Bank Negara Malaysia issues Exposure Draft on Medical and Health Insurance / Takaful Business

Bank Negara Malaysia (‘BNM’) issued an Exposure Draft of a Policy Document on Medical and Health Insurance/ Takaful Business (‘Policy Document’).
The Policy Document is a new document issued by BNM. The Policy Document, when issued, applies to licensed insurers under the Financial Services Act 2013 and licensed takaful operators under the Islamic Financial Services Act 2013 (‘licensed ITOs’) which underwrite or offer medical and health insurance/ takaful (‘MHIT’) products.
The Policy Document seeks to address developments in the MHIT business and promote more innovative, inclusive and sustainable MHIT business models to better respond to the needs of consumers and prevailing operating environment.
The Policy Document also aims to update the requirements on the conduct of the MHIT business, in line with the key strategies outlined in BNM’s Financial Sector Blueprint 2022-20261, to promote the following: 
  1. ensure that consumers can access a wider choice of MHIT products catering to different healthcare needs and within the reasonable means of the respective consumers;
  2. facilitate consumers’ decision-making process when purchasing MHIT products and promote enhanced understanding of MHIT products;
  3. protect policy owners’/ takaful participants’ interests;
  4. preserve the continuity and sustainability of the MHIT business through sound underwriting and pricing policies; and
  5. facilitate greater data sharing to support better cost control management and pave the way towards greater transparency. 
The Policy Document sets out the regulatory requirements covering the following areas of the MHIT business and products: 
  1. underwriting and terms of issue, including establishment of underwriting policies and procedures, processing of applications for MHIT policy/ takaful certificate, mandatory ‘free-look’ period, revisions and modifications to MHIT policy/ takaful certificate and continuity of coverage;
  2. product design, including applicable limitations;
  3. re-pricing and risk pooling practices;
  4. commissions and incentives, including maximum commission limits and parameters on incentives to intermediaries;
  5. monitoring and reporting requirements for MHIT-related data; and
  6. business conduct and disclosure to consumers, including disclosure at point of sale and at point of entering into contract and during the term of the policy/ takaful certificate contract, needs-based assessment requirements and prohibition of concluding sales of all MHIT products (including riders) through telemarketing channels. 
Subject to two exceptions2, BNM has proposed that the Policy Document will come into effect three months after the date of issuance of the document.
The deadline for submitting feedback by email to BNM on the exposure draft of the Policy Document is 15 March 2023.
Alert by Kok Chee Kheong (Partner) and Joey Tiw (Senior Associate) of the Corporate Practice of Skrine.

1 The three key strategies outlined in BNM’s Financial Sector Blueprint 2022-2026 are: (i) Strategy 1 - Steer positive change in behaviour among actors in the private medical healthcare ecosystem so that MHIT coverage remain inclusive and sustainable for policy owners/takaful participants, and financially viable for licensed ITOs; (ii) Strategy 2 - Support better cost control management by licensed ITOs by leveraging on digital solutions; and (iii) Strategy 3 - Institute higher standards on business conduct and sales practices amongst licensed ITOs.
2 The two exceptions are (i) paragraph 12.2 which requires licensed ITOs to submit MHIT claims data to a central medical claims data platform established by the industry (‘central platform’) for monitoring purposes, and is to commence on 1 January 2024; and (ii) paragraph 12.6 which requires licensed ITOs to ensure that the central platform operator is able provide an industry-wide annual analysis of the prescribed medical claims data collected through the central platform within 30 days after the end of the preceding year and to submit the same to BNM upon its request, and is to commence on 1 January 2025.

This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact