While life insurance premiums and family takaful contributions have grown by 48% since 2010, the penetration rate has only increased by 5 percentage points. This indicates that the industry is increasingly concentrated on a narrow insurance segment. If we eliminate double-counting, only 35% of adults have some form of cover. For the rest, products are too complex and remain unaffordable. Existing distribution channels also fail to provide adequate access, especially outside urban centres. Technological advancements are not being used to the fullest. Even for the population segments that are being served, making a purchase or a claim is a process fraught with anxiety and headache. Increasing medical insurance premiums have also placed insurers under heightened public scrutiny, with questions raised on the suitability of product designs that offer little protection against escalating costs of healthcare. Insurers’ contracting arrangements with healthcare service providers have also been called into question. While insurers might not be the guilty party here, the response to the criticism has been slow and wanting. As a group, the insurance community is meek in safeguarding the sector’s image and reputation. Underinvestment in domestic talent and capacity is another key concern. Among a large number of foreign insurers, significant reliance on group level support has limited the investments in core functions needed to develop strong domestic capabilities. In addition, large amounts of payments are being made for management fees and outsourcing arrangements. Between 2014 and 2016, it is estimated that insurers in Malaysia made no less than RM1.3 billion of such payments to foreign affiliates.

As an example, the HKMA and our peer authorities in the region have adopted fintech sandbox 3/4  BIS central bankers' speeches  regimes, which are effectively testing grounds with a well-defined scope and a clear timeline. The authorities do not generally stipulate an exhaustive list of regulatory requirements in these sandboxes; rather, the products are to be developed flexibly, and requirements would be evaluated during the process. Coordination among regulators has also already begun as the Global Financial Innovation Network (GFIN) is now inviting applications for cross-border testing of financial innovations. That said, while providing a conducive environment to support innovation, central banks and regulators would have to strike a good balance with its other functions in consumer protection and financial stability, especially as the new and innovative services grow in scale or become widely adopted. Cross-border coordination is also required to address potential arbitrage across jurisdictions, given the much wider reach of fintech products and services. Derivatives markets, on the other hand, have a much longer history. The regulatory framework should therefore be informed by history, and lessons from the global financial crisis must not be forgotten. Regulators need to guard against the problems that plagued derivatives markets before the crisis: namely, the overuse of leverage, excessive interconnectedness, and opacity. I don’t need to “preach to the choir” on the tremendous efforts exerted by regulators and market participants internationally to solve these problems.