Page 49 - LIAM Annual Report 2020

ANNUAL REPORT 2020 47

PRODUCT ILLUSTRATION RATE FOR
INVESTMENT-LINKED POLICIES
BNM issued specifications relating to the Product average historical FTSE Bursa Malaysia KLCI returns
Illustration Rate for Investment-Linked (IL) Insurance (“FBM KLCI Returns”) for the first 20 years, and 5%
Policy/Takaful Certificate under the Policy Document thereafter, where applicable. For other types of funds,
on Investment-linked Business on 27 December 2020. the X and Y are 2% and 5%, respectively.

Based on the Policy Document on Investment-Linked Under the new specifications, Scenario Y for equity
Business issued by BNM on 11 January 2019, insurers funds shall be the immediate preceding 10-year
are required to ensure that product illustration average historical FTSE Bursa Malaysia KLCI returns
is provided to a prospect at the point of sale or for the first 20 years, and 5% thereafter, or 5% (“fixed
marketing of an investment-linked insurance product rate”) until maturity.
based on two rates denoted as ‘Scenario X’ and
‘Scenario Y’ on a gross basis, to denote hypothetical The Scenario Y rates have been specified as 5.63%
rates of return of the fund. for the period between 1 January 2021 and 31 March
2021. The immediate 10-year average historical FBM
For equity funds where all of the cost of insurance is KLCI returns for 2021 is 4.01%, where insurers may opt
guaranteed, including those relating to extensions to to use the “FBM KLCI returns” or “fixed rate” on 1 April
these policies (or riders), X is 2% and Y is the 10-year 2021.

BALANCED SCORE CARD AND
CUSTOMER FACT FIND
BNM issued a revised policy document on BNM has also specified that appropriate
Operating Costs Controls for Life Insurance and procedures, processes and tools to ensure effective
Family Takaful Business on 24 December 2019. evaluation and independent review of the quality
of the advisory process and recommendations
Greater emphasis has been placed on quality of provided to policyholders based on the CFF forms
agents’ sales with the increase of weightage for completed by staff, agents and representatives
KPIs on Completion rate of CFF and, 1st and 2nd including bancassurance partners, are to be
year persistency rates. The KPI on number of policies established and applied by licensed insurers.
sold/marketed or annualised first year premium,
had been removed with effect from 1 January In this regard, the industry has embarked on the
2020. The percentage of BSC commission payable drafting of best practices with the objective to
by licensed insurers to an agent remains at 25% of determine the satisfactory completion of sales
the total commission payable. procedures for each application submission and
the appropriateness of the resulting product
The policy document also specified that the BSC recommendations. The sales procedures include
framework for Bancassurance Partners would be know-your-customer due diligence, needs/
implemented from 1 January 2021. The percentage suitability assessments, customer acknowledgments
of BSC commission payable has been set at 35% of explanations for product sales illustration and key
of the total commission payable. The KPIs are the features (e.g. claims details, cooling-off process,
same as they are for agents with a slight variation etc.), customer consent on policy replacements,
in the weightage. etc. which are to be properly documented.