Kurnia Group
Shaping up for better times ahead
THE STAR - Saturday, January 3rd, 2009
By ERROL OH
Kurnia Asia streamlining its insurance businesses
WHO says corporate annual reports are necessarily dry and drab? Kurnia Asia
Bhd's annual report 2008 includes illustrated origami lessons that guide you
on how to make paper boats, cranes, hearts, planes and stars. It sounds frivolous
but it fits the theme, "The Shape of Great Things to Come".
The insurance company starts the report by talking about changing its culture
and philosophy, and how it reaches out to customers.
It says: "Seeing things afresh, and acting upon them is akin to a blank sheet
of paper, ready to be folded, shaped and transformed into a variety of fascinating
forms." It adds that transformation is the only way to go. Few people will
dispute that.
The financial year ended June 2008 (FY08) is a year to forget for Kurnia Asia.
Less than four years after its listing on the main board, it reported a net
loss of about RM300mil, due mainly to an underwriting deficit of some RM400mil.
One worry is its dependence on motor insurance, which is stifled by a high
ratio of claims and the dim outlook for the motor vehicle sector. Although
Kurnia Asia bills itself as Malaysia's largest general insurer, it derived
over 86% of its gross premium income in FY08 from the motor business.
It needs to expand its presence in the non-motor segment and tighten up its
motor insurance operations. That is a job for its largest subsidary, Kurnia
Insurans (M) Bhd, considering that Malaysia accounted for nearly 97% of Kurnia
Asia's FY08 revenue.
The group stuck to the transformation theme when it appointed Capt K.H. Chia
as the chief executive officer and managing director of Kurnia Insurans last
July.
The 30-year veteran of the insurance industry - he started as a life insurance
agent and was previously the CEO of Citic-Prudential in China - is given the
task of hauling Kurnia Insurans (and by extension, Kurnia Asia) out of the
red.
Chia made up his mind to join the group after talking to Tan Sri Kua Sian
Kooi, who is chairman of both Kurnia Asia and Kurnia Insurans. "He was very
honest with me and he said the company was not in good shape at all. It needs
to be turned around," Chia recalls.
He says two factors prompted him to say yes. One was Kua's commitment to the
business. The other was Chia's lifelong love for taking up challenges.
The dream team
It also helped that the plan to reshape the group was already in motion before
Chia was recruited. Management consulting firm McKinsey & Co was hired two
years ago to provide advice and that led to the launch of Kurnia Asia's Transformation
of Operations and Performance (TOP) programme in July 2007.
Says Chia: "Another thing that convinced me was he (Kua) showed me the thick
report by McKinsey. I agreed with a lot of things inside the report. These
are critical areas and it's challenging to execute the recommendations."
His first 100 days at Kurnia Insurans was undoubtedly a busy period. He learnt
more about the business, set goals and strategies, and brought together the
top executives who would support him in leading the insurer.
The last was especially important in Chia's books. "I'm a strong believer
in people. Without good people, without a good management team, there's no
way you can get things done," he explains. "Without delay, we had everybody
on board within the first 100 days."
The team is a blend of familiar (including those who came from the holding
company) and new faces, and the structure reflects the changes in direction.
An indication of the group's intent to become less reliant on its motor portfolio
is the fact that it now has a general manager (GM) in charge of the non-motor
products. It is also looking to strengthen the selling of its products by others.
Hence, it has GMs to oversee agency distribution and alternative distribution.
When assembling the team, Chia felt it was important to have an impressive
line-up and thus has identified people who are well-regarded in the industry.
It is no wonder then that Kurnia Asia's management expenses for the first
quarter ended September 2008 increased 2.7% from a year ago, largely because
of the expansion of the Kurnia Insurans' senior management team.
"I wanted the wow effect. Anybody looking at the team and at the individual
expertise today, will go, 'Wow!' They are among the best in the market. This
will strengthen people's confidence in and respect for the company, moving
forward," he says.
Non-motor expansion
Of course, the names of the top guys will not mean much to Kurnia Insurans'
policyholders. For them, the hope is that the management changes will translate
into better customer experience.
Chia says that has already begun with initiatives such as improvements in
service quality (particularly in areas such as claims processing) and the introduction
of new services.
"To make headway, we have to make sure in the fastest time that we can make
an impact in service delivery. If we don't, people won't feel it and they won't
know (about the changes at Kurnia Insurans)," he adds.
For example, in November, the company relaunched its Kurnia Express claims
service (which promises immediate settlement of certain motor insurance claims)
and enhanced the Kurnia Auto Assist service by deploying employees on motorcycles
to assist policyholders suffering vehicle breakdowns.
On the growth of its non-motor portfolio, Chia says: "The Kurnia name is synonymous
with motor and that is not healthy. We need to transform the company so that
Kurnia will be THE general insurance company in Malaysia. We want to change
people's perception, that Kurnia is good not only in motor, but also in non-motor."
That requires Kurnia Insurans to acquire the competencies, capabilities and
flexibility to underwrite and manage claims in the non-motor business. Without
these, Chia points out, the company cannot go to the market and ask people,
especially its agents and brokers, for support.
It will take time, but there are some quick fixes to aim for along the way.
One of them is to leverage on the insurer's customer base of almost 3.5 million.
Says Kurnia Insurans GM, non-motor products, T. Sivapalan: "We can cross-sell
our non-motor products to existing clients and we can go through our agents.
We will also use our contact centre, which will start operating this month.
"The agency base will still be our core. At the moment, agents make up 60%
of the non-motor business in the market. We have about 7,000 agents. We will
diversify to be a complete insurer to all Malaysians."
The efforts to diversify will also cover the distribution channels. Says Chia: "In
the past, 95% of our business depended on agencies. We need to set up alternative
distribution channels, for example, through the brokers, banks and contact
centres."
Plugging leakages
Not all the attention will be on the non-motor division. There will be hard
work on the motor business as well, with a focus on risk selection and claims
management.
For one thing, the insurer will be very choosy about underwriting policies
that offer low premiums but high risks, such as third-party insurance for motor
vehicles. "We know for sure that we can't make money at the current premium
rates that we charge. So we don't want these," says Chia.
"We need to make our agents understand about risk selection and getting the
right type of business. If it's business that we don't want, we just have to
politely turn it down. We are not a rubbish dump. We can't take in everything."
Such a stance will have an impact on the company's revenue, which is why Chia
anticipates that Kurnia Insurans will see its topline declining or flattening
in the near-term.
He argues, "We are not managing for growth. We don't want to be greedy for
business that can't make profits. In fact, I've told the analysts that if they
see us not growing in the next two years, that's a good sign, that we are doing
the right thing."
On claims management, Chia says the emphasis is on stemming leakages such
as fraudulent claims and car theft. It is about boosting the company's effectiveness
and efficiency in this area by improving the controls, workflow, expertise
and speed of investigations.
Other recent steps are to make better use of its large amount of data to support
its underwriting guidelines and to trim the company's investment exposure to
equities.
He points out that after its poor showing in FY08, Kurnia Asia's best bet
for restoring confidence is to stage a steady and sustainable turnaround.
The global economic slowdown does not make things any easier. Says Chia: "I
don't deny that it's getting tougher and tougher. It's a real test of our skills
and discipline in management. When it gets tougher, the best people will relish
the challenge and do better than the rest."