FIN533 October 2021 Group Assignment - Iceps PDF

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BACHELOR OF BUSINESS ADMINISTRATION (HONS.) MARKETING-BAFIN533 - PERSONAL FINANCIAL PLANNINGTITLE: REPORT ABOUT INSURANCE PLANNING & CONSUMER CREDITPREPARED FOR:DR. NORLIZA BINTI CHE YAHYAPREPARED BY:NAME MATRIX NUMBERNORHAZWANI FUZINUR FARAHWAHIDA BINTI KAMAL ARIFFINNURHANI IZZATI BINTI MOHD SA...

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BACHELOR OF BUSINESS ADMINISTRATION (HONS.) MARKETING-BA240 FIN533 - PERSONAL FINANCIAL PLANNING TITLE: REPORT ABOUT INSURANCE PLANNING & CONSUMER CREDIT PREPARED FOR: DR. NORLIZA BINTI CHE YAHYA PREPARED BY: NAME

MATRIX NUMBER

NORHAZWANI FUZI

2019842544

NUR FARAHWAHIDA BINTI KAMAL ARIFFIN

2020394873

NURHANI IZZATI BINTI MOHD SABRI

2018839096

RAJA MUHAMMAD HAMIZAN BIN RAJA AHMAD

2020274352

HALIMATUL SAADIYAH BINTI ZAINAL

2020178221

SUBMISSION DATE: 30 JANUARY 2022

ACKNOWLEDGEMENT In the name of Allah, the most Gracious yet the Most Merciful, all praises to Him for giving the strength and His blessing to us in completing this assignment without having to face any barriers or burden. The final outcome of this assignment is possible due to a lot of support and encouragement from people around us, either directly or indirectly. First of all, we would like to express our profound thanks to our lecturer, Dr. Norliza Binti Che Yahya for her valuable guidance and assistance especially during the process of completing this assignment. We are beyond grateful to be blessed with such a supportive and helpful lecturer like her for this subject. Next, special appreciation to our family members for the endless love and prayers that they have given to us. We are very much thankful to them for helping us indirectly in completing this assignment. Last but not least, we would like to express our sincere gratitude to our dearest classmates who have been very helpful to each other since day one.

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SUMMARY This report contains the importance of insurance planning and consumer credit. Under this report we will discuss the importance and current issue in insurance planning and consumer credit. Apart from that we will also discuss the statistical information and any other related issues that we found in this report. Covid-19 has made us aware of how important insurance is in our daily life. Insurance is not only about life insurance it's also related to medical protection, critical illness protection, savings & investment and also accident protection. Consumer credit is personal debt taken on to purchase goods and services. A credit card is one form of consumer credit. Although any type of personal loan could be labeled consumer credit, the term is more often used to describe unsecured debt that is taken on to buy everyday goods and services. Last but not least in this report we will share the statistics on insurance and consumer credit during this pandemic either increasing or decreasing.

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TABLE OF CONTENT

ITEM

PAGE

Acknowledgement

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Summary

2

Table of content

3

Insurance planning ● Introduction ○ Background

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○ Purpose

5

● Body ○ Importance ○ Current issues ○ Statistical information

5 6-8 9

Consumer credit ● Introduction ○ Background ○ Purpose

10-11 11

● Body ○ Importance

Conclusion Recommendations References

12

○ Current issues

12-13

○ Statistical information

13-14 15 16-17 18

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INSURANCE PLANNING

Introduction of insurance planning Insurance planning is to protect yourself, your family and loved ones, your home, your assets, or your business against unexpected events. The idea behind insurance is to get a group to contribute financially to a fund specifically designed to help individuals recover in the case of an unexpected loss. Insurance is a key for you to be more focused on the important things in life. This is because it will ensure financial security for you and your family if unfortunate things happen. Such as, when large financial burdens like hospital bills or medical charges arise, insurance helps meet the costs and allows you to pursue your dreams. It is one of the efforts to reduce uncertainty. Types of Insurance 1. Life Insurance : Life insurance is what we can avail in order to safeguard our family in

