Perlindungan Tenang - Bank Negara Malaysia
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Perlindungan Tenang Applicable to: 1. Licensed insurers 2. Licensed takaful operators Issued on: 1 December 2020 BNM/RH/ED 029-19
Perlindungan Tenang
This exposure draft sets out the proposed requirements and guidance in providing
microinsurance/microtakaful products under Perlindungan Tenang. The proposals
in this exposure draft seek to accommodate further development of insurance and
takaful products that respond to the needs of the unserved or underserved
segments as well as promote innovative, sustainable and inclusive insurance and
takaful business models.
Bank Negara Malaysia invites written feedback on the proposals in this exposure
draft, including suggestions on areas to be clarified and alternative proposals that
the Bank should consider. The written feedback should be supported with clear
rationales, accompanying evidences or appropriate illustrations to facilitate an
effective review of this exposure draft.
Responses must be submitted by 15 January 2021 to:
Pengarah,
Jabatan Pembangunan Insurans
Bank Negara Malaysia
Jalan Dato' Onn
50480 Kuala Lumpur
Email: tenang@bnm.gov.my
Electronic submission is encouraged. Submissions received may be made public
unless confidentiality is specifically requested for the whole or part of the
submission.
In the course of preparing your feedback, you may direct any queries to the following
officers at 03-26988044-
For insurance related queries:
(i) Muhammad Ilman bin Ismail (ext. 7530);
(ii) Nurul Najiha binti Md Razin (ext. 8377);
(iii) Liung Miao Shan (ext. 8264); or
(iv) Tang Khai Sheng (ext. 7603).
For takaful related queries:
(i) Wafiuddin bin Ahmad (ext. 7621); or
(ii) Suhana Alia binti Sidek (ext. 8665).
Issued on: 1 December 2020Perlindungan Tenang
TABLE OF CONTENTS
PART A OVERVIEW ............................................................................................... 1
1 Introduction................................................................................................ 1
2 Applicability ............................................................................................... 2
3 Legal provisions ........................................................................................ 2
4 Effective date............................................................................................. 3
5 Interpretation ............................................................................................. 3
6 Related legal instruments and policy documents ...................................... 4
7 Policy documents superseded................................................................... 4
PART B POLICY REQUIREMENTS ....................................................................... 5
8 Product principles and features ................................................................. 5
9 Riders and endorsements ......................................................................... 6
10 Combined products ................................................................................... 7
11 Remuneration for Perlindungan Tenang products ..................................... 9
12 Distribution of Perlindungan Tenang products......................................... 10
13 Product approval ..................................................................................... 15
14 Monitoring and reporting.......................................................................... 16
PART C APPENDICES ......................................................................................... 17
Appendix 1: Product development process .............................................................. 17
Appendix 2: Information Checklist for Application to Participate in Perlindungan
Tenang Initiative ...................................................................................... 19
Appendix 3: Product documentation for Perlindungan Tenang applications ............ 21
Issued on: 1 December 2020Perlindungan Tenang 1 of 24
PART A OVERVIEW
1 Introduction
1.1 The Perlindungan Tenang initiative was launched1 by Bank Negara Malaysia
(the Bank) in 2017 in collaboration with the industry, with the objective of
expanding insurance and takaful solutions targeted at the unserved and
underserved segment, particularly the bottom 40% of households (B40), which
are affordable and accessible, provides good protection value, easy to
understand and administratively simple to purchase and to make claims.
1.2 Since the launch, the progress on Perlindungan Tenang has been encouraging,
with a total of 13 licensed insurers and licensed takaful operators (individually
or collectively referred as licensed person or licensed persons as the case may
be) offering microinsurance and microtakaful products through various
distribution channels which have provided protection coverage to nearly 75
thousand people as at end-2019. The experience over the last several years
has also provided valuable insights into the development of commercially viable
and sustainable microinsurance and microtakaful market in Malaysia.
1.3 Recognising the progress and the opportunities for further development, the
Bank is reviewing the Perlindungan Tenang framework to drive greater
innovation and diversity in products offerings to better cater to the needs of the
unserved and underserved segments (including Small and Medium
Enterprises), as well as enhance the fit-for-purpose framework under
Perlindungan Tenang to address supply-side challenges. This is in addition to
the other initiatives that have and will be rolled out on the demand side with the
objectives to better understand the needs of the target segments and prevailing
coverage gaps, as well as enhancing communication strategies and financial
literacy levels on the importance of protection coverage.
1.4 This Exposure Draft provides for enhancement to the existing framework aimed
at achieving the following:
(a) Promoting greater and more meaningful microinsurance/microtakaful
take-up through more robust requirement on product development and
enabling product combination;
(b) Promoting wider distribution channels to address challenges associated
with high distribution costs through greater operational flexibility; and
(c) Strengthening consumer protection to safeguard consumer interests.
1.5 With the proposed enhancements, the Bank hopes that the overall vision for
Perlindungan Tenang which is to enable the unserved and underserved
segments to access affordable and basic insurance and takaful products that
meet their needs could be further achieved in support of the financial inclusion
1 In 2016, the Bank published the Microinsurance and Microtakaful Discussion Paper which had invited
interested licensed persons to submit product proposals to apply for proportionate regulatory
treatment for microinsurance/microtakaful products.
Issued on: 1 December 2020Perlindungan Tenang 2 of 24
agenda. It is also envisioned that the “Perlindungan Tenang” brand evolves to
become a household name in the unserved and underserved segments that
consumers trust when looking for protection in the future. To make the vision a
reality, the Bank encourages licensed persons to consider the product
development process adopted by other microinsurance and microtakaful
providers across the globe as per Appendix 1 and welcomes constructive
feedback to achieve the intended objectives.
