[Insurance] What you need to know about the New Regulations on Investment-Linked Plans? (July 2019)

If you are planning to purchase an Investment-Linked Plan (ILP) insurance policy, then you should take note of the new regulations by Bank Negara that came into effect on 1 July 2019.

In January 2019, Bank Negara released a policy document that set several new requirements that investment-linked insurance providers must adhere to from 1 July 2019 onwards. Why? These requirements were designed with the primary objective of protecting the interests of policy holders.

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The salient requirements are as follows:

• Implementation of standards on *Minimum Allocation Rates (MAR) to protect the account values of IL policy/certificate owners;
  
  
• Minimum standards on sustainability tests and communication to policy/certificate owners to improve long term persistency of IL policies/certificates and consumer awareness; and
  
  

• Strengthened disclosure standards on product illustration to facilitate more informed decision-making by consumers.

Allocation changes for one of the ILP plans from an insurer.

What does “Minimum Allocation Rate (MAR)”  means?

It refers to the minimum proportion of premiums payable by policy owner/takaful contributions made by takaful participant that is allocated in the unit fund(s) of choice before the deduction of any charges.

What should investment-linked policy owners/takaful participants do?

For existing owners of investment-linked policies/certificates and consumers who have purchased an investment policy/certificate before 1 July 2019, you should:

• Understand the term of your contract and how long your coverage is expected to last, based on the current level of premium/contribution.
• Contact your insurer/takaful operator or agents (insurance/takaful/bancassurance) for further clarification, if necessary.
• Receive a letter from your insurer/takaful operator providing information on sustainability of coverage from 1 July 2019. Please discuss with your insurer, takaful operator or agent (insurance/takaful/bancassurance) on how the information on sustainability of coverage affects the terms and conditions of your contract, and meets your insurance/takaful protection needs.
• Continuously review your protection needs and financial situation, and be aware of any changes to the tenure your coverage is expected to last.
• Understand the options available to manage the investment-linked policies/certificate to meet your needs and discuss them with your insurers, takaful operators or agents (insurance/takaful/bancassurance) where necessary.
• Take appropriate action, if necessary.

Beginning 1 July 2019, for consumers who intend to buy a new investment-linked policy/certificate, you should:

• Understand that the premiums/contributions quoted at point of sale are expected to be sufficient to fund coverage until the end of the contractual term.
• Review carefully the terms and conditions to ensure that they meet your insurance/takaful protection needs.
• Continuously review your protection needs and financial situation and be aware of any changes to the tenure your coverage is expected to last.
• Understand the options available to manage the investment-linked policies/certificate to meet your needs and discuss them with your insurers, takaful operators or agents (insurance/takaful/bancassurance) where necessary.
• Take appropriate action, if necessary.
  
  

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