case of our death during the tenor of the policy. The most basic form of life insurance available to buyers is term insurance. Life insurance helps secure your family financially with a lump sum amount that is paid out in the event of the policy holder’s death within the policy period 2. Health Insurance : This is purchased for covering medical expenses revolving around various health issues, including hospitalization, treatments and so on. These insurance plans come in handy in case of medical emergencies; it can also avail of cashless facility across network hospitals of the insurer. 3. Child Plans : These insurance policies are savings instruments that help in generating lump sum funds whenever children reach a certain age for pursuing higher studies. In these plans, the life assured is that of the child or the recipient of the funds while the parents are the policy owners. 4. Home Insurance : These insurance plans cover any damages to the home on account of accidents, mishaps and natural calamities, among other such events. 5. Auto Insurance : These are insurance plans for vehicles, including cars and bikes. These offer protection against natural calamities, damages to third parties (people who have

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incurred losses or been hurt in an accident with the policyholder’s vehicle) and also damages to the vehicle along with mishaps and accidents.

Purposes of insurance planning Insurance planning is a critical component of a comprehensive financial plan that includes evaluating risks and determining the proper insurance coverage to mitigate those risks. The principal goal of insurance planning is to identify and analyze risk factors in life and seek proper coverage to attain a peace of mind if disaster strikes. The chances of recovering partly or fully are assured by having insurance. Therefore, insurance is an economic device transferring risk from an individual to a company and reducing the uncertainty of risk via pooling.

Importance of insurance planning Insurance plans are beneficial to anyone who are looking to protect their family, assets/property and themselves from financial risk/losses: Insurance plans will help you pay for medical emergencies, hospitalization, contraction of any illnesses and treatment, and medical care required in the future. There are five (5) importance of insurance planning which is beneficial to you. Insurance planning can give protection to you and your family in terms of financial. For example, if any unexpected events occur which need a large amount of money, insurance can be covered for you and you can only focus on you, your family and other issues. Besides that, you can reduce stress during difficult times.

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Current issues

Year of 2020 is the world's battle with the Coronavirus or Covid-19. The first public messages about the virus was on December 31, 2019. Media statement has been made by the Wuhan Municipal Health Commision from their website on cases of “viral pneumonia” in Wuhan. Malaysians were also affected by the Covid-19, and the first case detected in Malaysia was on January 24, 2020.

The case did not end there, Malaysia reported the first death from Covid-19 was on March 17,2020. Malaysia experienced Covid-19 cases which increased drastically. The result led to a nationwide lockdown known as the Movement Control Order (MCO) starting March 18,2020 and it’s announced by Prime Minister Tan Sri Muhyiddin Yassin. Besides that, the symptoms of Covid-19 have been provided by the Ministry of Health (Malaysia), as per picture 1. This is for Malaysians to be more aware about the virus.

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Picture 1: Symptoms of Covid-19

As per current issue on the above, we can see that Covid-19 is one of the risks that we can’t predict. It cannot be seen nor avoided. As we all knew, until January 2022, everyday there are new positive cases and deaths because of Covid-19. However the number of people affected is not as high as before. It is shown in graphs 2

and 3.

Graph 2: Daily New Cases in Malaysia

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Graph 3: Daily New Deaths in Malaysia The virus can be affected by anyone. This is because the virus can separate easily through surrounding us. Some individuals might have financial issues when they are facing with Covid-19, because it can affect our daily activities, our income and our health. There are (2) types of people who are positive with Covid-19, either their body can easily deal with it or it can make their health become worse. These are the issues why insurance planning is vital for each of individuals.

The Covid-19 pandemic has given the insurance industry a chance to prove its worth, but has also demonstrated that the industry must become more efficient in order to meet the evolving needs of its clients. This pandemic has presented all types of business either big or small unpredicted challenges. The Covid-19 pandemic pulled apart strong constructs that had been built over decades within just a few weeks. It revealed vulnerabilities and fragilities in sophisticated global supply chains.

