Bank Negara Malaysia (‘BNM’) issued an Exposure Draft Policy Document on Perlindungan Tenang (‘Exposure Draft’) on 1 December 2020.
 
Upon issuance, the policy document will apply to licensed insurers under the Financial Services Act 2013 and licensed takaful operators under the Islamic Financial Services Act 2013 (individually a ‘licensed person’ and collectively ‘licensed persons’).
 
Perlindungan Tenang is an initiative launched by BNM in 2017 in collaboration with the insurance and takaful industry to provide microinsurance/microtakaful products to the unserved and underserved segments, in particular the bottom 40% of households (B40), which are affordable, accessible, provide good protection value and are easy to understand, simple to purchase and to make claims.
 
The Exposure Draft seeks, among others, to expand Perlindungan Tenang to Small and Medium Enterprises (SMEs) and to enhance the framework to achieve the following:
 

1. Promoting greater and more meaningful microinsurance/microtakaful take-up through more robust requirement on product development and enabling product combination;

2. Promoting wider distribution channels to address challenges associated with high distribution costs through greater operational flexibility; and

3. Strengthening consumer protection to safeguard consumer interests.

All Perlindungan Tenang products must adhere to the following principles:
 

Affordable	Amount of premium/takaful contribution is affordable for the target group.
Accessible	Distribution channel is accessible to and approachable for the target group. Product may have minimal exclusions.
Good value	Protection provided corresponds to the key needs of the target group. Proportion of premium/takaful contribution allocated to insurance/takaful benefit is at least 50%.
Easy to understand	Product features are self-explanatory such that no advice and only simple disclosures are needed. Benefits, terms and conditions are straightforward. Content, language, mode and timing of disclosure and marketing are suitable for consumers with only a basic understanding of insurance or takaful.
Easy to buy, nominate and claim	All processes from purchase to claims minimise administrative burden for consumers. Claims process is designed to minimise the time between the risk event occurring and pay-out.

 
Further, all Perlindungan Tenang products must include the following features:
 

All products	Maximum term of coverage of one year. Minimum 15-day free-look period1. 30 days grace period2. Guaranteed acceptance or on-the-spot acceptance or rejection of risk. Provide a lump-sum payment. Claims to be paid out within five working days from receipt of complete documentation.
Life insurance or family takaful only	No savings or investment or surrender benefit.

 
BNM has expressed its willingness in the Exposure Draft to consider applications from licensed persons to offer a combination of Perlindungan Tenang products with other products offered by financial institutions (‘combined product’).
 
The requirements and matters to be considered in relation to the structuring and offering of combined products are set out in section 10 of the Exposure Draft.
 
All Perlindungan Tenang products (including combined products) require BNM’s approval before they are launched.³
 
To enhance the distribution channels for Perlindungan Tenang products, a new category of intermediaries ‘Perlindungan Tenang partners’ (‘PT Partners’) will be introduced. This category is in addition to the existing insurance and takaful agents registered with the General Insurance Association of Malaysia (GIAM), Life Insurance Association of Malaysia (LIAM) and Malaysian Takaful Association (MTA).
 
The role of PT Partners is to assist with product distribution, premium or takaful contribution collection, collecting consumer and nominee’s details, as well as claims submission and claims payout. PT partners may also describe the product features and relevant processes including premium or takaful contribution payment, policy or takaful certificate renewal and claims procedures in accordance with the marketing and educational materials provided by the licensed person. However, further queries are to be routed by PT Partners to the licensed person.
 
PT Partners are not subjected to qualifications, written examinations, training and continuing professional development and are not subject to any limit as to the number of licensed persons they may represent.⁴
 
Feedback on the Exposure Draft are to be submitted to BNM by 15 January 2021.