Key notes on Financial Services Act 2013. Especially in regards to safeguarding insurance customer’s & providers rights & nominations (Schedule 7 – 10).
Note: Simplified for easier reading & understanding. E&OE.
(Last updated: Aug 5, 2016)
- Passed by Malaysian Parliament at end 2012
- Came into effect on 30th June, 2013
- Repeals the Insurance Act 1996
- Schedule 7, 8 & 10 effective 30th June, 2013
- Schedule 9 effective 1st January, 2015
- Development banks
- Insurance companies
List of prohibited business conduct (Schedule 7)
- Engage in conduct that is misleading or deceptive in relation to nature, features, terms or price of financial service or product.
- Induce financial consumer to do or omit an act in relation to any financial service or product.
- Exert undue pressure, influence or using or threatening to use harassment, coercion, or physical force.
- Demand payments including threatening to bring legal proceedings.
- Exert undue pressure on, or coercing, financial consumer.
- Collude with any other person to fix or control the features or terms (except for any tariff or premium rates or policy terms approved by BNM).
Key details for insurance policy holders
- Freelook Period: Policy owner may within 15 days (or longer period as specified by Bank) return the life policy & immediately refunded premium paid (subject to deduction expenses incurred for medical examination). This 15 days takes date from the date after the Policy Acknowledgement Slip (PAS) is signed.
- For Investment Linked Policy (ILP), refund = unallocated premium + value of (remaining) units + insurance charges & policy fees
- Capacity of minors to insure: (Schedule 8) Age 10-16 may assign/be assigned a policy with written parental consent. Age 16 above may assign a policy with written parental consent. (Schedule 10) At age 16 may nominate any person as nominee (previously age 18).
- Age 18 for ILP
- Trust of policy moneys (Schedule 10): Effective 30 June 2013 cannot appoint self as trustee. No impact on self-appointment of trustee made prior to 30 June 2013. For trust policies, policy owner cannot revoke nomination/add nominee, vary/surrender policy or assign/pledge policy as security without written consent of trustee.
- Payment of policy moneys if no nominee (Schedule 10): Requires Letter of Administration or Grant of Probate for all claim amount. Policy owner’s parents/spouse/children can apply to waive LoA/GoP subject to company approval may at it’s discretion pay up to limit of RM100k.
- If nominee incompetent (i.e. unsound mind), paid to a trustee. If no trustee, paid to surviving parents of incompetent nominee. If claims amount <RM50k & no parents, company may at discretion pay to person who will take care of nominee. If claims amount >50k, paid to public trustee/trust company.
- Interest on claim amount (Schedule 10): If claim not paid by insurer within 60days, insurer to pay min compounding interest rate of prevailing 12mth FD rate + 1%. If no nominations, 60days based from date of LoA/GoP.
Nominees: Power to make nomination (schedule 10 – To change existing nominee)
- Revoke siblings & appoint parents/spouse: No consent required
- Revoke OR change from parents/spouse/children: Consent from trustee required
Financial Services Act 2013 – Schedule 9
- Effective January 1, 2015
- New Legal Position (Consumer Insurance Contracts –Paragraph 5)
Before a consumer insurance contract is entered into or varied, a licensed insurer may request a proposer who is a consumer to answer any specific questions that are relevant to the decision of the insurer whether to accept the risk or not and the rates and terms to be applied.
If the licensed insurer does not make a request as above, compliance with the consumer’s duty of disclosure shall be deemed to have been waived by the insurer.
- Consumer insurance with duration 1 year or less if consumer deliberate or reckless misrepresentation: avoid the consumer insurance contract & refuse all claims
- Consumer insurance with duration 1 year or less if consumer careless or innocent: avoid contract & refuse all claims if insurer would not have entered the contract OR treat contract on different terms & may reduce proportionately claims amount.
- Insurance underwriting changes: more detailed proposal forms with more specific questions; removal of “Name & address of your regular doctor”; additional question of “Are you presently a bankrupt”
Insurance VS Commercial Contract
- Insurer & insured have a duty to deal honestly & openly with each other in negotiation VS Each party is expected to make the best bargain & judge for themselves as long as neither party misleads the other
- Uberrima Fides (of the utmost good faith) VS Caveat Emptor (let the buyer beware)