Malaysia To Roll Out Insurance Starter Pack For Low Income Earners

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KUALA LUMPUR – Malaysia’s insurance and takaful industry is expected to roll
out the development of an insurance starter pack, nationally, for low-income
earners, and further develop alternative distribution channels to increase the
insurance penetration rate in the country.

In the Financial Stability and Payments Report 2016 released today, Bank
Negara Malaysia said the country’s overall insurance penetration remained flat
within the range of 54 per cent to 56 per cent over the last five years.

“Affordability and access remain key barriers to higher levels of
penetration,” it said.

To address the issue, the report said various innitiatives were introduced,
including the requirements for life insurers and family takaful operators to
make basic protection products available through direct distribution channels
beginning from 2017.

It also noted that among lower income groups, only four per cent of
households currently have some form of life insurance or family takaful cover.

“Focus has mainly been directed at lowering distribution costs and
simplifying product design and delivery, while ensuring meaningful protection
for policyholders,” it said.

It also said that surrender payments over the past four years have increased
above the long-term historical average level, raising concerns over sales
practices.

“Escalating healthcare costs have also contributed to more frequent
repricing activity for medical and health insurance/takaful products which can
increase difficulties faced by policyholders to maintain their policies,” it
said.

Hence, it said BNM would continue to take firm action to ensure fair
practices by insurers and takaful operators, including requirements for firms
to take specific steps to better manage policyholders’ expectations.

“This include the shift to use plain language policies to help consumers
better understand the benefits, exclusions and obligations under insurance and
takaful policies.

“By end-2017, more than three quarters of the insurance and takaful policies
for personal lines of business are expected to be simplified using plain
language,” it added.
— BERNAMA

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