BNM Paves the Way for Digital Insurance with Proposed Licensing Framework
by Fintech News Malaysia January 5, 2022Bank Negara Malaysia on Tuesday issued the Discussion Paper on Licensing Framework for Digital Insurers and Takaful Operators.
The Discussion Paper outlines the proposed framework for licensing new digital insurers and takaful operators (DITOs) to encourage digital innovation in the insurance and takaful sector.
DITOs are expected to contribute to a more inclusive, competitive, efficient insurance and takaful sector in line with evolving needs of consumers.
Nor Shamsiah Mohd Yunus
“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,”
said Bank Negara Malaysia Governor Tan Sri Datuk Nor Shamsiah Mohd Yunus.
The central bank has also similarly issued a digital banking licensing framework on December 2020 with similar objectives.
The central bank said that framework will adopt a balanced approach.
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.
In this discussion paper, BNM proposes a foundational phase not unlike it digital banking framework which allows for DITOs to have a lower minimum paid-up capital of RM 40 million.
The discussion paper also states that incumbent insurers who wish to apply for a digital license may do so through a separate body like a subsidiary or via a consortium. However it highlights that existing players do no need additional licensing to digitise their business.
The Bank 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 applications for a DITO licence will be open at a later date. The Bank invites written feedback on the Discussion Paper by 28 February 2022.
The full discussion paper can be found here.