Employees were restricted to work remotely or exposed to new social distancing and safety measures when at the workplace. Whilst companies had expected a pandemic event to enter the world stage at some point, hardly anyone was prepared. For the corporate insurance industry, the pandemic has given the opportunity to support companies, through claims payments and advice to help navigate the impact of the crisis.

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Statistic Life Insurance in Malaysia

The table shows that the total number of bank employees who are selling life insurance in Malaysia amounted to around 17.3 thousand people. It shows a general insurance agent is to obtain insurance business from customers or prospects of the insurance company.

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CONSUMER CREDIT

Introduction on Consumer Credit Consumer credit is defined as personal debt that is taken on to purchase goods and services. A credit card is a common form of consumer credit. Consumer credit can also be known as consumer debt. Although personal loans are considered as consumer credit, it is more often used to describe unsecured debt that is taken on to purchase everyday goods and services. Credit, when handled correctly, may be a useful and efficient financial tool. Credit is the American way of life, from a basic credit card to an auto or home loan. Cashless transactions are quickly becoming the norm, and credit cards are one of the most widely used. Understanding credit is necessary in order to take advantage of credit and avoid the frequent financial trap of debt.

Types of Consumer Credit ● Installment Credit It is used for a specific purpose and is issued at a fixed amount over a specified timeline. Payments are usually made monthly in equal installments, and are issued for major purchases such as appliances, cars, and furniture. Installment credit is usually offered at a lower interest rate as an incentive to the consumer, and the item purchased serves as collateral should the consumer default in paying the installment.

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● Revolving Credit An example would be credit cards, where it can be used for any purchase. The credit is “revolving” as the line of credit remains open, and the consumer can use the credit to it is maximum limit, as long as the borrower pays the minimum amount every month. This type of credit is available at a higher interest rate as it is not secured by a collateral.

● Charge cards This type of credit is frequently confused with a revolving credit card. The main distinction between a credit card and a charge card is that a credit card can hold a balance, whereas a charge card must be paid in full each month. Penalty fees will be imposed if the amount is not paid on time and in full. An example of a well-known charge card is American Express. This type of credit is beneficial in terms of avoiding credit card debt.

● Non-Installment or service credit The borrower can use this type of credit to pay for a service, membership, or other item at a later period. Payment is usually required the month after the service, and overdue accounts are subject to a charge, interest, and/or penalty charge. Nonpayment will result in service termination and may be reported to a credit bureau, negatively impacting your credit score. In our daily lives, services or non-installment contracts are fairly prevalent. Service credit includes things like cell phones, gas and electricity.

Purpose of Consumer Credit

Consumer credit is usually offered by banks, retailers and others to enable consumers to purchase goods immediately and pay off the cost over time with interest. Generally, it is divided into four categories - installment credit, revolving credit, charge cards and noninstallment or service credit. 11

Consumer credit allows people to secure a loan against their future earnings in order to buy goods and services. That can be lifesaving in an emergency, such as a car breakdown. Because credit cards are relatively secure to carry, the United States is quickly becoming a cashless society, with people relying on credit for both major and small purchases. Consumer credit on a revolving basis is a lucrative business. Consumer credit is available via banks and financial organizations, department stores, and a variety of other enterprises.

Importance of Consumer Credit

The existence in the concept of credit enables business transactions to take place efficiently and the economy can grow. Credit helps companies have access to tools that they need to produce the things we buy. A business that doesn’t enter into credit might not be able to buy the machines and raw goods or pay the labor needed to produce products and make a profit.

Credit also gives access to the majority to purchase the things they need. For example, a house or a car that is usually nearly impossible to pay all at once. With credit, this enables them to purchase these items and pay them over time, with interest.

Current issues on consumer credit

In this pandemic, the unprecedented spike in unemployment has big consequences on people financially. Banks have been through a variety of crises as in recent times, so top management has developed muscle memory. However, there are numerous differences from the previous storm in 2008, meaning that old playbooks would only get you halfway there.

