BNM Issues Exposure Draft of Policy Document on Bancassurance/Bancatakaful

On 30 August 2021, Bank Negara Malaysia ("BNM") issued the Bancassurance/Bancatakaful Exposure Draft ("Exposure Draft") for industry feedback. The Exposure Draft outlines the requirements for Bancassurance/Bancatakaful arrangements which will apply to existing and new Bancassurance/Bancatakaful arrangements, including renewals.

The Exposure Draft aims to:

1. ensure Bancassurance/Bancatakaful subsists as a viable, widely accessible channel for consumers to purchase insurance and takaful products;
2. promote sound market conduct practices which safeguard consumers’ interest through needs-based sales, disclosure, and enhanced transparency; and
3. promote market competitiveness while preserving consumer choice.

The Exposure Draft, which is more comprehensive relative to the existing Bancassurance Guidelines, sets out, inter alia:

1. the responsibilities of the Board and senior management about the governance and management of its Bancassurance/Bancatakaful arrangements;
2. the conditions or appropriate targets tied to the payment of upfront fees, to ensure all parties to the Bancassurance/Bancatakaful arrangement deliver quality sales and prevent misaligned incentives from developing;
3. the requirements that all upfront fees (including service fees, facilitation fees or any type of fees related to or forming the upfront fees) payable by a licensed person to its Bancassurance/Bancatakaful partner, or any other party on its behalf, shall come from the licensed person’s shareholders fund;
4. the quality of sales, including formulating robust internal policies, procedures, and controls with respect to its Bancassurance/Bancatakaful persistency rates;
5. the clear demarcation of responsibilities and accountability between the licensed person and the Bancassurance/Bancatakaful partner;
6. the transparency and disclosure requirements in marketing; and
7. the minimum qualifications and training requirements, including minimum eight hours of annual professional development requirement (CPD) for staff of Bancassurance/Bancatakaful partners.

The deadline for providing feedback on the Exposure Draft was 30 September 2021. BNM is presently contemplating an effective date six months after the issuance of the final policy document.