Zeti Akhtar Aziz: Challenges of financial education in Malaysia
Opening remarks by Dr Zeti Akhtar Aziz, Governor of the Central Bank of Malaysia, at the Launch of
the Insurance Consumer Education Programme, Kuala-Lumpur, 29 August 2003.
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Saya berasa amat berbesar hati mengalu-alukan kehadiran tuan-tuan dan puan-puan ke majlis
pelancaran Program Pendidikan Pengguna bagi industri insurans dan takaful pada pagi ini.
Pelancaran program ini merupakan satu lagi perkembangan penting dalam pembangunan industri
insurans dan takaful.
Ladies and Gentlemen,
The economic and financial landscape in Malaysia has undergone significant transformation. In the
process, the economy has become more diversified with new sources of growth. In tandem with these
changes, we have seen the modernisation of the financial sector that has also become increasingly
more diversified to meet the new requirements of the economy. There has also emerged new
distribution channels and channel convergence within the financial sector. The financial sector has
also increasingly leveraged on advances in technology which has significantly changed the way
financial business is being conducted. As market advances continue to expand the range of financial
products and services, consumers are being faced with increasingly complex choices and options in
the management of their personal finances and exposure to risk. In this more complex financial
landscape, it becomes important for consumers to have improved access to information. Financial
education for Malaysian consumers is central to this process. It is therefore a matter that is accorded
high priority by the Central Bank.
It therefore gives me great pleasure today to launch the Consumer Education Programme for the
insurance and takaful industries. This represents an important step in the ongoing evolution of the
development of our financial system. Indeed, this also represents a part of the overall efforts to
promote market integrity and consumer protection over the whole spectrum of banking, insurance and
takaful activities in the market. For consumers to fully realise the benefits of increased opportunities
available in this continuously changing financial environment, consumers need to be in a position to
actively manage their financial assets while at the same time safeguard their financial future.
The public response to the launch of the Consumer Education Programme for the banking sector early
this year has been most encouraging. To date, more than two million visitors have accessed the Bank
Negara Malaysia's "Banking Info" website and more than 360,000 booklets have found their way into
the hands of consumers. The launch of the Consumer Education Programme for the insurance and
takaful industries today will be part of this on-going effort to enhance the ability of consumers to
understand and draw meaningful comparisons of alternative financial products and make
betterinformed decisions in financial planning.
In formulating a consumer education strategy, the distinct features of the insurance industry have been
taken into consideration to meet the information needs of insurance consumers. Insurance contracts
are essentially formed on the basis of disclosures made by prospective policyholders about the risks to
be insured. Such disclosures determine if an insurer will assume the risk and the price at which it is
assumed. The ability to enforce a claim against an insurer will depend on the accuracy and
completeness of the disclosures. This underwriting and claims assessment process distinguishes
insurance from other financial products. There is also a wider range of intermediaries in the insurance
industry compared with other financial service industries. The entire spectrum includes the insurance
agents, insurance brokers and advisers in the distribution process, and the loss adjusters, managed
care organizations, lawyers and auto repair workshops in the claims process.
The unique features of insurance have significant implications on disclosures and liabilities which
directly affect the insuring public. The implications become even more significant as competitive
pressures give rise to the rapid introduction of new products that require a better understanding of
what they entail on the part of the average consumer. The specific objectives of the Consumer
Education Programme for the insurance and takaful sector are therefore:
to promote public understanding of critical information when buying insurance and takaful

products and services;
to familiarise the public with the underwriting and claims processes; and

to create awareness of ethical market practices such that consumers can be more assertive

and discerning in making decisions.
The Consumer Education Programme seeks to provide relevant information to consumers about
insurance products, their costs and benefits, processes and documentation involved in the insurance
cycle, and more importantly, the rights and responsibilities of the various parties to an insurance
contract. It is also to promote greater awareness among consumers about the means and avenues for
redress in the event of dispute or dissatisfaction with any insurance product or service.
This Consumer Education Programme for the insurance sector will extend over a 10-year horizon and
will be undertaken on several levels under a step-by-step approach to reach out to the various target
groups. Similar to the Consumer Education Programme for banking, the insurance education
programme has been given the acronym: "InsuranceInfo" (or "InfoInsurans" in Bahasa Malaysia). Over
time, it is envisaged that the acronym and the programme will become readily recognizable in the
public domain.
In its first year, the Consumer Education Programme will focus on the wide dissemination of
information in 12 priority areas that have been identified. These include issues on the fundamentals of
insurance and takaful products and services, highlighting the important terms and conditions, rights
and obligations under a policy contract as well as the redress avenues available, and the common
insurance and takaful products. With participation from the insurance associations, Bank Negara
Malaysia has produced 12 booklets that set out the important information for consumers in these
areas. These booklets can be obtained from the principal offices and branches of insurance
companies and takaful operators, as well as from selected branches of banks that have
bancassurance arrangements with insurers.
Ladies and Gentlemen,
In addressing the challenges of financial education, collaborative partnerships are important. No single
organisation can be expected to meet all the demands for consumer education. While Bank Negara
will continue to actively engage the insurance industry in the development, production and
dissemination of educational materials and initiatives, the process needs to be driven by the industry.
Insurance intermediaries provide the direct link to the insuring public and therefore is an essential part
of the efforts to increase familiarity on insurance by the community. With approximately 147,000
agents currently in the market, the agency force can contribute significantly towards raising the level of
financial literacy among Malaysians through InsuranceInfo. Similarly, the various consumer
associations, through their direct contact with consumers, have an important role to play in promoting
an active consumer movement by providing useful guidance to consumers in dealing with issues
relating to insurance and takaful matters. Their wide network, close proximity, and good relationship
with consumers can contribute towards the successful implementation of the Consumer Education
Programme.
Just as the rapid deployment of new information technology has expanded the scope of financial
services, so too, has it increased our options for meeting the challenges of financial education. In this
regard, the InsuranceInfo website represents an important delivery channel which has significant
potential to be used extensively to bring relevant and timely information to the public. All the pamphlets
and booklets can be downloaded from the website. Over time, the website will be continually
enhanced to provide for a more interactive and user-friendly interface with consumers that will also
enable consumers to provide feedback on the programme and obtain prompt answers to their
questions.
Ladies and Gentlemen,
The Consumer Education Programme represents one of several important elements in the overall
strategy of enhancing the consumer protection infrastructure. To achieve the desired outcome of high
standards of market conduct that are founded on principles of integrity, sound ethics and
professionalism, Bank Negara Malaysia has adopted a combination of regulatory policy instruments.
These include policy development, regulatory initiatives, compliance reviews and ongoing surveillance.
Recent initiatives that have been implemented in the area of strengthening market conduct within the
insurance sector include:
The framework for the introduction of qualified independent advisers is currently being

