Insurance industry told to continue supporting more inclusive market

KUALA LUMPUR: The insurance industry players should continue to work in developing and refining the approaches to proportionally and support more inclusive insurance market, said Bank Negara

Governor Tan Sri Muhammad Ibrahim said in the larger scheme of things, the industry regulators could not ignore the broader objectives of supporting economic growth and improving the overall welfare of society.

“Equally important, with environmental, social and governance considerations becoming important criteria and increasingly adopted by investors, the ethics and sustainability of the insurers’ activities will be important factors in creating shareholder value.

“Consumer welfare and wider social impacts, alongside profits, will constitute key matrics by which performance is measured,” he said in his keynote address at the International Association of Insurance Supervisors here yesterday.

He said this was only appropriate, as maintaining public’s trust and confidence was also a good business strategy.

Muhammad said technological advances and scientific breakthroughs had opened new possibilities to operate and deliver products to customers and they would make customers better off but insurers, on the hand, may be confronted with some fundamental ethical issues.

“For insurance companies, this requires a rethinking of professional and ethical standards. Thus, a need for a new paradigm on ethics,” he said.

He said there were specific challenges for regulation and supervision in the industry, including the lifespan of regulations, which was getting shorter and shorter, with new areas of risk emerging faster than regulators could write new rules.

To further add to the complication, he said, there were potential threats that were also creeping in from beyond the traditional regulatory perimeter, he said.

“These could be both from non-traditional players or unfamiliar business modes or technologies,” he said.

In combating these challenges, Muhammad said, the industry needed a better and effective approach to collate intelligence, including from non-traditional sources.

“Technological advancement offers additional opportunities. There is clearly vast potential on the use of big data and machine learning to improve risk identification and assessments.

“We also need broader toolkits that allow for more targeted and proportionate interventions. Good progress has been made in recovery and resolution planning that ensure large financial institutions can be unwound in an orderly fashion without threatening broader stability,” he said.

The governor said in Malaysia, the takaful and insurance protection system complemented supervision through differentiated premiums that created strong incentives for insurers to maintain prudent risk profiles. — Bernama