‘CAPACITY BUILDING FOR SUPERVISORS’
Bank Negara says insurance industry needs more experts, not regulations
RUPA DAMODARAN
KUALA LUMPUR rupabanerji@mediaprima.com.my
REGULATORY supervision in the insurance industry must be supported by more experts rather than regulations, says Bank Negara Malaysia governor Tan Sri Muhammad Ibrahim.
“In the current state of constant change, building the capacity of supervisors is one of the most critical priorities,” he said at the 24th International Association of Insurance Supervisors (IAIS) Annual Conference 2017, here, yesterday.
By doing so, it would guard against threats to stability without affecting growth and innovation, he said.
“In a world of fierce competition, complex product offerings and evolving customers’ needs, there is always the risk of administering excessive and complicated regulations.
“This could lead to unintended consequences that can make the financial system less, rather than more stable.”
Rules also had the effect of restricting innovation, he warned, adding that this would only result in insurers exposed to higher business risks.
“We need to create room for experimentation,” he said.
“Platform-based solutions and insure-tech companies are opening up insurance access to large segments of the population at a fraction of previous costs.”
Some regulators had adopted “regulatory sandboxes” to test solutions and design regulations, but when things did not work out, they must be prepared to change tactics and strategy, he added.
Muhammad also highlighted that rethinking with new paradigms was important to anchor business and public policy.
“Rather than see the competitive landscape through a zerosum lens, cooperative competition or ‘coopetition’ can result in synergistic benefits.”
While technological innovations will make customers better off, on the other hand, insurers may be confronted with some fundamental ethical issues.
For insurance companies, this requires a rethinking of professional and ethical standards, thus the need for a new paradigm on ethics.
There is always the dilemma and trade-offs in directing more resources towards social impact investments, in cases where it lowers risk-adjusted returns for policyholders.
Meanwhile, outgoing IAIS secretary-general Yoshihiro Kawai will be replaced by Jonathan Dixon.