Bank Negara Insurance Reform

Regulatory reforms are expected to help the insurance industry expand, including by introducing new products, next year. Bank Negara Malaysia (BNM) is finalising reforms to insurance regulations that will remove set tariffs for various segments, according to the Oxford Business Group (OBG).

Under the new regime, which will be implemented in phases starting in 2017, policy pricing will be based on risk analysis, including personalised driver and vehicle profiling, rather than set by the regulator.

“We see the first phase of detariffication as able to encourage the increase in number of new insurance products with the introduction of variation in product features,” said a July report by investment holding company Malaysian Industrial Development Finance (MIDF).

“Insurers can freely tailor their new products and price them according to risk profile and customer preferences. Correspondingly, this may result in higher premium income and lower claims ratio, which will be beneficial to insurance companies’ bottom line,” the MIDF report said.The OBG said the phased approach was designed to allow time for consumers and industry stakeholders to adjust to the new operating environment, with an assessment of the impact of reforms scheduled for 2019 before full liberalisation takes place.

Though tariffs will be de-regulated, the pricing of products will still have to fall within the risk-based capital framework issued by BNM.

Price competition among insurers could potentially lead to a consolidation of the country’s insurance industry through mergers and acquisitions, it said.

According to BNM data, as of 2015 there were 40 licensed insurers in Malaysia, of which 33 are direct insurers. Out of this number, 10 firms offer life insurance, 19 offer general insurance and four offer both life and general products.

Maybank Ageas has signalled its intent to double in size by 2020. Khazanah Nasional and Canada’s Sun Life are said to be in talks to acquire the insurance operations of the Hong Leong Financial Group, in a deal estimated to be valued at around RM3.2 billion.

RAM Ratings said the insurance sector’s prospects in the medium to long term were favourable due to a low penetration rate, improved consumer awareness, better product innovation and distribution, and market liberalisation.


OBG noted that Malaysia’s Economic Transformation Plan aimed to increase the country’s life insurance and takaful penetration rate to 75 per cent of the population by 2020, or 4 per cent of GDP, representing significant growth opportunities for the industry.