Malaysia: Central bank aims to promote microtakaful under low-cost insurance framework
Source: Middle East Insurance Review | Jan 2021
Bank Negara Malaysia (BNM) has released an exposure draft seeking to promote more innovative, sustainable and inclusive insurance and takaful business models.
The exposure draft sets out the proposed requirements and guidance in providing microinsurance/microtakaful products under Perlindungan Tenang, said the central bank.
Perlindungan Tenang is an initiative launched by BNM in 2017 in collaboration with the insurance industry, with the objective of expanding insurance and takaful solutions targeted at the unserved and underserved segment, particularly the bottom 40% of households (B40).
The exposure draft provides for enhancement to the existing framework aimed at achieving the following:
- Promoting greater and more meaningful microinsurance/microtakaful take-up through more robust requirement on product development and enabling product combination;
- Promoting wider distribution channels to address challenges associated with high distribution costs through greater operational flexibility; and
- Strengthening consumer protection to safeguard consumer interests.
Since the launch of Perlindungan Tenang, the progress on the initiative has been encouraging, with a total of 13 licensed insurers and licensed takaful operators offering microinsurance and microtakaful products through various distribution channels that have provided protection coverage to nearly 75,000 people as at end-2019.
The experience over the last several years has also provided valuable insights into the development of commercially viable and sustainable microinsurance and microtakaful market in Malaysia, said BNM.
The central bank is reviewing the Perlindungan Tenang framework to drive greater innovation and diversity in product offerings, as well as enhance the fit-for-purpose framework under Perlindungan Tenang to address supply-side challenges. This is in addition to the other initiatives that have and will be rolled out on the demand side with the objectives to better understand the needs of the target segments and prevailing coverage gaps, as well as enhancing communication strategies and financial literacy levels on the importance of protection coverage.
BNM seeks feedback on the proposals in the exposure draft, including suggestions on areas to be clarified and alternative proposals that the Bank should consider. Feedback must be submitted by 15 January 2021. M