Envisaged growth of the microinsurance and microtakaful market in Malaysia
OBJECTIVE
Unserved and underserved households and SMEs can access and afford insurance and
takaful products that meet their financial protection needs
DEMAND SIDE SUPPLY SIDE
Unserved and underserved households and Industry offers commercially sustainable,
SMEs demand insurance and takaful needs-driven products that compete on
products on their own accord quality
Critical success factors Critical success factors
Unserved and underserved households Providers have a long-term growth
and SME have a positive experience and perspective on the microinsurance and
develop confidence in insurance and microtakaful market and hence invest in
takaful pilots, innovation and service improvement
Unserved and underserved households Regulatory environment is proportionate to
and SME recognise the importance of the nature, complexity and risk of
financial protection and how insurance and microinsurance and microtakaful
takaful meet their financial protection
needs
2 Applicability
2.1 This policy document is applicable to licensed person as defined in paragraph
5.2.
3 Legal provisions
3.1 The requirements in this policy document are issued pursuant to sections 47,
123, 143 and 266 of the Financial Services Act 2013 (FSA) and sections 57,
135, 155 and 277 of the Islamic Financial Services Act 2013 (IFSA).
Issued on: 1 December 2020Perlindungan Tenang 3 of 24
4 Effective date
4.1 This policy document comes into effect on [date of publication of final policy
document].
5 Interpretation
5.1 The terms and expressions used in this policy document shall have the same
meanings assigned to them in the FSA and IFSA, as the case may be, unless
otherwise defined in this policy document.
5.2 For the purpose of this policy document –
“S” denotes a standard, an obligation, a requirement, specification, direction,
condition and any interpretative, supplemental and transitional provisions that
must be complied with. Non-compliance may result in enforcement action;
“G” denotes guidance which may consist of statements or information intended
to promote common understanding and advice or recommendations that are
encouraged to be adopted;
“financial institution” means a person carrying on a financial business
regulated under the laws enforced by the Bank;
“financial products” refer to financial products developed, offered or
marketed, by a financial institution or for and on behalf of another person by a
financial institution;
“free look period” means a required period of time in which a
policyholder/participant may examine a newly issued individual
policy/certificate and surrender it in exchange for a full refund of premium
minus any claims made;
“grace period” means an additional period of time after the due date of
premium/takaful contribution during which payment may be made without
penalty while keeping the policy/certificate in force;
“industry” means the insurance and takaful industry;
“licensed person” refers to a licensed insurer under the FSA and a licensed
takaful operator under the IFSA;
“Perlindungan Tenang product” refers to an insurance or takaful product
participating in the Perlindungan Tenang initiative that has been approved by
the Bank to meet the requirements set out in this policy document; and
“Perlindungan Tenang partner” refers to an entity appointed by a licensed
person to distribute Perlindungan Tenang products, which is not an insurance
and takaful agents.
Issued on: 1 December 2020Perlindungan Tenang 4 of 24
6 Related legal instruments and policy documents
6.1 This policy document must be read together with other relevant policy
documents, guidelines or circulars that have been issued by Bank Negara
Malaysia (the Bank), in particular –
(a) ‘Guidelines on Proper Advice Practices for Life Insurance/Family
Takaful Business’;
(b) ‘Risk Management in Technology (RMiT);
(c) ‘Outsourcing’;
(d) ‘Internet Insurance (Consolidated)’;
(e) ‘Internet Takaful’;
(f) ‘Product Transparency and Disclosure’;
(g) ‘Introduction of New Products by Insurers and Takaful Operators’;
(h) ‘Schedules 8 and 10 of the Financial Services Act 2013’;
(i) ‘Anti-Money Laundering, Countering Financing of Terrorism and
Targeted Financial Sanctions for Financial Institutions (AML/CFT and
TFS for FIs)’;
(j) ‘Medical and Health Insurance Business’;
(k) ‘Medical and Health Takaful Business’;
(l) ‘Direct Distribution Channels for Pure Protection Products’;
(m) ‘Agent Banking’ and ‘Specifications Relating to the Policy Document on
Agent Banking’;
(n) ‘Management of Customer Information and Permitted Disclosures’;
(o) ‘Fair Treatment of Financial Consumers’; and
(p) ‘Prohibited Business Conduct’.
7 Policy documents superseded
7.1 This policy document supersedes the specification letter on Introduction of
Insurance and Takaful Products Targeted at Underserved Segments issued
by the Bank on 9 November 2017.
Issued on: 1 December 2020Perlindungan Tenang 5 of 24
PART B POLICY REQUIREMENTS
8 Product principles and features
S 8.1 Licensed persons must ensure that Perlindungan Tenang products, including any
riders or endorsements, adhere to the following principles2 –
Affordable Amount of premium/takaful contribution is affordable for
the target group.
Accessible Distribution channel is accessible to and approachable
for the target group.
Product may have minimal exclusions.
Good value Protection provided corresponds to the key needs of the
target group3.
Proportion of premium/takaful contribution allocated to
insurance/takaful benefit is at least 50%.
Easy to Product features are self-explanatory such that no
understand advice and only simple disclosure are needed.
Benefits, terms and conditions are straightforward.
Content, language, mode and timing of disclosure and
marketing are suitable for consumers with only a basic
understanding of insurance or takaful.
Easy to buy, All processes from purchase to claims minimise
nominate and administrative burden for consumers.
claim Claims process is designed to minimise the time
between the risk event occurring and pay-out.
S 8.2 Licensed persons shall include in Perlindungan Tenang products, the following
features but not limited to:
All product lines Maximum term of coverage of 1 year
Minimum 15-day free-look period
30 days grace period
Guaranteed acceptance or on-the-spot
acceptance or rejection of risk
Provides a lump-sum payment
Claims to be paid out within five working days from
receipt of complete documentation
Life insurance or No savings or investment or surrender benefit
family takaful only
2 For examples of the application of these principles, refer to FSPSR 2017 box article – Expanding
Insurance and Takaful Solutions for the Underserved Segment
3 Please refer to Item 2 in Appendix 2 for the justification criteria
Issued on: 1 December 2020Perlindungan Tenang 6 of 24
Question 1:
Do the above principles and features sufficiently address or support
your company’s potential new or innovative solutions e.g. value-
added services? Please elaborate on any challenges you may face
in complying with them and share examples of principles/features
that you propose to be considered, and why.
