum amount of initial charge, management fee, mortality

cost and any other charges to be borne by policy owners must
be stated;
210
A.
A. Sales
SalesMaterials/
Illustrations/
/
v.
The basis of computation of all policy benefits, bid and offer

prices of the units, units allocation and the procedure for
creating and canceling of units must be stated.
vi.
The basis and frequency of valuation of assets underlying the

fund;
211
A.
A. Sales
SalesMaterials/
Illustrations/
/
vii. All guarantees to policy owners must be explicitly stated.
guarantees include guaranteed minimum death, maturity
benefits, minimum surrender values and surrender penalty
A statement of the investment performance of the fund for the

past 5 years where available.
212
A.
A. Sales
SalesMaterials/
Illustrations/
/
viii. The following information must be placed and clearly stated:
1) The value of policy may rise or fall
2) The assumptions used for illustrations are hypothetical
3) The performance of the fund is not guaranteed.
ix.
Any other information that BNM may from time to time deem
necessary.
213
B.
B. Statement
Statement to
toPolicy
PolicyOwners
Owners

i.
The number and value of units held at the end of the previous
statement period;
ii. The number and value of units bought/ sold during the
statement period;
iii. The number and value of units at the end of the statement
period;
iv. Charges incurred during the statement period;
214
B.
B. Statement
Statement to
toPolicy
PolicyOwners
Owners
v.
Total amount of premium received during the statement

period;
vi. The current death benefit and surrender value at the end of
the current period;
vii. The amount of outstanding loans, if any, at the end of the

statement period; and
viii. Any other information that BNM may from time to time deem
necessary.
215
C.
C. Fund
FundPerformance
PerformanceReport
Report to
toPolicy
PolicyOwners
Owners

i.
A summary of the audited financial statement of the fund;
ii.
Trend analysis of not less than 5 years, where available, on the net
investment return of the fund;
iii.
Composition and list of investments held by the fund as reporting

date;
216
C.
C. Fund
FundPerformance
PerformanceReport
Report to
toPolicy
PolicyOwners
Owners

iv.
Any charges levied against the fund during the year;
v.
A statement on changes in the investment objective, orientation,

restrictions and limitations, during the year consistent with the
original intent; and
vi.
Any other information that BNM may from time to time deem
necessary.
217
Chapter 11:
Identifying and Establishing
Customer Needs
11.1 Introduction
Process of providing effective advise
e) Discuss possible recommendations
f) Implementation of the agreed recommendations
g) Monitoring the portfolio
219
11.2 Establish relationship with the client
to convince the client that he can assists to fulfill his

financial goals.
It is a step to do a preliminary screening of clients financial

objective and goals
220
11.3 Gathering all relevant financial data
Conduct a fact-find exercise to obtain all relevant data

before making recommendations

Mandatory to fill up Customer Fact Find Form (CFF)
The CCF helps the agent to ascertain the clients

financial situation and establish the clients needs
Understand the of customers present situation
Help customer to achieve goals and objective
221
11.3 Gathering all relevant financial data

Life and financial priorities and goals
Recommendations
and
record of advice
CFF
Net Worth
Analysis
Risk profile
Cash Flow Analysis
Customers personal and

dependents details
222
11.4 Establishing current financial position and goals
Analyse data
Establish
Current financial
position
Future goal
A blue print for

recommendation
223
11.5 Developing plans and strategies to meet the goals
Develop pertinent plans that help client to realise his goals
Recommendation that will satisfy the clients need in area like:
a) Adequate insurance coverage

b) Planning for childrens education
c) Retirement planning
c) Assets Accumulation
d) Estate planning
224
11.6 Discuss possible recommendations

Agent must understand that a plan that has been developed is
unique only for a particular client

Discuss in detail about the plan
No
Any
Changes
Yes
Implement
Change and
reconfirm
225
11.7 Implementation of the agreed recommendations
Put into effect all the recommendations that have been agreed
to
Any changes must be communicated to the client
226
11.8 Monitoring the portfolio
Monitoring the clients policies is a very important function in

an agents scope of work
Agent should :
Inform client progress of policies
Make sure client receives quarterly or yearly report
227
11.8 Monitoring the portfolio
Make the necessary switching and adjustment ensure that the client
gets the best return
,
Do a policy review on half or yearly basis
Regular reviews will help agent to:
1) Obtain quality referrals from the clients
2) Allow agent to be in place to do cross selling of other insurance

related products
228
Chapter 12:
Marketing and After Sales Service,
Ethics and Code of Conduct
,

Introduction
Marketing
Marketing
The management process responsible for identifying,

anticipating and satisfying customers requirements profitably
,,
230
Marketing
In the past,
Sales
Sales
oriented
oriented
Hard sales
techniques
Customers
Customers
Company
Company
Product
Product
??
Do not understand the policy

Do not meet their needs
Can not afford to pay
* Owing to changes in the market environment, many insurance

companies have became market-oriented.
231
Marketing
Functions undertaken by a market-oriented insurer
:
Planning and control

Market identification
Product Development
Selection of distribution channel
Promotion
232
A Market Oriented Agent

