Bancassurance and bancatakaful provide immense potential for further market penetration given the relatively higher level of public confidence in financial  4  BIS Review 123/2007  dealings with banks and the significant spin-offs that can be reaped through data mining arrangements with banks. Although bancassurance has become firmly entrenched in Malaysia (accounting for 45% of new business premiums in 2007), it also continues to develop rapidly in terms of market reach and operational sophistication. Fourthly, with the rapid technological advancements and increasing consumer demands for more efficient delivery of products and services, the Malaysian insurance industry has continued to transition towards information technology-driven solutions, as well as, leveraging on more efficient payment and settlement systems such as e-payments. This has significantly enhanced the delivery of personalized and customized insurance solutions, made possible through the utilization of new delivery channels, including those that are internet-based. In the area of general insurance for instance, the successful implementation of e-cover notes for motor insurance policies led to vast improvements in service efficiency, better enforcement of cash-before-cover regulations as well as reduction in premium collection fraud. In the area of capacity building, human capital development is key to the future development and growth of the financial sector. As competition intensifies, the role of human capital in defining the areas of comparative advantage will become more prominent.

•  Secondly, the dynamics of the market place have already resulted in alternative marketing approaches to the traditional agency system, including more cost effective distribution channels like bancassurance. This concept has gained acceptance worldwide for the provision of a wide range of life and pension products via the distribution networks of banks. BIS Review 123/2007  1  •  Thirdly, globalization of the world economy and financial markets, as well as trends towards greater financial innovation and promoting shareholder value, have contributed to a wave of mergers and acquisitions between insurers, banks and asset management companies resulting in the emergence of financial conglomerates. These integrated entities will inevitably raise the bar in the entire business value chain, including product design and pricing, streamlining of distribution channels and integrating valuable databases of customer information, thus accentuating further competitive pressures within the life insurance markets in the region. •  Finally, an area that will present significant opportunities as well as challenges to the insurance industry will be the evolving structure of social security systems and safety nets that will have to keep pace with demographic changes as well as the rising cost of medical care. Many nations are already finding it difficult to provide adequately for the needs of the aging population through state provided social security. It has been reported that globally, life insurance premiums amounted to USD2,200 billion in 2006, and Asia as a region is the fastest growing life insurance market, in line with rapid economic development and growth.