To pave the way for this, Bank Negara Malaysia (BNM) today issued the exposure draft on licensing and regulatory framework for digital insurers and takaful operators (DITOs) for written feedback following the issuance of the discussion paper earlier this year.

In a statement, the central bank said the exposure draft outlined the proposed framework to facilitate the entry of DITOs into Malaysia that can offer strong value propositions to realise inclusion, competition and efficiency.

“The exposure draft specifies licensing and application procedures, as well as specific requirements on the eligible business models and distribution channels of DITOs.”

As this marks a new type of entry into digitisation, BNM expect DITOs to enhance financial resilience of consumers whose protection needs are currently not served or not adequately served. Their products should also be diverse, whilst providing good consumer experience.

Akin to digital banks, there will be an observation period for licensed DITOs called a foundational phase. This period will last for three years to a maximum observation period of five years. Should DITOs fail to show credibility, they will be required to implement an exit plan.

BNM has informed that the applicants will be required to submit a comprehensive five-year business plan, and amongst others, method statements in managing technology and cyber risk in delivering its products and service.

The applicants are also expected to show skill in protecting consumer data and authentication of online transitions to mitigate fraud/cyber risks.

DITOs will also have to comply with the Financial Services Act 2013 (FSA) or Islamic Financial Services Act 2013 (IFSA).

“BNM welcomes written feedback, backed by clear rationales, to be submitted by April 28, 2023 to [email protected],” it said.