Is your company interested to offer a life/family takaful product with
a savings/investment element under Perlindungan Tenang e.g.
education or endowment products? Please share how your company
envisions such a product, and how it would be able to meet the 5
principles in paragraph 8.1.
S 8.3 Before launching any Perlindungan Tenang product that fulfils the above
principles and features, licensed persons are required to submit an application to
the Bank for approval as set out in paragraph 13.
9 Riders and endorsements
S 9.1 In the event that a rider (for life insurance/family takaful product) or an
endorsement (for general insurance/takaful product) is attached to a
Perlindungan Tenang product, licensed persons shall only consider the rider or
endorsement as Perlindungan Tenang product, if it meets the following
requirements:
(a) the rider or endorsement meets the principles and features of
Perlindungan Tenang products set out under paragraph 8. In particular,
the rider(s)/endorsement(s) must provide basic cover, easy to
understand, complements the base Perlindungan Tenang product and
corresponds to the key needs of the target segment; and
(b) the rider or endorsement is attached on an opt-in basis to the base
Perlindungan Tenang product, whereby surrendering the base
Perlindungan Tenang policy/certificate will also terminate all related riders
or endorsements in effect.
S 9.2 Licensed persons shall ensure that clear and adequate disclosure is made to
consumers on the option of adding the rider or endorsement, the coverage
provided under the optional rider or endorsement, the amount of additional
premium or takaful contribution that needs to be paid and the sum assured
provided under the optional rider or endorsement.
Question 2:
Does your company envision any other possible additions to a
Perlindungan Tenang product, apart from riders/endorsements?
Issued on: 1 December 2020Perlindungan Tenang 7 of 24
10 Combined products
G 10.1 To facilitate meaningful take-up of Perlindungan Tenang products, the Bank is
open to consider applications from licensed persons to offer a combination of
Perlindungan Tenang product(s) with other financial products offered by financial
institutions (“combined product”).
S 10.2 Licensed persons shall sell the combined product with an opt-out feature to give
consumers the option to withdraw from purchasing or discontinue purchase of
Perlindungan Tenang products at both point of sale and during the free-look
period, while continuing with other components of the combined product.
S 10.3 Licensed persons shall consider the following in structuring a combined product:
(a) the overall benefit or value add of the combined products in managing
risks of consumers when products are combined vis-a-vis being offered
individually;
(b) mechanisms are in place to facilitate consumer awareness and to allow
consumers to provide feedback to the licensed persons on the combined
product; and
(c) the ability of the combined products to reach scale and drive process
efficiency.
S 10.4 When financial institutions (including licensed persons) are involved in offering a
combined product, the following requirements must be met:
(a) the licensed person shall carry out appropriate due diligence on the
financial institution(s) before establishing a business relationship for the
purpose of offering the combined product;
(b) the licensed person shall enter into a contractual agreement with the
financial institution(s) involved which must clearly specify the rights,
responsibilities and expectations of all parties, including but not limited to
the following:
(i) policy or takaful certificates and claims servicing, collection and
transmission of premium or takaful contribution, complaints handling
and disputes settlement, including specific time frames or
turnaround time;
(ii) underwriting of the Perlindungan Tenang product(s) (if any) shall be
carried out by the respective licensed person(s);
(iii) profit, cost-sharing of expenses or any other form of remuneration
to be earned by parties involved; and
(iv) exit plan upon termination of the non-Perlindungan Tenang
component of the combined product.
(c) to ensure seamless consumer experience and effective administration,
the licensed person must identify a lead financial institution which would
act as the main contact point for the consumer or Perlindungan Tenang
partner;
(d) the licensed person shall ensure that financial institutions involved shall
not be absolved of their responsibility and obligations in accordance with
the terms and conditions of their respective financial products; and
Issued on: 1 December 2020Perlindungan Tenang 8 of 24
(e) where Perlindungan Tenang partner is distributing the combined product,
the licensed person must ensure that the Perlindungan Tenang partner
meets the necessary regulatory requirements, qualification criteria and
other necessary requirements for distributing the primary financial
product.
S 10.5 The licensed person shall ensure that the lead financial institution collecting the
premium or takaful contribution attributable to the Perlindungan Tenang
product(s) either directly or through any of the assigned distribution partners
transmit such amount to the respective licensed person.
S 10.6 In the event of any claim in regard to Perlindungan Tenang product(s), the
licensed person shall put in place a mechanism for the lead financial institution
to forward the claim to the respective licensed person(s) and offer assistance for
the expeditious disposal of claim.
S 10.7 In offering combined products, licensed person(s) must observe the following
requirements:
(a) identify and disclose the name(s) of the licensed person(s) that underwrite
Perlindungan Tenang products to the consumer in the marketing materials
and policy or takaful certificate;
(b) identify and disclose separately the premium or takaful contribution
components of Perlindungan Tenang product(s) to the consumers at
point-of-sale and post-sale stages, as well as in all marketing materials
(e.g. brochure, sales literature, policy document);
(c) notify consumers about the purchase of a Perlindungan Tenang product
within 5 working days from the date of the product purchase, including
policy or takaful certificate coverage, exclusions, waiting period (if any),
claims procedure and free-look period through 100%4 welcome calls for
first-time consumers (excluding renewals) of the combined product;
(d) offer a free-look period on the Perlindungan Tenang product(s) of 30 days
from the date of the product purchase; and
(e) ensure the withdrawal or discontinuation process is made easy,
immediate and convenient for consumers.
G 10.8 The Bank reserves the right to require licensed persons to review or permanently
or temporarily withdraw the combined product at any time, should the Bank be
concerned over the effectiveness of the consumer safeguards.
4 100% welcome calls refer to to the welcome calls successfully conducted (where customers pick up
the call)”.
Issued on: 1 December 2020Perlindungan Tenang 9 of 24
Question 3:
Is the requirement to only allow Perlindungan Tenang product(s) to
be combined with other financial products too restrictive? If yes,
please provide examples of possible combinations with non-
financial products/services your company have in mind.
In relation to paragraph 10.3, what are the factors that would
necessitate/justify for a Perlindungan Tenang product to be
combined with other financial products?
Please share any potential example of a combined product your
company has in mind and what would be the potential challenges in
applying the requirements and safeguards mentioned under
paragraphs 10 above e.g. conducting 100% welcome calls to first-
time consumers of the combined product?
11 Remuneration for Perlindungan Tenang products
G 11.1 Limits on commission and agency-related expenses as specified in the following
policy documents, do not apply in respect of agents distributing Perlindungan
Tenang products and Perlindungan Tenang partners (collectively referred to as
“Perlindungan Tenang distributors” in this part:
(a) Guidelines to Control Operating Costs of General Insurance Business
issued by the Bank on 1 July 2009;
(b) Operating Costs Controls for Life Insurance and Family Takaful Business
issued by the Bank on 24 December 2019;
(c) Guidelines on Bancassurance issued by the Bank on 27 April 2009; and
(d) Guidelines on Bancatakaful issued by the Bank on 27 April 2009.
G 11.2 Licensed persons are provided the flexibility to ascertain the structure and amount
of remuneration for the Perlindungan Tenang distributors.
G 11.3 The licensed person should ensure that the remuneration structure minimises
erosion of protection value and aims to achieve the following:
(a) minimise the Perlindungan Tenang distributor’s bias towards promoting
Perlindungan Tenang products with higher premiums or takaful
contributions but do not meet the consumer's needs; and
(b) incentivise Perlindungan Tenang distributors to provide better quality and
consistency in service delivery to support consumers’ needs and maintain
high level of persistency.
G 11.4 Examples of remuneration structures that licensed persons may consider are as
follows:
(a) a fee that is not linked to the premium or takaful contribution amount;
(b) absolute fee amount per service rendered, such as per policy or takaful
certificate issuance or per claims paid out; and
(c) a climbing fee structure that is linked to policy or takaful certificate
renewals.
Issued on: 1 December 2020Perlindungan Tenang 10 of 24
12 Distribution of Perlindungan Tenang products
G 12.1 For the purposes of distributing Perlindungan Tenang products, licensed persons
may appoint entities under a new category of intermediaries termed as
“Perlindungan Tenang partners”. This is in addition to the existing insurance or
takaful agents registered with the respective industry associations i.e. the
General Insurance Association of Malaysia (PIAM), Life Insurance Association of
Malaysia (LIAM) and Malaysian Takaful Association (MTA).
G 12.2 For the purposes of distributing Perlindungan Tenang products, insurance or
takaful agents will not be subject to the limit on the number of licensed insurers
and licensed takaful operators that an insurance or takaful agent is allowed to
represent under the respective industry associations’ requirements.
Appointment of Perlindungan Tenang partners
S 12.3 Subject to paragraphs 12.6 and 12.7, if licensed persons decide to appoint
Perlindungan Tenang partners, such Perlindungan Tenang partners must be
appointed from any of the following types of entities:
(a) a sole proprietorship, partnership or company established in Malaysia;
(b) an agent bank appointed pursuant to the Policy Document on Agent
Banking issued by the Bank on 30 April 2015;
(c) a society, including co-operatives or non-governmental organisation,
established in Malaysia; or
(d) a statutory body, a public authority or instrumentality or agency of the
Federal Government or a State Government such as hospitals, clinics,
zakat institutions, religious organisations and district offices.
S 12.4 Licensed persons shall register and maintain an updated list of appointed
Perlindungan Tenang partners with the respective industry associations for
monitoring purposes. However, Perlindungan Tenang partners will be excluded
from all applicable definitions of insurance or takaful agents in the intercompany
agreements or guidelines of the respective industry associations and will not be
subjected to the requirements specified in the corresponding rules such as:
(a) qualifications, written examinations, training and Continuing Professional
Development;
(b) minimum requirements for persistency, maintenance of contract and
promotion; and
(c) the number of licensed persons the agent is allowed to represent.
Selection of Perlindungan Tenang partners
S 12.5 Licensed persons shall establish internal selection criteria to ensure that
appointed Perlindungan Tenang partners are sufficiently capable and reliable to
discharge assigned responsibilities competently.
S 12.6 In appointing Perlindungan Tenang partners, licensed persons shall ensure that
due diligence on the selected entity has been conducted. At minimum, the
appointed entity must be an established entity which:
Issued on: 1 December 2020Perlindungan Tenang 11 of 24
(a) is approved, registered with or licensed by the relevant authorities, other
than entities in paragraph 12.3(d);
(b) the entity shall not be on any publicly available blacklist or watchlist issued
by domestic authorities; and
(c) has permanent business premises and an established core business or
function.
S 12.7 Licensed person shall ensure that staff or members of a Perlindungan Tenang
partner who are directly engaged in or responsible for distributing Perlindungan
Tenang products meet the following requirements:
(a) Malaysian citizen of at least 18 years old;
(b) have attended a training program that is developed and provided by the
licensed person as stipulated in paragraph 12.8. For avoidance of doubt,
the individual staff or member is not required to undertake the PCEIA,
TBE and CEILLI5 examinations.
(c) shall not be an undischarged bankrupt. He/she must not have been
involved in criminal acts or acts of dishonesty. This must be confirmed by
licensed persons before his or her appointment. The licensed person
must ensure that any agreements or arrangements between the licensed
person and the Perlindungan Tenang partner provide sufficient ground
for the licensed person to terminate the appointment of the Perlindungan
Tenang partner in the event of any non-disclosure or inaccurate
disclosure on past conduct by staff or members of the Perlindungan
Tenang partner.
S 12.8 Licensed persons shall develop and conduct training to ensure that the staff or
members of their Perlindungan Tenang partners are sufficiently competent to
discharge their responsibilities at a reasonable standard of service quality. The
training must encompass, at minimum:
(a) product features, including additional features i.e. rider or endorsement
and combined products, if any;
(b) standard operating procedure for product distribution, servicing and
claims;
(c) code of ethics and conduct;
(d) protection of consumer information;
(e) fraud detection mechanisms including identification of counterfeit money
and anti-money laundering and combating of financing terrorism
(AML/CFT) procedures; and
(f) basic concepts and principles of microinsurance or microtakaful.
S 12.9 Licensed persons are required to provide adequate and self-explanatory
marketing and educational materials to appointed Perlindungan Tenang partners
on, among others:
(a) product features;
(b) claim and nomination procedures;
5
PCEIA: Pre-contract Examinations for Insurance Agents; TBE: Takaful Basic Examination; CEILLI:
Certificate Examination in Investment-Linked Life Insurance
Issued on: 1 December 2020Perlindungan Tenang 12 of 24
(c) contact details of the consumer service centre (preferably a toll-free line
at the minimum); and
(d) rights and responsibilities of consumers.
Role and responsibilities of Perlindungan Tenang partners
G 12.10 Provided that any assigned responsibilities commensurate with their capacity,
Perlindungan Tenang partners may:
(a) assist with product distribution, premium or takaful contribution collection,
collecting consumer and nominee’s details, claims submission and claims
payout; and
(b) describe the product features and relevant processes including premium
or takaful contribution payment, policy or takaful certificate renewal and
claims procedures in accordance with the marketing and educational
materials provided by the licensed person. However, further queries will
need to be routed to the licensed person.
G 12.11 For avoidance of doubt, the agreements entered into between licensed persons
and their Perlindungan Tenang partners and activities carried on by Perlindungan
Tenang partners in relation to Perlindungan Tenang products are not considered
as outsourcing arrangements.
S 12.12 Licensed persons shall ensure the appointed Perlindungan Tenang partners do
not carry on the following:
(a) analysing the financial planning needs of a person relating to an
insurance product; and
(b) recommending an appropriate insurance product to a person.
S 12.13 Where agent banks are appointed as Perlindungan Tenang partners, licensed
persons shall ensure that agent banks do not:
(a) market and provide explanations regarding the product beyond the
marketing materials provided by licensed persons;
(b) facilitate manual claim or nomination application; and
(c) receive physical documents from consumers.
S 12.14 Licensed persons shall ensure that all transactions by their Perlindungan Tenang
partners are conducted via online on a real-time basis.
S 12.15 Licensed persons are required to ensure internal policies, procedures, systems
and controls are available to support Perlindungan Tenang partners at all stages,
consistent with the Risk Management in Technology Policy Document issued by
the Bank on 19 June 2020. In establishing systems and infrastructure to support
Perlindungan Tenang partners, licensed persons shall ensure the systems
comply with the following:
(a) able to support on-line real-time processing;
(b) able to provide a secured network including end-to-end encryption; and
(c) robust in managing infrastructure capacity to support the Perlindungan
Tenang partner’s role, responsibilities and services.
Issued on: 1 December 2020Perlindungan Tenang 13 of 24
S 12.16 Licensed persons shall put in place adequate safeguards for consumer
protection. At minimum, licensed persons must prominently display the contact
details of their customer service centre (preferably a toll-free line at the minimum)
at the business premise of the Perlindungan Tenang partners and marketing
materials.
S 12.17 For appointments of agent banks as Perlindungan Tenang partners, the licensed
person must enter into a contractual agreement with the financial institution(s)
which had appointed the agent bank for effective oversight over the affairs and
conduct of the appointed Perlindungan Tenang partner.
S 12.18 Licensed persons shall review the appointment of Perlindungan Tenang partners
or terminate any arrangements with their Perlindungan Tenang partners at any
time, whether permanently or temporarily, if there is any concern over the
conduct of the Perlindungan Tenang partners including their staff or members,
and its impact to consumers has been brought to the attention of the licensed
person.
Oversight and governance of Perlindungan Tenang partners
S 12.19 Licensed persons shall be responsible and accountable for the oversight of, and
management of risks arising from the conduct of their Perlindungan Tenang
partners including their staff or members.
S 12.20 In ensuring effective oversight of Perlindungan Tenang partners, a licensed
person shall:
(a) enter into a contractual agreement with their Perlindungan Tenang
partners that specifies the rights, responsibilities and expectations of the
licensed person and its Perlindungan Tenang partners. The licensed
person must ensure that the contract does not contain any clause that
would prevent the licensed person from modifying or terminating the
contract if required;
(b) establish measures to enable consumers to identify and verify the identity
of their Perlindungan Tenang partner. At minimum, licensed persons
must:
(i) issue a formal identification document to their Perlindungan Tenang
partners, such as an authority card or certificate, that Perlindungan
Tenang partners will be required to clearly display to the consumer;
and
(ii) publish and update the list and details of authorised appointed
Perlindungan Tenang partners (e.g. name, address, the period of the
appointment) on their website or other channels that allows the
consumers to verify the identity of the Perlindungan Tenang partner;
and
(c) develop and implement effective and efficient procedures to monitor and
control the conduct of their Perlindungan Tenang partners. This includes
the maintenance of a proper record of all arrangements as well as
conduct and performance tracking.
Issued on: 1 December 2020Perlindungan Tenang 14 of 24
S 12.21 Licensed person shall establish measures to ensure customer’s information is
protected. Licensed person and Perlindungan Tenang partners are not allowed
to share customers’ information with third parties without the prior consent of
customers.
S 12.22 The Board of Directors (BOD) of the licensed person must establish and approve
the overall framework governing the appointment of Perlindungan Tenang
partners including:
(a) policies relating to the selection, management, monitoring, operations,
compliance, conduct and service quality of a Perlindungan Tenang
partner;
(b) consumer protection measures, including awareness and education
strategies;
(c) infrastructure to support Perlindungan Tenang partners including system
and technology requirements;
(d) controls and monitoring to ensure compliance with relevant legislation
and regulatory requirements; and
(e) Business Continuity Plan (BCP) and contingency arrangements to ensure
continuity of insurance and takaful services in the event of a disruption.
Question 4:
Would licensed persons be interested to partner with entities other than
those listed in paragraph 12.3? Please state the type of entities
accompanied by reason(s) for such interest.