Without discounting the enormous public health and larger economic ramifications, which are rightfully the top priority of many, a tremendous effort is required to solve the practical challenges at the heart of the conflict in day-to-day bank credit operation and risk 12

management. Bank institutions are able to help their customers with a moratorium if they do not pay their loan for about 6 months. Government gave an approval issue to take money in KWSP about RM 5,000 with the i-citra program.

The Consumer Credit Act will be enacted in 2022 by Bank Negara Malaysia (BNM), with the goal of enhancing regulatory provisions for all consumer credit activities, including suppliers of "Buy Now Pay Later" programmes. The central bank would work with the Ministry of Finance (MoF) and the Securities Commission (SC) to pass the Act, according to Bank Negara Malaysia governor Datuk Nor Shamsiah Mohd Yunus. BNM is working with relevant authorities to keep track of changes and educate the public about BNPL schemes, she said, but the share of credit given to households and the schemes is still tiny. The introduction of a Consumer Credit Act, planned in Budget 2021, aims to create a legal framework for consumer loan issuance while also enhancing control of non-bank credit providers.

According to a report, in the United States, credit access declined during the pandemic for credit cards, but increased for mortgages and auto loans. In a report released by the Consumer Financial Protection Bureau in August 2020, there was no reduction in available credit card credit. However, credit limit increases were halted since the start of the Covid-19 pandemic.

Statistic Consumer Credit in Malaysia

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The table shows the data for Malaysia consumer credit, billion currency units in Malaysia from December 1996 to November 2021. The average value in the table during that period was 231.66 billion Malaysia Ringgit with minimum of 56.74 billion in December 1996 and maximum 435.66 billion Malaysian Ringgit in December 2020. It shows loans provided by commercial banks to households or individuals for purchase goods and services. Due to expected improvements in macroeconomic factors such as employment and GDP, access to credit cards and personal loans was expected to rebound in the first half of 2021. However, while some consumers may have overextended themselves and will struggle to make monthly payments once government assistance program end, many will seek loans again, sending their balances back up. Credit card loans declined in 2020 at both small and large banks, with large banks accounting for the majority of the volume fall. In the meantime, auto loan growth slowed in March and April 2020, but picked again in the second part of the year as new and used car sales restarted.

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CONCLUSION

Insurance planning shows that one of the importance in our life, it can be a backup plan or money if something bad happens. That can give protection to family and other assets or business, it can ease financial burdens that can occur when disaster strikes. But the person or company must really understand their insurance plan before they purchase the insurance policy. It will affect what they need or protect. Even though most of us understand the importance of insurance, purchasing a policy isn't always a top priority. It also doesn't appear to be as simple as achieving other financial objectives, such as increasing your emergency fund by having funds automatically put into your savings account.

Buying insurance encourages you to contemplate the worst-case scenario, such as losing your home to a fire or flood. Some people are immobilized by dread and avoid discussing insurance at all costs. Consumer are similarly uneducated when it comes to the subject of insurance. It's difficult to navigate the insurance market, and policies don't always provide the protections that customers anticipate. As a result, many people lack the necessary insurance coverage.

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Consumer credit shows an arrangement to receive cash or loan. It needs to be paid in a long term that can affect some financial individual or company. An individual or company must control their finances and study what they need. The important thing must be to focus on consumer credit because it increases consumption by increasing its purchasing power. For nearly four thousand years, governments have regulated personal credit and people have weighed the costs and advantages. Even though the mechanics of the procedure haven't changed, the economics of personal credit haven't. People borrow when they believe the modifications in the mix and timing of their purchases will be worth the extra costs.

RECOMMENDATIONS

Insurance is important because it can help to provide financial security for our family when it's needed most. It depends on the family's financial support to enjoy a decent standard of living and that is important once we start a family. When we take an insurance it can reduce stress during difficult times because none of us know what lies around the corner and we also cannot know tragedies such as an accident or death that can leave our family facing tremendous emotional stress. Wi...