ACTIVITIES OF PIAM

Developments In The General Insurance Industry

Financial Sector Masterplan (FSMP)
The Financial Sector Masterplan (FSMP) launched in March 2001 is a blueprint to evolve the financial system into one that is dynamic, competitive and resilient. One of the significant achievements is the introduction of various consumer protection and education initiatives to enhance the level of financial literacy and awareness among consumers while ensuring sufficient redress mechanisms are in place. Initiatives undertaken jointly by the insurance industry and Bank Negara Malaysia (BNM) were the Consumer Education Programme (CEP) and the establishment of the Financial Mediation Bureau (FMB). The CEP is a ten-year programme designed to educate consumers with insurance related information through published materials in hard copy and the internet. The FMB is an integrated agency that aids consumers to resolve disputes against insurers and other financial institutions.

Ethics Committe
The Association has also identified self-regulation as a key component of the FSMP. This has culminated in proposals for the formation of an Ethics Committee. This Ethics Committee will specifically address complaints before they reach the stage of the normal disciplinary channels available under the PIAM Constitution. The proposed Ethics Committee will deal with complaints from members on a “pre-emptive” basis i.e. expeditiously and with a view to manage or stop any malpractices before they can become disruptive to the industry. Any delays in disciplinary actions are at the expense of fair competition and, ultimately, not in the best interest of the general membership of PIAM.

The Ethics Committee will also be able to refer complaints to the Disciplinary Committee formed under the provisions of the PIAM Constitution where it is of the view that the subject matter of a complaint merits disciplinary actions.

Risk Based Capital Framework (RBC)
BNM issued the revised Risk Based Capital Framework (RBC) in April 2007. Under the revised framework, the board of directors of an insurance company are expected to play a greater role in enhancing the robustness of risk management infrastructure and market conduct governance. The framework will also promote greater protection of the interests of the various stakeholders, particularly policyholders.

The revised RBC which is expected to take effect from 1st January 2009, will further enhance the existing solvency framework by establishing more transparent and risk adjusted capital and valuation requirements that reflect all major financial risks of insurers. This is to ensure that the capital positions of individual insurers are at levels that commensurate with their risk profiles. The enhanced framework will also accord greater flexibility and relaxations for insurers in managing their investments. Insurers that possess the ability to adopt the framework earlier have been given the flexibility to migrate to the framework in 2008.

Goods and Services Tax (GST)
The introduction of a Goods and Services Tax (GST) to replace the existing Sales and Services Tax was announced in the 2005 Budget in September 2004. The proposed implementation date at that time was 1^st January 2007 but has subsequently been postponed indefinitely.

Nevertheless, in anticipation of the introduction of the GST and to ensure that the industry's preparedness for GST is high, there was consultation with the Tax Review Panel (TRP) formed by the Ministry of Finance in 2005. Recommendations on GST treatment on issues affecting the general insurance industry were submitted to the TRP in September 2005.

A very important aspect which needed to be highlighted and addressed by members was the key GST transformation challenges and measures in planning ahead for GST implementation and rollout. To address these concerns, the Association had formed a Working Group on GST with the main objective of devising appropriate procedures, methodology and training sessions to prepare member companies and staff for the effective implementation of GST as well as to create awareness of the issues and problems relating to this implementation with proposed remedies and work flows. The Working Group started with an Industry Awareness Programme by organising a series of talks on GST by Consultants who are experts in this area. The talks are designed to establish issues and problems relating to the GST implementation and where possible remedies or workflows can be identified to address these issues and problems.

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