Operating Cost Controls for General Insurance and Takaful Business

Changes in customer preferences, and the emergence of new intermediaries and/or disruptors that leverage on technological innovation, are reshaping the way licensed persons are carrying on their general insurance and general takaful businesses. As part of the Bank’s efforts to promote a financial sector that continues to deliver value to customers, the operating cost control requirements aim to achieve the following objectives to:
(a) facilitate a dynamic and responsive marketplace that meets the evolving needs of customers;
(b) foster healthy competition in the general insurance or takaful sector to enable customers to receive the best products and services for their needs, including appropriate sales advice; and
(c) ensure all intermediaries adopt high standard of professionalism, while being remunerated appropriately for their efforts and performance.

The requirements in this policy document are intended to:
(a) strengthen licensed persons’ financial discipline and accountability on the management of their intermediaries. This is to encourage continuous improvements in the quality of service of intermediaries and preserve good value of products and services offered to customers;
(b) accord licensed persons with greater flexibility to manage operating costs that are commensurate with their business strategies. This would pave the way for greater innovation and improved access to insurance and takaful products and services, including for the unserved and underserved customer segments; and
(c) ensure consistent application of the cost control requirements, to preserve appropriate incentives for delivering high standards of service quality to customers.

This policy document sets out the following:
(a) realignment of operating cost control categories and limits, which includes, amongst others, the removal of management expenses limits;
(b) requirements and guidance on a licensed person’s policies on remuneration, governance and management of intermediaries; and
(c) reporting requirements.

This document belongs to Bank Negara Malaysia (BNM). Full access to the original source is available here: https://www.bnm.gov.my/banking-islamic-banking