Issued on: 1 December 2020Perlindungan Tenang 15 of 24
13 Product approval
S 13.1 Before launching any Perlindungan Tenang product that fulfils the principles and
features as specified under paragraph 8, licensed persons are required to
submit an application6 for the Bank’s approval. The written application shall be
directed to:
Pengarah
Jabatan Penyeliaan Insurans dan Takaful
Bank Negara Malaysia
Jalan Dato' Onn
50480 Kuala Lumpur.
S 13.2 Licensed persons shall ensure that the products that adhere to the principles
and features as set out in paragraph 8, and are approved by the Bank, carry a
designated “Perlindungan Tenang” logo to enable the public to recognise these
products. The logo shall be displayed on the disclosure and marketing material
of the approved product. After the Bank has approved the application submitted
pursuant to paragraph 13.1, Licensed persons shall obtain the logo from the
respective industry associations, namely, the Life Insurance Association of
Malaysia, Persatuan Insurans Am Malaysia and Malaysian Takaful Association
which are entrusted for the management and administration of the logo.
S 13.3 Licensed person shall submit proposals for combined products, riders or
endorsements and the appointment of Perlindungan Tenang partners together
with the Perlindungan Tenang product application, for the Bank's assessment
and approval pursuant to paragraph 13.1.
S 13.4 Licensed persons must seek the Bank’s approval by submitting an application if
any revision is to be made to the original Perlindungan Tenang product such as
changes to pricing, distribution and material operational processes. Such
application to the Bank must be made through an addendum which shall include
a comparison of the original and revised wordings of the affected area(s) and a
history of all previous related revisions.
S 13.5 For the purpose of the submission under paragraph 13.4, licensed persons must
include a description of the impact, if any, on the product’s adherence to the
Perlindungan Tenang principles and requirements as set out in paragraphs 8.1
and 8.2.
S 13.6 For products that are currently being sold, please also provide together with
the product application as specified in paragraph 13.1, the following
information to date:
(a) Number policies sold
(b) Number of people covered (if group policy or takaful certificate); and
(c) Data on claims experience e.g. claims paid, claims ratio and no. of
claims.
6 Please refer to Appendix 2 for the Information Checklist for application to participate under
Perlindungan Tenang together with Appendix 3 for general insurance and takaful product.
Issued on: 1 December 2020Perlindungan Tenang 16 of 24
14 Monitoring and reporting
S 14.1 In monitoring the effectiveness and progress of Perlindungan Tenang products,
licensed persons shall maintain a report of the performance of all Perlindungan
Tenang products on a quarterly basis.
S 14.2 A licensed person shall ensure that the report referred to in paragraph 14.1 is
maintained in accordance with the reporting template7 attached with this policy
document, which generally comprises information on the following:
(i) In-force and new policies or takaful certificates;
(ii) Persons covered (group policies);
(iii) Premium or takaful contribution amount;
(iv) Sum assured;
(v) Claims information;
(vi) Consumer satisfaction; and
(vii) Combined product (where applicable).
S 14.3 A licensed person shall submit the report as stipulated in paragraph 14.2 digitally
to the Pengarah, Jabatan Perkhidmatan Data dan Statistik, Bank Negara
Malaysia on a quarterly basis within 21 days after the end of each quarter.
S 14.4 A licensed person shall also submit any additional information as specified in the
reporting template to be submitted annually, together with the fourth quarter
submission, as specified in paragraph 14.3.
G 14.5 A licensed person may continually monitor and undertake process enhancements
to improve consumer’s experience including buying, nomination, post-sales
servicing and claims of Perlindungan Tenang products.
G 14.6 If the claims ratio for a combined product or a rider/endorsement does not meet
the expected level, the Bank may require the licensed person, to undertake
necessary actions to ensure the Perlindungan Tenang product continue to meet
the needs of the target segment.
Question 5:
What would be the potential challenges, if any, to comply with the
reporting requirements in paragraph 14.1 to 14.4 above?
7 Please refer to the attachment to this Exposure Draft - Perlindungan Tenang Reporting Template
Issued on: 1 December 2020Perlindungan Tenang 17 of 24
PART C APPENDICES
Appendix 1: Product development process
Microinsurance Product Development Process
i. Globally, the microinsurance product development process is designed with a
primary focus on the consumers’ perspective, to ensure that appropriate products
are distributed to the targeted market segment in an effective manner and is
meaningful for the end consumer. The process is also continuous, as products
are monitored for potential improvements.
ii. The following are suggested steps for new product development8 that may be
considered or adopted by licensed persons:
(a) Institutional assessment: Thorough understanding of the commitment
to be made before embarking on product development;
(b) Market research: Understanding the market is e.g. demand, supply,
delivery channels, regulations and education level of potential clients;
(c) Prototype design and testing: Designing prototype to evaluate the
market’s response to the product and to educate the public about its value
before full roll-out;
(d) Partnerships: Evaluating and selecting the right partner which will affect
the quality and success of the product;
(e) Product design: Every product needs to meet Perlindungan Tenang
principles;
(f) Pilot testing: Products may be tested on a small scale to address
problems earlier than after a product is fully implemented;
(g) Roll-out: Once a product has been shown to be feasible and successful
on a small scale, it can be made available to a wider audience; and
(h) Continuous assessment: Even after a successful roll-out, products must
be continually monitored and undertake enhancements to continue
improvement of the products.
Examples of potential risk events to be covered and other value-added services
1) Medical and Health
Basic coverage to defray potential public hospital expenses, such as for
certain types of medical devices or equipment or travelling expenses.
Global example: CARE Foundation in India sent community health
workers (CHW) to villages to offer primary and preventive care
consultations alongside outpatient health insurance9. After screening
patients, they used mobile to consult doctors remotely to determine the
appropriate action.
2) Agriculture
8 Microinsurance product development for microfinance providers – Michael J. McCord, 2012
9 Brief No. 2 on Creating client value: Ten blueprints for microinsurance providers, ILO, 2014
Issued on: 1 December 2020Perlindungan Tenang 18 of 24
In Malaysia, the agriculture sector recorded the highest percentage of job
losses compared to other sectors following the Covid-19 outbreak
(21.9%). 33% and 21.1% workers from Fishing and Agriculture &
plantations sub-sectors respectively had lost their jobs10. This shows that
this segment, which typically live on uncertain income flow, could be
particularly vulnerable to shocks.