finalized. Such independent advisors will form a new distribution channel for the sale of life
insurance products. These intermediaries will be licensed under the Insurance Act and will
be held to the highest standards of prudential conduct, accountability and governance to
safeguard the interests of consumers.
The entry requirements for agents have now been raised under a graduated implementation

programme that commenced in April 2003. Under the programme, examinations have been
made mandatory to maintain continuing education standards of agents.
Guidelines dealing with unfair practices in insurance business have been introduced in April

2003 to provide a more comprehensive framework for the regulation of insurance market
practices. Among other things, the Guidelines provide for enhanced disclosures to
consumers, requirements for insurance to be sold on equitable terms and conditions, and
specific restrictions against misrepresentation and unfair discrimination.
The Guidelines on Claims Settlement Practices introduced in 1995 have now been revised to

incorporate new measures and improved market practices in claims handling, as well as the
specification of minimum fraud control and risk management practices relevant to the claims
process.
A minimum standard on product disclosure and transparency in the sale of medical and

health insurance policies was issued in May 2003. The standard requires insurers and their
intermediaries to provide sufficient details of the essential features of medical and health
policies so that policyholders will understand the important provisions of the policies, in
particular, with respect to premiums, benefits, exclusions and limitations under the policies.
A survey has also been commissioned to determine the level of consumer satisfaction with

financial services, including insurance. The results of the survey will provide important input
for the development of a service quality index for financial services that will serve as a
benchmark for financial institutions to evaluate their service levels and identify areas for
improvement.
In our efforts to promote a larger role for consumer activism, attention has also been directed at
enhancing dispute resolution mechanisms for consumers to seek redress. Within the insurance sector,
the Insurance Mediation Bureau established in 1992 constitutes the main avenue outside the court
system for resolving disputes between policyholders and their insurers. To further enhance the role of
the Insurance Mediation Bureau as a dispute resolution mechanism, an expanded scope for the
Bureau involving higher limits for claims falling within its purview and the inclusion of third party claims
is being considered. This will provide greater access to the Bureau for a wider spectrum of the insuring
public. At the same time, efforts are also underway to merge the mediation bureaus of both the
banking and insurance sectors into a single new Financial Mediation Bureau that will serve as a
one-stop centre for the resolution of a broad range of retail consumer issues raised against the
financial institutions that are regulated by the Central Bank.
With effect from 1 June this year, we have also made it a requirement for all insurers and takaful
operators to establish dedicated complaints units in their respective organizations. The experience has
been that most complaints can be resolved in-house by the service providers themselves, in particular
those complaints that involve delays in claims settlements due to institutional procedures, which
generally comprise the bulk of public complaints. The establishment of the complaints unit by insurers
and takaful operators is expected to promote a more pro-active approach in the management of
complaints. Such consumer complaints also provide valuable information regarding any shortcoming
in the products and services. Responding to consumer complaints also promotes customer goodwill.
Certainly, as consumer awareness and financial literacy increases with the implementation of this
Consumer Education Programme, it is essential for financial service providers to recognise the
opportunity to build customer loyalty and increase customer retention through this mechanism.
Ladies and Gentlemen,
The advent of new technology and other market innovations will bring new challenges and possibilities
for businesses and consumers. We can expect that this pace of change in the financial services
industry will continue to increase. In striving to adjust to these changes, we should not underestimate
the significant improvements in financial and business practices that can be achieved by empowering
consumers through education.
As we continue on this drive to raise the standards of individual economic and financial well-being
through consumer education, the broad involvement of all parties involved in every stage of the
programme's implementation is vital to encourage expanded linkages between business and
consumer education on an ongoing basis. Our success in this important endeavour will have a
significant bearing on how well prepared our society is to meet the challenges of an increasingly
dynamic and complex financial environment.
Dengan itu, saya ingin mengambil kesempatan ini untuk mengucapkan terima kasih kepada semua
pihak yang terlibat di atas kerjasama dan sumbangan serta komitmen yang diberikan bagi
menjayakan Program Pendidikan Pengguna ini. Usaha-usaha sedemikian diharap akan dapat
membaiki dan meningkatkan lagi prestasi dan keupayaan industri insurans dan takaful dalam
memberikan pengguna produk dan servis bertaraf antarabangsa.