FIRE INSURANCE

Review of Fire Tariff

To ensure a gradual progression towards a de-tariffed market, the Fire Sub-Committee has implemented the following to improve underwriting skills in the industry:-

  1. with effect from 10th August 2011, the 3-year review requirement for specially-rated risks above RM30 million has been removed. Insurers are now only required to submit an application for review of the special rate to the Rating Committee in the event of any material change of the risk.
  2. the threshold limit for self-rating would be increased from the current limit of RM30 million to RM50 million and training courses have been conducted by the Rating Committee to further educate and guide underwriters and surveyors in carrying out fire risk assessments and applying the self-rating exercise.
  3. with effect from 20th April 2011, the requirement to submit an application for a provisional special rating to the Rating Committee has been removed. Insurers now conduct the self-provisional rating for risks above RM30 million by using the self-rating mechanism on their own.

Proposed Flood Model for the Insurance Industry

An Ad-Hoc Committee comprising industry representatives has been set up to look into the proposed project to develop a flood model of the country for use by the insurance industry.

The Ad-Hoc Committee would study, review and analyse suitable flood modelling frameworks and work with consultants providing such flood modelling solutions. The Committee will also coordinate invitations for tenders and recommend the appointment of the project consultants and, subsequently, monitor the progress of the project.

Houseowner/Householder Plain Language Policy

The Fire Sub-Committee has circulated the final approved Houseowner/Householder Plain Language Policy (English and Bahasa Malaysia version) for use by insurers with effect from 31st March 2012.

Under the Guidelines on Product Transparency and Disclosure issued by BNM, insurers are required to use plain language in contracts, agreements and policy documents issued to individuals and SMEs.

Insurance Coverage for the Timber/Furniture Industry

To address the difficulties faced by the timber and furniture trade companies in securing insurance coverage for their assets, the “Guidelines for the Timber/Furniture Industry” has been drawn up by the Fire Sub-Committee. The Guidelines would spell out the Minimum Requirements and Best Practices which are required to be put in place by the timber/furniture industry in areas such as loss prevention, housekeeping, etc. to improve on the insurability of their risks.

The Guidelines are currently under review by the Malaysian Timber Industry Board and would be implemented for use by member companies once adopted.

NON-TARIFF

Scheme for Compulsory Medical Insurance for Foreign Workers

The Scheme was mandated by the Ministry of Health effective 1st January 2011. The Scheme was opened to insurance companies currently writing Foreign Workers Compensation Insurance Scheme and is mandatory for all foreign workers except for certain specified categories of workers.

ISM has been requested to collate monthly statistics from member companies on the said insurance Scheme for experience analysis.

CORPORATE GOVERNANCE

E-Payment Implementation in the Insurance Industry

BNM had formed a Working Group on E-Payment Implementation in the Insurance Industry to facilitate the transition to e-payments by insurance companies. This is an important area of development in the financial sector in view of the emphasis placed on the transition to e-payment modes in the country under the Financial Sector Blueprint.

The Association had consulted members on their areas of concern on this transition and some of the issues raised were that there was a need to increase public awareness further as their acceptance of this mode of payment was a crucial success factor. In addition, a rationalisation of the current transaction costs charged by banks as compared to the conventional modes of payments was necessary to attract users to the e-payment modes. Another area of concern expressed was to ensure continuous enhancement to the security of e-payment systems.

These areas are currently being addressed by all parties and, in regard to costs, the Association of Banks in Malaysia (ABM) has been in discussion with the various Associations on the most acceptable charges for e-payments that could be imposed by the service providers. A decision on the costs of e-payment facilities is pending and will, no doubt, contribute significantly in expanding further the use of e-payments by the general public.

Enterprise Risk Management (ERM)

The ERM Working Group organized the 5th Knowledge Sharing Forum Tea Talk on “Unlocking the International ERM Best Practices from the Insurance/Reinsurance & Rating Agencies Perspectives” on 7th April 2011.

The forum discussed the following topics:-

  • ERM from Insurer/Reinsurer and Rating Agency perspectives;
  • ERM Implementation Processes for Insurance/Reinsurance Companies;
  • the use of rating agencies in developing the risk profile, risk appetite and tolerance framework of companies;
  • best practices in ERM implementation; and
  • the practical aspects of ERM implementation steps for insurance/reinsurance companies to start up and develop their ERM implementation programs.