Bank Negara Malaysia, the nation’s central bank, recently issued the Discussion Paper on Licensing Framework for Digital Insurers and Takaful Operators.
As noted by Bank Negara, the Discussion Paper outlines the proposed framework for “licensing new digital insurers and takaful operators (DITOs)” in order to encourage “digital innovation” in Malaysia‘s insurance and takaful sector. It also complements the banking institution’s initiative on virtual banks and digitalization of the financial services sector.
As explained in the update:
“DITOs are expected to contribute to a more inclusive, competitive, efficient insurance and takaful sector in line with evolving needs of consumers.”
Bank Negara Malaysia Governor Tan Sri Datuk Nor Shamsiah Mohd Yunus said:
“The proposed framework aims to attract new digital players that can offer innovative solutions to address critical protection gaps among the unserved and underserved market segments, as well as enhance customer experience and elevate trust.”
The announcement also mentioned that the framework will take on a balanced approach.
As noted in the update:
“The focus is to encourage more significant innovation, whilst promoting financial stability and protecting consumer interests. The Discussion Paper covers the requirements for entry, such as criteria in assessing an application and capital requirement, and explores new business models such as risk-sharing.”
The Bank also mentioned that it aims to “issue an Exposure Draft upon obtaining feedback from the Discussion Paper.”
This will be “followed by a Policy Document on prudential and business conduct requirements for DITOs in 2022,” the announcement confirmed while noting that the applications for a DITO license will be “open at a later date.”
The Bank welcomes written feedback on the Discussion Paper “by 28 February 2022.”
As noted in the paper:
“The Bank may also impose requirements, to address the need for DITOs to strengthen their technology resilience against operational disruptions and growing sophistication of cyber threats. The management of technology risk is critical to ensure continuous availability of DITO’s services to the customers and adequate protection of customer data.”
The paper also mentioned:
“Upon completion of the foundational phase, licensed DITOs will be subject to similar prevailing regulatory and supervisory requirements and allowed similar business scope applicable to the existing players. Failure to fulfil any of the requirements by the end of the foundational phase may potentially result in the DITO’s licence being revoked pursuant to section 20 of the FSA and section 18 of the IFSA.”