Insurance players urged to team up to be competitive

KUALA LUMPUR: Insurance players have been urged to consider synergistic partnerships among companies to achieve the scale and competitive edge to lift performance and break into new markets as the current local economy is in need of transformational change in the sector.

Bank Negara governor Datuk Nor Shamsiah Yunus ( pic) said the industry plays a key role in helping contain costs and aligning consumers and the medical industry towards preventive care measures, which would reduce the burden on individuals in society.

"The world's population is ageing and Malaysia is not far from this. An ageing population will put pressure on growth and the social protection system. Insurance will have a role to play in ensuring the life, health and pension needs of society are met in a sustainable manner," she said in her opening speech at the Malaysian Insurance Institute Summit here yesterday.

Nor Shamsiah said there is significant untapped potential for the industry to increase its broader economic impact, and feature much more prominently in Malaysia's growth story.

“However, this cannot happen unless the industry steps up its game and takes a more strategic view of its role in the economy... working much more proactively across the industry and with relevant bodies and agencies.

“These demands on the industry are far from trivial and will not be met without strong leadership, a longer-term view on investments in capacity, and a relentless focus on quality standards and operational efficiency. ‘Yet, today these conditions remain hampered by what is still a highly fragmented industry,” she added.

From the bank's perspective, she said the aim is to facilitate innovation in three main ways, including lowering the barriers to innovation and competition.

This, she said, is achieved by providing an environment through the regulatory sandbox for the industry, including non-insurance firms, to test innovations without costly regulatory reprisals, allowing the bank to appropriately tailor Bank Negara rules to better suit innovations.

“Second is through proportionality. We aim to better reflect proportionality in our regulatory framework. For insurance, we expect that this will be mostly targeted at conduct rules where a more proportionate approach could be taken to reduce compliance costs for insurers to introduce innovative solutions in areas where we believe the risks to consumers are low.

“The third area of focus will be to develop a more coherent approach, particularly across agencies, for ensuring legal and regulatory compatibility with new innovations in insurance,” she said.

This, she said, includes addressing issues that may arise in legal constructs such as smart contracts, liability issues associated with robo-advice or driverless cars, as well as strengthening defences against cyber threats and abuses by criminal elements.

The central bank has also consulted the industry on potential enhancements to be made to its requirements on investment-linked insurance business to address some of the gaps in ensuring the stability and development of the insurance sector.

The central bank is also currently assessing the outcomes of the second phase of the Phased Liberalisation of Motor and Fire Tariffs which started in 2016, as it prepares to launch into the next phase of liberalisation. — Bernama