by Ho Chung Teng

TUNE Protect Group Bhd is looking to re-price some of its products to minimise future negative impact from large, one-off claims. Its group CEO Razman Hafidz Abu Karim tells FocusM its motor, flood and fire products will undergo a price underwriting strategy.

Higher-than-expected personal accident claims as well as claims from its motor and property business saw the company’s FY17 net profit decline to RM50.02 mil from RM86.58 mil in the previous corresponding period. For Q4 ended Dec 31, 2017, its net profit declined by 49.52% to RM8.35 mil from RM16.54 mil a year earlier. This is despite an improved operating revenue (OR) of RM138.52 mil from RM135.46 mil last year.

The company attributed the lower Q4 net profit to a decrease of RM3.95 mil in net premiums earned, mainly from the Middle East general reinsurance market and motor class of general insurance business, as well as an increase of RM5.44 mil in management expenses mainly due to provision for impairment on receivables and administration expenses.

Razman also attributes the weaker Q4 results to flooding claims along with a large personal accident claim. “I call it an unanticipated large claim (that) came to about RM4.5 mil,” he says. Motor claims have been a drag since early 2017, he adds.

Subsequent to the announcement of Tune Protect’s Q4FY17 results on Feb 28, the insurance company’s share price declined to a 52-week low of 70.5 sen on April 25 from the closing price of RM1.01 on Feb 28.

When asked why Tune Protect failed to protect itself against such high claims risk, Razman says it is hard for the company to identify such risks. “Someone said this is all in the underwriting, but it is easier said than done. For floods, you might be protected (by low claims), but in areas that never flooded before, they now flood,” he explains.

To better prepare itself moving forward, Razman says Tune Protect will need to up its game in terms of underwriting. “We have to anticipate the unexpected.”

As such, the company is looking to shift its focus to non-motor products. “It’s not to say that we are ignoring motor, but we do not intend to just go on like some of our peers, pure motor. Overall it (motor) is a very difficult line of business to underwrite, but there are (other) profitable lines,” Razman adds.

Plans for 2018

For Q1FY18, Tune Protect’s net profit improved to RM16.57 mil from RM11.93 mil in the previous corresponding period, with OR increasing to RM142.95 mil from RM130.08 mil last year. Its gross written premium (GWP) rose to RM171.3 mil from RM162.9 mil.

The company attributes the strong Q1 results to positive top-line growth with GWP and OR rising by 5.2% and 9.89% year-on-year respectively.

It says the GWP growth was contributed primarily by the digital global travel business and growth in the existing motor portfolio in the general Insurance business.

The company adds that the improved net profit was due to a decrease in net claims of RM5.87 mil due to favourable prior years’ claims development, closure of time-barred claims on inward treaties in the general insurance segment and a decline in provision for doubtful debts by RM2 mil.

Razman says for this year, Tune Protect is projecting a double-digit GWP growth backed by the introduction of a slew of projects. He adds that such growth will be derived from two core businesses – global travel and general insurance.

Among the plans in place are; introducing travel and Haj Takaful products, enhancing dynamic pricing, collaborating with a peer-to-peer UK-based Insurtech company, product bundling, signing with a fifth airline partner, partnering with Fomema and Kopima Bhd for mass acquisition and improving customer experience.

For its global travel segment, Razman says growth from this business line will be backed by the continuation and improvement of its bundling and dynamic pricing initiatives. He says Tune Protect introduced two Takaful products last month by partnering a Takaful operator in Bahrain.

“We are currently working on it (takaful products) to expand it into four other markets through the year. We are (also) looking at Indonesia. So with these two key initiatives, we expect GWP to grow,” he adds.

On dynamic pricing initiatives, Razman says this is an initiative Tune Protect started last year and it has yielded some positive results. However, it is only being done with airline partners.

The dynamic pricing strategy will require Tune Protect to engage a third party vendor. The pricing move will hopefully be completed by next year and assist in improving the GWP.