Global example: Weather Risk Management Services (WRMS) in India
provides weather forecasts and alerts, as well as crop prices to clients via
mobile as part of its crop insurance package11. WRMS learnt that farmers
preferred receiving weather alerts as they were able to respond by
adapting their irrigation techniques to save crops. This in turn reduced the
number of claims and damaged crops.
3) Small and Medium Enterprises (SME)12
The majority of Malaysian SMEs are microenterprises (77%), and these
businesses are concentrated in the services sector13. Based on the SME
Finance Survey conducted by the Bank in 2018, 54% of SMEs have
insurance/takaful products, with only 38% of microenterprises having
insurance/takaful. From the survey, demand for all risk covers, fire and
burglary are among the highest.14
Global examples:
i. MicroEnsure provides multi-risk insurance services and products to
its consumers in many African markets. The exact cover provided
is worked out together with its partner microfinance institution, but
a typical product includes the following benefits:
o Credit health – Hospitalization for any medical reason of
owner and up to five employees;
o Death of owner;
o Permanent disability of owner or up to five employees;
o Catastrophic business loss (fire/allied perils); and
o Death of any of up to five employees;
ii. Pacifico offers several products to small businesses in Peru:
o Multi-risk business insurance product which covers fire,
earthquake, civil unrest, natural disaster, robbery, cash in
premises and transit, electronic and mobile devices, and
breakdown of machinery. It is a voluntary product with free
hotlines for medical and legal advice, as well as free
transport to hospitals.
10 Report of Special Survey on Effects of Covid-19 on Economy and Individual (Round 1), Department
of Statistics Malaysia
11 Brief No. 2 on Creating Client Value: Ten Blueprints for Microinsurance Providers, ILO, 2014
12 Insurance for Small Businesses, ILO and Impact Insurance, 2016
13 Economic Census, Department of Statistics Malaysia, 2016
14 Understanding Financing through the Lens of Small and Medium Enterprises (SMEs), Financial
Stability and Payment Systems Report, 2018
Issued on: 1 December 2020Perlindungan Tenang 19 of 24
Appendix 2: Information Checklist for Application to Participate in Perlindungan
Tenang Initiative
Documents Tick if
appended
1. Product documentation and overview
(a) For life insurance and family takaful or medical and health insurance and
takaful, all information specified under Paragraph 13.4 of the policy
document on Introduction of New Products by Insurers and Takaful
Operators issued on 15 May 2015. Projected business volume shall be
for a minimum projection period of three years. For group policies or
certificates, please provide the target number of insured or covered
persons.
(b) For general insurance and takaful, all information is specified under
Appendix 3.
2. An explanation of how the proposal has been designed to meet the profile and
needs of the target group, including justifications on how the product meets the
Perlindungan Tenang criteria listed in paragraph 8.1. To demonstrate this, the
licensed person should provide the following:
(a) Key features/benefits of the product;
(b) The relevant target segment, and the risks it seeks to address, including:
(i) Characteristics of the target segment, e.g. age range, gender, life
stages, socio-economic characteristics, geographical location and
any other defining characteristics
(ii) Impact of the risk events
(iii) Existing coping mechanisms and their effectiveness (if available)
(c) Comparison with existing products/services currently available in the
market to address the risks, and highlight any modifications or
advantages of the product to be introduced;
(d) Market research in support of the above assessments, for example:
(i) Market study/analysis
(ii) Questionnaire or surveys
(iii) Focus Group Discussions
(iv) Pilot tests
(v) Reference to official publications such as Department of Statistics
Malaysia’s reports
(e) Key Performance Indicator(s) to achieve on a yearly basis for continuous
assessment on the relevancy of the product.
3. A clear explanation of any departure from existing regulatory requirements
sought (if any), including:
(a) justification as to why it is necessary
(b) how the regulatory flexibility required will benefit the consumer
(c) an assessment of arising risks
(d) how these risks will be managed
4. A clear map of operational processes, including expected timelines and the
consumer journey
(a) Marketing and disclosure
(b) Purchase or enrolment
(c) Mode and frequency of premium/ takaful contribution payment
(d) Nomination, including how consumers will be reminded to nominate
(e) Enquiries, including how to access critical documents such as policy or
takaful certificate, claim form and nomination form
(f) Cancellation
(g) Claims notification, submission and settlement, including claims
documentation and how claims will be paid out
(h) Renewals
(i) Up-selling or offering of add-ons, if any
Issued on: 1 December 2020Perlindungan Tenang 20 of 24
5. If involving a new distribution channel, including the appointment of
Perlindungan Tenang partner:
(a) clear description of the role and responsibilities of the distribution
channel
(b) structure and amount of remuneration
(c) procedures to ensure oversight of and management of risks arising from
the proposed distribution model such as operational including IT-related
risks, conduct, AML/CFT or other risks
(d) plans to ensure capacity and competence of the distribution channel to
carry out its responsibilities
(e) when appointing the same Perlindungan Tenang partner, the value of
such arrangements
6. Applications for any other concurrent regulatory approvals needed under other
existing policy documents (e.g. Introduction of New Products by Insurers and
Takaful Operators, Guidelines on Internet Insurance, Guidelines on Takaful
Operational Framework, or any other policy documents issued by the Bank to
the Bank’s regulatees particularly for combined products or appointment of
Perlindungan Tenang partners to distribute the products). Please state the full
list of approvals sought in the application letter.
Question 6:
What would be the potential challenges, if any, to comply with the
justification criteria set out under item 2 above?
Issued on: 1 December 2020Perlindungan Tenang 21 of 24
Appendix 3: Product documentation for Perlindungan Tenang applications
A. General information
1. Product description
Summary of the product i.e. type and purpose of cover, benefits and premiums or
takaful contributions for all plan options.
