The introduction of the life insurance and family takaful framework, and the liberalisation of the fire and motor tariffs will solidify the sector and improve innovation, said Bank Negara Malaysia (BNM) deputy governor Datuk Muhammad Ibrahim.
“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 at the 5th Malaysia Insurance Summit organised by the Malaysian Insurance Institute in Kuala Lumpur yesterday.
The central bank aims to increase the penetration for life insurance and family takaful from 56% currently to 75% by 2020, measured by the number of policies in force against population.
“This is envisaged in the Economic Transformation Programme and this target is certainly achievable,” he said.
Muhammad Ibrahim said product innovation remains key to achieve the target, particularly in the micro-insurance and micro-takaful spaces which should reach the underserved segment of the society.
In the non-life or general insurance (GI) space, he said a more market-driven pricing structure will be introduced for motor and fire insurance.
He said this will pave the way for the development of products that can be more responsive to consumer and business needs.
Importantly, he said this development will be critically dependent on insurance and takaful companies building strong internal underwritings and risk-pricing practices to ensure the sustainability of the business, particularly in the highly competitive motor insurance segment.
“Let me re-emphasise the importance of this development to our market and the criticality to remove the current market distortions that undermine the long-term sustainability of motor insurance,” he said, adding that the industry cannot afford to take a short-term view.
He said it must keep its sights on building the foundations for operating in a more diverse and mature market, with stronger value propositions for consumers.
“Presently, with the high volume of vehicles referred to by the industry, the Malaysian Motor Insurance Pool (MMIP) has a life of its own and I was told the MMIP is the 9th largest GI in Malaysia.
“This was never the intent. Let’s revert to its original mandate as a mechanism to insure the highest risks motor vehicles,” he said.
Towards this end, he said 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 said it is important that adequate training is provided and the right remuneration and incentive structure is implemented to promote a committed and professional agency force.
“Conduct issues are viewed seriously by BNM and we are fully committed to the responsibility entrusted to the central bank to effectively enforce regulatory requirements on fair conduct towards consumers,” he said.