KUALA LUMPUR: Regulatory supervision in the insurance industry must be supported by more experts than regulations, says Bank Negara Malaysia governor Tan Sri Muhammad Ibrahim.
"In the current state of constant change, building the capacity of supervisors is one of the most critical priorities," Muhammad said in his keynote address at the 24th International Association of Insurance Supervisors (IAIS).
By doing so, it will guard against threats to stability without affecting growth and innovation.
“In a world of fierce competition, complex product offerings and evolving customers’ needs, there is always the risk of administering excessive and complicated regulations.
“This could lead to unintended consequences that can make the financial system less, rather than more stable.”
Rules also have the effect of restricting innovation, he warned, adding that this would only lead insurers exposed to higher business risks.
We need to create room for experimentation, he said.
“Platform-based solutions and insure-tech companies are opening up insurance access to large segments of the population at a fraction of previous costs.”
Some regulators have adopted “regulatory sandboxes” to test solutions and design regulations but when things do not work, they must be prepared to change tactics and strategy.
Muhammad also highlighted that rethinking with new paradigms was important to anchor business and public policy.
“Rather than see the competitive landscape through a zero-sum lens, co-operative competition or “co-opetition” can result in synergistic benefits.”
While technological innovations will make customers better off insurers on the hand, may be confronted with some fundamental ethical issues.
For insurance companies, this requires a rethinking of professional and ethical standards, thus the need for a new paradigm on ethics.
There is always the dilemma and trade-offs in directing more resources toward social impact investments, in cases where it lowers risk-adjusted returns for policyholders.
Meanwhile, outgoing IAIS secretary general Yoshihiro Kawai will be replaced by Jonathan Dixon.