KUALA LUMPUR (Jan 4): Bank Negara Malaysia (BNM) on Tuesday (Jan 4) issued a discussion paper on the licensing framework for digital insurers and takaful operators (DITOs).

The paper outlines the proposed framework for licensing new DITOs to encourage digital innovation in the insurance and takaful sector, BNM said in a statement.

The paper also complements the central bank’s initiative on digital banks and digitalisation of the financial sector.

BNM said DITOs are expected to contribute to a more inclusive, competitive, efficient insurance and takaful sector, in line with evolving needs of consumers.

“The proposed framework aims to attract new digital players that can offer innovative solutions to address critical protection gaps among the unserved and underserved market segments, as well as enhance customer experience and elevate trust,” said BNM governor Tan Sri Nor Shamsiah Mohd Yunus.

The framework will adopt a balanced approach, the central bank said, adding that the focus is to encourage more significant innovation, while promoting financial stability and protecting consumer interests.

The discussion paper, it said, covers the requirements for entry, such as criteria in assessing an application and capital requirement, and explores new business models such as risk-sharing.

BNM said it aims to issue an exposure draft upon obtaining feedback from the discussion paper. This will be followed by a policy document on prudential and business conduct requirements for DITOs in 2022.

The applications for a DITO licence will be open at a later date, BNM said.

The central bank has invited written feedback on the discussion paper by Feb 28.