2. Marketing name(s)
3. Target product launch date
4. Distribution channel(s) and target market(s)
(a) Provide details of the distribution channel(s) which will be used to market the
product, including any specific sales strategy and partner names such as
bancassurance/Perlindungan Tenang partners.
(b) Provide details on the target market and the risk(s) the product seeks to
address similar to Appendix 2 Item 2(b).
5. Projected business volume
(a) Specify the target or projected business volume for a minimum projection
period of three years, in terms of monetary value (RM) and number of policies
or takaful certificates. For group policies or certificates, please provide target
number of insured or covered persons.
(b) The target or projected business volume can be presented at more granular
levels by distribution channels, age bands or consumer segments, if there is
such a differentiation.
B. Detailed product description
6. Nature of contract and product benefits
(a) Duration of contract
(b) Specific underwriting considerations and/or underwriting questions for this
product
(c) Benefits available under this product:
i. Describe the benefits provided in relation to the contingencies covered
by the product.
ii. State the minimum or maximum sum insured or covered.
iii. Indicate the cessation of any particular benefits at a predetermined date,
or at policy or takaful certificate anniversary.
(d) Benefit schedule if applicable, giving full details on each benefit payable
including any limits.
(e) Rebate, surplus sharing or other non-claim payouts or benefits
(f) Available options and guarantees.
Issued on: 1 December 2020Perlindungan Tenang 22 of 24
i. Describe any options and guarantees available under the product.
(g) Key exclusions or limitations
i. Describe all major exclusions or limitations in terms of coverage for this
product.
(h) Applicable excesses.
7. Premium or takaful contribution and charges
(a) Table of premium or takaful contribution rates.
(b) Describe the premium or takaful contribution term, frequency and any
contingent or reinstatement premiums or takaful contribution that is applicable.
(c) Provide details on fees or charges including the basis, conditions and purpose
of the imposed fees or charges.
8. Smoothing of premium or takaful contribution rates
(a) If premium or takaful contribution rates are smoothened, provide a comparison
of the premium or takaful contribution rates with and without smoothing.
(b) Explain the financial impact of the smoothing on the total expected portfolio.
9. Endorsements available for this product
Specify the endorsements currently available for this product subject to the
requirement in 9.1.
C. Pricing basis
10. Technical basis
(a) Describe in detail the methodology used to price the product. Where
combinations of pricing approaches are used, provide the methodology and
rationale for each pricing approach.
(b) State the underlying assumptions of this product.
(c) Provide the rating differentials and parameters used:
i. If Generalised Linear Models (GLM) are used, provide the relativity factors
and the base price of the GLM;
ii. If a formula method is used for pricing, provide and explain the formula.
(d) Provide the expense assumption used to price this product.
(e) Describe the commission structure for this product and its rationale.
(f) Describe the basis for profit loading, if any.
(g) Describe the basis for any additional contingency buffer, such as to
compensate for the lack of data for new features or insured/covered perils.
(h) State the basis and methodology used for the valuation of reserves for the
product.
(i) State the basis and methodology used to determine the capital required for
the product.
Issued on: 1 December 2020Perlindungan Tenang 23 of 24
11. Reinsurance or retakaful arrangement
Describe the reinsurance or retakaful arrangement for the product, including the
form of reinsurance or retakaful, the retention level and name of the reinsurer(s)
or retakaful operator(s) as well as their financial rating(s).
12. Departure from technical basis
Justify any departure of pricing from the premium or takaful contribution rates
obtained if the technical basis under paragraph 10 is adopted in its entirety.
D. Documents for marketing and contractual uses
13. Policy documentation, disclosure and marketing material
(a) sample proposal form
(b) sample nomination form
(c) sample policy or takaful certificate documents
(d) policy or takaful certificate
(e) policy or takaful certificate schedule
(f) sample sales materials
(g) sample marketing brochure
(h) sample telemarketing script
(i) sample flyers
(j) policy or takaful certificate information statement
(k) product disclosure sheet
E. Additional supporting information
The information below does not have to be submitted together with the application.
However, a licensed person must maintain proper internal documentation of the
information below and be able to provide it to the Bank upon request.
14. Financial impact analysis
(a) Provide the results of financial projection for a minimum projection period of
one year, including:
i. business volume in terms of monetary value and number of policies;
ii. projected profitability using relevant profitability measures such as
profit margin, return on equity etc.; and
iii. projected capital requirement and impact to capital position, including
capital required, capital available and capital adequacy ratio (CAR).
The results shall be provided with and without the quantitative impact of
the departures described under paragraph 12.
Issued on: 1 December 2020Perlindungan Tenang 24 of 24
(b) Provide quantification results of sensitivity test and break-even analysis for key
risk factors, including:
i. results and comments on the sensitivity tests on the profit margins for
the overall portfolio and the key model points by varying the
assumptions of key rating factors. The comments must take into account
the validity of the sensitivity tests, plausibility of occurrence, non-linearity
of risks, correlations, etc;
ii. explanation on the appropriateness of stress levels applied; and
iii. results and comment on the stress level of the key risk factors which
lead to the break-even point of the projected profit margin.
15. Product risk management
(a) Provide details of the risk management for the product including:
i. description of the product’s key inherent risks from the perspectives of
both the licensed person and consumers;
ii. systems and/or processes in place to manage the risks identified and
the effectiveness of the measures; and
iii. consistency of the product with enterprise risk and capital management,
including:
(A) consistency of the product with internal risk appetite, risk limits and
capital limits;
(B) any capital support provided for the product and the measures of
when the capital will be recouped; and
(C) any product specific risk limits, thresholds or triggers for re-pricing
or ceasing new business.
(b) For new products distributed through internet, wireless or other electronic
channels, provide a brief description on the IT infrastructure and risks
management for IT-related risks. This includes:
i. assessment of the IT-related risks and measures put in place to mitigate
the risks;
ii. description on application security and application architecture
diagram;
iii. IT and network security infrastructure arrangements; and
iv. network diagram (where applicable) depicting external linkages and
control checkpoint.
Issued on: 1 December 2020You can also read
