Surging demand for digital Takaful and insurance services driven by the pandemic has led to Bank Negara Malaysia (BNM) to develop the Digital Insurance and Takaful Framework as it prepares to license digital insurance and Takaful operators (DITOs).
“Studies show increasing reliance on digital channels to purchase or seek information on insurance and Takaful cover. For example, while currently more than two-thirds of Malaysian consumers purchase insurance and Takaful products through traditional offline channels, a similar proportion also express interest in using online channels. In response, licensed insurers and Takaful operators in Malaysia have also become increasingly digitalized and some have developed dedicated digital strategies to embrace digital technology,” noted the central bank in a discussion paper on licensing framework for digital insurers and Takaful operators released last week.
Open for feedback until the 28th February 2022, BNM expects to issue an exposure draft upon obtaining input on the discussion paper. A policy document on prudential and business conduct requirements for digital insurers and Takaful operators will be issued after the exposure draft with applications for a license expected at a later date.
The discussion paper outlines requirements for setting up DITOs and proposed regulatory flexibilities with regards to the foundational phase and physical access points. The regulator has proposed that only digital players who carry insurance and Takaful business either on a risk-sharing basis or as a full carrier will need to be licensed as DITOs.
“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 BNM Governor Nor Shamsiah Mohd Yunus.