Intermediaries are individuals and firms recommending, arranging or selling of insurance or takaful products to customers.
The proposed "Proper Advice Practices for Insurance and Takaful Business" aims to replace the "Proper Advice Practices for Life Insurance/Family Takaful Business" issued in 2012. The central bank said the proposed rules seek to ensure recommendations to policy owners align with their financial needs, objectives and personal circumstances.
It said FSPs and intermediaries are expected to adopt robust advisory practices that are aligned with customers' interests, emphasizing that such practices should be “guided by the principles of suitability, transparency, fairness, professionalism and accountability”.
A key proposal is the standardization of the Customer Fact-Find (CFF) form under a single "Complete Customer Disclosure" framework.
Intermediaries will be required to collect sufficient details to build a comprehensive profile of a customer before recommending products, including information to identify vulnerable consumers, risk profiling, income regularity, existing coverage and overall budget.
The draft rules also introduce stringent sales controls for investment-linked products, particularly for vulnerable consumers. It is proposed that investment-linked products can be recommended to vulnerable consumers only if they possess prior financial experience or express explicit interest, and consent to audio or video recording of the sales interaction.
Additionally, new controls are proposed for telemarketing channels, including a ban on concluding sales over the phone. Prospective customers must instead be referred to qualified intermediaries to undergo full needs-based assessments.
To ensure compliance, FSPs must set up pre-issuance verification controls and post-issuance sales quality reviews conducted by independent units not involved in direct sales.
Pre-issuance verification calls will be mandatory for high-risk sales, such as those involving vulnerable consumers, high-premium products, or policy replacements.
The proposed policy will apply to all individual life insurance, family takaful and medical and health insurance/takaful (MHIT) products. It excludes products sold via direct digital channels without intermediary advice, group policies, workplace employee benefit plans and Perlindungan Tenang products.
BNM said it is considering a six-month grace period following the issuance of the policy document to ensure that FSPs have time to enhance their systems and processes. The proposed new rules come amid public concern on rising healthcare and insurance costs.
The government is currently trialing a base medical insurance plan that starts as low as RM60 before a full rollout next year.
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