As for airline partnerships, Tune Protect has partnered AirAsia, Cebu Pacific, Air Arabia, Cambodia Angkor Air and recently, Kuwait-based Wataniya Airways.

“(Wataniya Airways) evolved from our Middle East entity. It is new and there is a bit of work in terms of IT and integrating our systems and so on. Hopefully, by the end of Q2, we will be able to launch this business,” Razman adds.

The move to team up with airlines will benefit shareholders, as Tune Protect’s global travel segment contributes the lion’s share of between 60% and 70% to the company’s bottomline.

Razman shares that a high percentage of its global travel business is derived from its related party, AirAsia.

From a topline perspective, global travel insurance contributes about 20% of Tune Protect’s revenue. Razman explains that the higher bottomline contribution from the segment is due to travel insurance traditionally enjoying a low claims ratio.

“Even with our operating costs, we enjoy a healthy margin. That’s why it contributes quite a high figure to the bottomline as opposed to some other lines of business.”

General insurance on mass acquisition move

For its general insurance segment, Razman says Tune Protect is working with various parties for critical mass acquisition to back its GWP growth. Among the recent partners it gained are the Foreign Workers’ Medical Examination (Fomema) and Koperasi Institut Memandu Malaysia Bhd (Kopima).

Fomema is Malaysia’s largest foreign workers’ agency that deals with all the workers’ medical related issues. It has about a million workers registered with it, and over 1,000 sign up at its portal daily.

As for Kopima, a driving institution cooperative, Tune Protect seeks to provide coverage for all its driving students for accident and health insurance.

Besides partnering with a large association or cooperative, Razman says Tune Protect is also looking to acquire a UK-based peer-to-peer Insurtech company.

He declines to share the acquisition cost, saying that it is insignificant. “It’s immaterial to our balance sheet. It’s from our own internal funds, so it’s manageable. It is not going to be a significant stake, just sufficient for us to leverage.

“What we are hoping from this investment is to leverage on the technology and the insurance experience and bring them to this part of the world,” Razman adds. The acquisition of the Insurtech entity is targeted to be completed by Q2.

On its earlier joint-venture deal in Indonesia, Razman says that the deal had ceased earlier. However, he adds that Indonesia remains on Tune Protect’s list of countries to expand into. “It’s a market that we cannot ignore. AirAsia flies there and it’s our third-largest market where global travel is concerned.

IT insurance company

“We are constantly looking for opportunities. We are working to enter there but as you know, we have regulatory challenges there, and we have not found a right fit yet,” Razman explains.

On customer experience, he says one of Tune Protect’s key initiatives is to facelift its branding to focus on the mobile and tech-savvy generation as the company wants to be a fresh young entity targeting the millennials.

“There has been an increase of US$1.5 tril (RM5.96 tril) in revenue during the period 2014-2018 in e-commerce and online retail, so the projected growth is to US$4.8 tril by 2021,

“We want to be part of that growth. In Asean, the e-commerce industry in 2017 was about US$13 bil and is expected to be worth about US$88 bil in 2025. Global mobile penetration has risen from 12.4% between 2014 and 2018. That’s why we are adopting the strategy that we are having at the moment,” Razman elaborates.

In the next three years, Tune Protect has earmarked RM25 mil worth of capital expenditure for digitalisation.

Razman adds that Tune Protect today has evolved from being an insurance facilitator for its biggest airline partner AirAsia and putting travel insurance on the map, to having investments in general insurance entities in Malaysia and Thailand.

For its forward strategy, Razman says Tune Protect has three main pillars. The first is product differentiation and information, the second to widen its distribution channels to expand reach and thirdly, to provide exceptional customer experience.

On customer experience, Razman says Tune Protect is looking to launch “protection on-the-go” within the next six months, subject to regulatory approvals. He says it will offer products which are simple to purchase and claim and also innovative ones such as on-demand products. FocusM