73
and interest of the Takaful consumers. BNM also issues the Risk-Based Capital Framework for
Takaful Operators (RBCT) in order to meet solvency requirements.
BNM introduced the roadmap of reforms related to life insurance and Family Takaful (LIFE)
Framework in 2015. This reform is to bolster the long-termprogress of life insurance and Family
Takaful. The progress achieved includes:
a) Greater accessibility to life insurance and Family Takaful inMalaysia. The customers
are provided with all the information related to affordable products. The percentage
of policyholder’s awareness of the products remains low even though more
alternative distribution channels such as the Internet is being used to promote the
product to the public. It will be mandatory for conventional insurance companies
and TOs to provide the participants with accurate information to ensure informed
purchasing decisions.
b) The gradual removal of limits on operational costs.
BNM revised the standards issued in January 2019 relating to Life insurance and Family Takaful
Framework (LIFE framework). The new standard is meant to review the investment-linked
business for insurers and TOs (IFSB, 2018). This advanced revised standard assures the
unprejudiced treatment and proper safeguard of policyholders and Takaful participants.
The key requirements in the revised investments linked to business standards include:
1) The introduction of the Minimum Allocation Rate (MAR) to act as a safeguard for
customer account values by removing the commission limits that will take effect in July
2019 (for Life insurance) and July 2020 (for Family TOs), respectively. Verily, it will
result in commissions being expanded over the longer-term, along with incentives to
improved sales and services as well as persistency management for long term
investment-linked policies or Takaful certificate.
2) Secured expectations for insurers and TOs to direct more sturdy sustainability in order
to ascertain an investment-linked policy and Takaful certificate that is able to manage
the coverage until the end of its contractual term.
3) Improved manifestations for the investment-linked product with proper explanation to
assist the customers for better understanding of the key risks and benefits of
investment-linked policies and Takaful certificates, which will help customers make
informed and accurate decisions.
The BNM implemented further reforms in the regulation of TOs. Currently, most of the TOs need
to convert their composite Takaful into separate licenses. The TOs need to register single Family
Takaful and General TOs separately. Recently, six composite conventional insurance companies
and TOs transformed to single life/family and general licenses from their composite licenses,
whereas other five composite conventional insurance companies and TOs retained only their