Motor and Fire Insurance unlikely to be detariffed rather will be restructured on risk-based pricing

The non-life insurance industry is not likely to see any detariffication in the near term; more like the Bank Negara putting it through some form of restructuring, i.e. from a risk-based premium pricing to making the industry workforce and agents more professional in their modus operandi. The following are emphasis:

(1) Premium should be fairly charged —- risk behaviour of policyholder is important.

(2) Insurers and Takaful operators must have a proper pricing regime in place so that those fairness as pointed out in item (1) above could be dispense. Not sure if this pricing regime is to be submitted to the regulator before launching the premium pricing structure.

(3) Getting item (2) to work means insurers / Takaful operators are able to focus on the needs of policyholders and not on an-across-the-board discounting

(4) The regulators will be more robust in screening and checking insurer/takaful operators database for breaches of regulation —- in 2017, a Chief Compliance Officer (CCO) is to be made mandatory —- screening for breaches that pose unfairness to the policyholders.

(5) Non-life insurance offerings should be more inclusive, i.e. the need for more insurer/takaful operators to provide microinsurances to the lower income group….


So far for now…. hope you enjoy catching up on this piece of news:


BNM: Motor, Fire Insurance to be restructured with Market-driven Pricing

07 October 2015 | Source: Bernama

KUALA LUMPUR, Oct 7 (Bernama) — The motor and fire insurance sectors will be restructured with more market-driven pricing, Deputy Bank Negara Malaysia (BNM) Governor Datuk Muhammad Ibrahim said.

He said this would pave the way for the development of products that are more responsive to consumer and business needs in the two most dominant lines of business in the Malaysian general insurance sector.

“Importantly, this development will be critically dependent on insurance and takaful companies building strong internal underwriting and risk pricing practices to ensure the sustainability of the business, particularly in the highly competitive motor insurance segment,” he said in his keynote address at the 5th Malaysia Insurance Summit here today.

He said the development is critical to remove the current market distortions that undermine the long-term sustainability of motor insurance.

“The industry cannot afford to take a short-term view, it must keep its sights on building the foundations for operating in a more diverse and mature market, with stronger value propositions for consumers,” he said.

Muhammad said the other major development in Malaysia is the introduction of the Life Insurance and Family Takaful Framework.

He said the life insurance and family takaful sector’s focus is to increase the penetration level, as measured by the number of policies in force per population, from 56 per cent currently to 75 per cent by 2020 as envisaged in the Economic Transformation Programme.

“Product innovation remains key to achieving this target, particularly in the micro-insurance and micro-takaful space which would expand the reach to the underserved segments of society,” he added.

Muhammad said both these initiatives would allow the industry greater operational flexibility to innovate, while ensuring that consumers’ interests remain adequately protected.

“Our goal remains unchanged — to ensure Malaysians have the opportunity to avail themselves of efficient and effective means to manage risks with insurance and takaful solutions that are appropriate for their circumstances,” he said.

He said in tandem with these developments, insurers and takaful operators must be fully accountable for the conduct of their intermediaries in ensuring that customers receive proper advice and quality service throughout the duration of the policy.

He added that it is important for adequate training to be provided and the right remuneration and incentive structure is implemented to promote a committed and professional agency force.

Muhammad said the Financial Services Act provides the central bank with explicit and expanded enforcement powers, including monetary and non-monetary actions in addition to private and public reprimand as well as direction to make restitution to aggrieved parties.

He said as a result of supervisory interventions by BNM, more than RM30 million in premiums were refunded to the affected policyholders due to mis-selling practices in the sale of life insurance products in the past.

“The enforcement measures undertaken signal the Bank’s low level of tolerance for misconduct.

“It also serves to remind the industry of BNM’s expectation for common complaints and grouses against the industry such as delay in claim settlement and mis-selling practices by agents to be completely eliminated or at the very least reduced significantly,” he added.



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