3033 Topic 6
3033 Topic 6
3033 Topic 6
The insurance industry in Malaysia first started in the 18th century. The
insurance industry then was based on the British system because it was
introduced and managed by British trading companies and agencies. There
were few locals involved due to lack of expertise.
There were agency houses like Harrisons and Crossfield, Boustead and
Sime Darby act as an agent to accept risk and settle claim to insuring
trade.
They are:
1. Director General of Insurance
This office is set up under the Insurance Act of 1963 to regulate and
supervise the life insurance industry in Malaysia. At present, the
director general of insurance is also the governor of Bank Negara.
Thus, we often use the term Bank Negara and director general of
insurance interchangeably.
2. Life Insurance Association of Malaysia (LIAM)
3. National Association of Malaysian Life Insurance Agents
(NAMLIA)
This association represents the life insurance agents of the registered
life insurers in Malaysia.
4. Malaysian Insurance Institute (MII)
This is a non-profit organisation that conducts courses for the staff
and agents of the insurance industry.
RE-INSURANCE
The practice of insurers transferring portions of risk portfolios to other
parties by some form of agreement in order to reduce the likelihood of
having to pay a large obligation resulting from an insurance claim.
The intent of reinsurance is for an insurance company to reduce the
risks associated with underwritten policies by spreading risks across
alternative institutions.
The reinsurer may be either a specialist reinsurance company, which
Objectives of LIAM
To promote public understanding and appreciation of life insurance;
To improve the image of the life insurance industry through self
regulation;
To give support to the regulatory authorities in developing a strong
and healthy industry;
To enhance the professionalism of staff and agents through
continuous training and education;
To liaise and work with local and foreign life insurance organizations
towards achieving common.
3. MALAYSIAN INSURANCE AND TAKAFUL BROKER
ASSOCIATION (MITBA)
The Malaysian Insurance and Takaful Brokers Association (MITBA), is
the only national body of insurance and takaful brokers, and was
registered with the Registrar of Societies on 3 December 1974.
MITBA is the collective voice of the industry, advising members,
regulators, consumers, trade associations and other stakeholders on
key insurance issues.
MITBA also provides training, technical advice, guidance on
regulation and business support.
Its role is to elevate the status of insurance and takaful brokers
through professional development and by establishing improved
standards of qualifications and ethical practices.
The main objectives of the Association are:
to elevate the status, safeguard and advance the interests, procure
the general efficiency and proper professional conduct of members.
Towards achieving these objectives the association has drawn up a
Code of Ethics and Conduct, Insurance Brokers Accounting
Standards, Brokerage / Fee Sharing Guidelines, Clients Charter, and
the Insurance Introducer Agreement for all members to observe.
ii.
iii.
iv.
It has also been an active year for M&As, involving, among others,
the following:
AIA Group Limited (AIA) completed its US$1.8 billion (MYR5.78
billion) acquisition of ING Group N.V's (ING) Malaysian insurance and
takaful business. The acquisition combined INGs Malaysian
operations and AIAs existing Malaysian business, previously the third
and the fourth
largest in Malaysia respectively, to create the largest life insurance
firm in the country.
ii.
business practice.
The main purposes of insurance regulation include:
i.
The protection of public interest
Public interest is protected by ensuring that the insurer is
financially solvent and able to meet its obligations to its policy
owners and claimants.
To maintain insurer solvency
ii.
The promotion of fairness and equity
By ensuring that insurers, insurance brokers and adjusters
(collectively known as licensees under the Act) are fair and equitable
in their dealings with their clients and claimants, fairness and equity is
promoted.
To ensure reasonable rates are charged to customers
iii. Fostering of competence
Competence is fostered by the insistence placed on a high level
of professional competence and integrity of insurers, insurance
brokers and adjusters.
To ensure that players in the insurance industry are competent.
iv.
The playing of a developmental role
By encouraging the insurance industry to take an active part in
the economic development of the country, regulation plays a
developmental role.
Subsidiary/Branch
Branches are not permitted. Insurers must be public companies;
reinsurers, brokers, adjusters and financial advisors must be
incorporated.
There is currently a freeze on the issue of new insurance licences by
BNM, although BNM may be open to consider applications on a case
by case basis. Prior consultation with BNM is encouraged.
BNM approval is required for a licensed insurer to own an interest in
FDI restrictions
70 per cent limit on foreign equity ownership.
> 70 per cent considered on a case by case basis for players who
can facilitate consolidation and rationalisation of the industry.
Control approvals
Prior written approval of the BNM or the Minister of Finance (as the
case may be) is required for a person to:
initially acquire an aggregate share interest of >5 per cent in a
licensed insurer;
subsequently hold an aggregate share interest in a licensed
insurer equal to or exceeding each multiple of 5 per cent, or the
trigger for a mandatory general offer (i.e. 33 per cent);
hold more than 50 per cent interest in share in a licensed insurer;
have control over a licensed insurer, regardless of shareholding
level; or
dispose of shares resulting in shareholding below 50 per cent or a
change in control.
Minimum capital
minimum paid-up share capital:
insurer:
local reinsurer (life):
local reinsurer (non-life):
RM 100 million
RM 50 million
RM 100 million
RM 20 million
Group supervision
Under the Financial Services Act 2013, BNM is empowered to
exercise oversight over financial groups for the purposes of promoting
the safety and soundness of a licensed insurer.
Policyholder protection
The Malaysia Deposit Insurance Corporation (MDIC) administers the
Takaful and Insurance Benefits Protection System (TIPS) which
protects specific benefits under life and general insurance, subject to
specific limits for different classes of coverage.
Outsourcing
Core Activities consist of activities constituting insurance business
(ie, receiving proposals for insurance, negotiating on proposals for
insurance on behalf of an insurer, issuing of policies, collection or
receipt of premiums or settlement or recovery of claims on policies),
board and senior management oversight, investment management,
internal audit and compliance functions, risk management, strategic
Note:
The Financial Services Act 2013 provides that any guideline, direction
or circular which was issued before the enforcement of the Financial
Services Act 2013 under the repealed Insurance Act 1996, in relation
to any matter which corresponds with any provision of the Financial
Services Act 2013, shall be deemed to be standards and shall remain
in full force and effect in relation to the person to whom it applied until
amended or revoke.
1. Weekly Report.
Article 1
Self Regulatory Measures in Insurance Industry
NST, 12 Dec 2001
Many have argued the pros and cons for self-regulation, but self-regulatory
manner.
LIAM has also initiated on its own measures such as various inter-company
agreements and guidelines that help to regulate the proper conduct of
businesses by its members, and to ensure ethical conduct and
professionalism between insurers and agents.
In 1991, as a further step towards greater self-regulation, LIAM formulated
a Code of Ethics and Conduct for its members that deals with life insurance
selling and practices.
The Intermediation Bureau (IMB) is really a self-regulatory measure that
was set up in response to an increasing number of disputes between
policyholders and their respective insurance companies. The role of the
IMB dovetails very neatly with the CSB and the self-regulatory measures of
LIAM (and PIAM), and its significance cannot be under-estimated.