The Insurance Sector Will Improve after Malaysia and Thailand Sign

Insurance MoU

The Malaysia central bank, Bank Negara Malaysia (BNM), and Thailand's Office of
Insurance Commission (OIC) have signed a Memorandum of Understanding (MoU)
on December 18, 2017 with an aim to enhance cooperation for the development of
the insurance sector of both countries. This is the second biggest insurance news in
Malaysia after Bank Negara announced Jessica Chew as its deputy governor,
effective January 1, 2018. The insurance MoU was signed by Bank Negara governor,
Muhammad Ibrahim, and OIC secretary general, Suthiphon Thaveechaiyagarn.

The MoU that has been signed between two countries will support the insurance
regulatory authorities, encompass arrangements for mutual assistance and
information exchange, enhance cooperation in capacity building and provide
assistance for risk management of insurance businesses. The insurance MoU aims
to strengthen the collaborative arrangements between Malaysia and Thailand. It will
help in the supervisory cooperation in the financial sector.

What is a MoU?

A memorandum of understanding (MOU or MoU) is a formal agreement between two

or more parties. MOUs are used to establish official partnerships. They are not
legally binding but they carry a degree of seriousness and mutual respect.

How could an insurance MoU help the Malaysia insurance sector?

The insurance industry in Malaysia is small by international standards. The Malaysia

government has projected positive economic growth in the coming years, so it
expected that a large proportion of the population will reach good per capita
income. This means that the demand for risk and savings-type of insurance
products will increase too.

Despite prevailing economic headwinds, the insurance sector in Malaysia continues

to be in a strong position. Recently, BNM has introduced detariffication of motor
insurance sector, which is showing positive growth factor for the sector. After the
introduction of the phased liberalisation of motor insurance, another announcement
that topped the headlines of online insurance news portals in Malaysia is the
Economic Transformation Plan (ETP) 2020. This plan calls for insurance and takaful
penetration to hit 75% of the population by 2020. Presently, unaffordable product
offerings have limited the access of insurance products to large segments of the
population. BNM needs to take efforts to reduce complexity and cost to increase
penetration of insurance products. Thailand and Malaysia can work together to
identify how to simplify products to deepen penetration, leverage technology with
online and mobile channels, improve incentive structures, deepen engagement
through financial advisers and increase consumer touch points through
partnerships. This insurance news has garnered positive reviews from the
stakeholders of the insurance companies as they believe the MoU insurance will
help to improve the condition of the sector.

In Malaysia, the whole financial sector is currently undergoing several changes.

Undoubtedly, the insurance sector is one of the most important growth drivers of
the financial services sector in Malaysia. The recent announcement of motor
detariffication, which garnered lots of attention in the insurance news portals in
Malaysia in July 2017, is believed to improve the performance of the insurance
sector. As the insurance sector is currently undergoing a series of regulatory
reforms, the insurance MoU between Malaysia and Thailand will definitely help
Malaysia to achieve its 2020 target of 75% penetration rate as well as improve total
industry assets.