Objectives
:
1. Satisfying customers requirement & needs
2. Earn an income for himself
Sales
plan
Sales goal
Objectives these can be in term of target market
-
Sales strategy
Implementation and control
233
A Market Oriented Agent

An agent who is market oriented, is required to know:
Product Knowledge
Market Knowledge
Knowledge of Buying Process
Knowledge of Selling Process
Selling Technique
234
Customer Buying Decision Process
1. Problem
Recognition
5. Post- purchase
evaluation
4. Purchase
2. Information
search
3. Evaluation of
alternative policy
235
The Selling Process

Locate the
prospect
customer
Close the
sales
Handle
objection
Create a
sales
presentation
Conduct the
sales
interview
236
After-Sales Services
After
Aftersales
salesservices
services
Follow-up
Follow-upstage
stage
Remain
Remainsatisfied
satisfiedwith
withthe
thepurchase
purchase
After-sales
After-salescalls
calls
Reduce
Reducecognitive
cognitive dissonance
dissonance
Agents specific responsibilities

a. Make sure the application is complete and all the proposers
answers have been recorded accurately and clearly;
b. Provide timely response to any applicant or company questions or

requests
237
After-Sales Services
t!
o
H
The delivery of a policy gives the agent opportunity to:

:
Dispel the customers cognitive dissonance
Provide a basis for future sales

Re-emphasize the insurance agents commitment
Encourage the policy owner to call the agent if the policy owner
has any problems or questions
Explain the policys provisions, terms and conditions
Obtain referred leads

Strengthen the customer relationship
238
12.3 Ethics And Conducts

Ethics
Behaving
Behavingin
inIntegrity
Integrity,
,
Compliance
Complianceto
tothe
theBest
BestPrinciples
Principles&&Practice
Practiceof
ofFinancial
Financial
Advice
Advice
Behaving
Behavingin
inProfessional
Professional&&Honourable
HonourableManner
Manner
Observe
Observe&&Apply
ApplyThe
TheCodes
Codesof
ofGood
GoodPractices
Practices
239
LIAMs Guidelines On The Code Of Conducts
LIAMs guidelines are provided under the following headings:

:
Part
PartIIGuidelines
Guidelineson
onthe
theCode
Codeof
ofConducts
Conducts
1
1-
Part
PartIIIILife
LifeInsurance
InsuranceSelling
Selling
2
2-
Part
PartIII
III Statement
Statement of
ofLife
LifeInsurance
InsurancePractice
Practice
3
3
-
-
240
LIAMs Guidelines On The Code Of Conducts
Part I- Guidelines on the

Code of Conduct
Part II - Life Insurance

Selling
Part III - Statement of

Life Insurance Practice
1
-
Introduction
Statement of philosophy Introduction
General sales principles Claims
Coverage
Proposal forms
Explanation
Monitoring devices
Policies &
Seven principles of the

guidelines
Code of conduct
Disclosure of
underwriting information
Accounts & financial

aspects
accompanying
documents
Sales materials/
advertisements
/
241
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CEILLI Examination Revision

Learning & Development Department, Sales & Distribution Division (Life)

2. Key Considerations In Investment

6. The Structure of Investment-Linked Life Insurance Funds

8. Benefits and Risk of Investing In Investments Linked Funds

9. Investment-Linked Life Insurance Product

10.Taxation And Law Covering Investment-Linked Life Insurance Product

11.Identifying And Establishing Customers Needs

Refers to the same thing

Key Considerations in Investment :

2.1 Investment Objectives

2.1 Investment Objectives

3 fundamental characteristics of investment vehicle:

2.1 Investment Objectives

Example :i. Government bonds or sukuk bonds

ii. Treasury Bills or Fixed Deposit account

2.1 Investment Objectives

2.1 Investment Objectives

2.1 Investment Objectives

2.1 Investment Objectives

Funds for dependents

2.1 Investment Objectives

Depends on the objectives

2.2 Fund Available

2. Have to do a Cash Flow and Net Worth analysis

Have enough money to put aside for investments

2.2 Fund Available

5,000 Rental / Housing Loan Payments

1,000 Childcare / Parents allowance

1,000 Education Expenses

500 Groceries and Utilities

Loans (Car, Credit Card etc)

Thus, by this simple analysis we can identify that, this client

2.2 Fund Available

2.2 Fund Available

220,000 Housing Loan Balance

30,000 Car Loan Balance

20,000 Credit Card Balance

1,500 Personal Loan Balance

Client have Positive Net Worth position by subtract

2.2 Fund Available

RM291,500 RM265,500 = RM26,000

Warrant Buffet advises you need to first set

2.3 Risk or Security

Will be able to determine how best to allocate your

2.3 Risk or Security

2.3 Risk or Security

2.3 Risk or Security

Low risk / Conservative

2.4 Investment Horizon

Investors income needs

ii. Desired risk exposure

2.5 Accessibility of Funds

2.6 Taxation Treatment

The tax status of

More details in Chapter 10 10

2.7 Performance of the Investment

History of the invested

It reduces risk with small reductions in return

Eggs In One Basket

Types of Investment Assets

3.1 Cash and Deposits

3.1 Cash and Deposits