For instance, fluctuations in private consumption are considerably larger in Iceland than in other developed countries, and much greater than can be explained by fluctuations in external conditions. But there is a certain problem concerning the implementation of various types of exchange rate peg, in that studies of the structure of the Icelandic economy suggest that a flexible exchange rate is in some ways a beneficial arrangement for Iceland. It is also clear that concluding Iceland’s EU membership application will take some time and, if Iceland does choose to join the EU, adopting the euro will take even longer. As a consequence, it is very important to ask whether monetary policy, demand management in general, and the regulatory and supervisory framework of the financial sector can be reformed in such a way as to make a flexible exchange rate on the basis of the Icelandic króna an attractive option without sacrificing free movement of capital. Such a solution could benefit Iceland either in the run-up to euro area accession or for the longer term. The Central Bank report entitled Monetary policy in Iceland after capital controls contains a discussion of possible reforms aimed at addressing the shortcomings in demand management and the regulatory framework before the financial crisis. A subsequent report, Prudential rules following capital controls, outlines the regulatory framework that would reduce the financial system risk that can accompany free movement of capital. Together, the recommendations in these two reports would make domestic monetary policy more effective and would hopefully reduce excess exchange rate volatility.

Medical inflation has been on a rising trend with millions of ringgit spent in Malaysia on healthcare expenditure each year. Old age and urban poverty are also on the rise with many exhausting their lifetime savings within the first five years of retirement. These are structural issues that have deep implications on the industry. It should be discussed and debated intelligently. To my mind, the focus of debate therefore should be on how to improve the productivity of agents, and ensure that they are well supported through training and continuing professional development and given all the assistance to provide quality advice and services to the public. More should be done to educate consumers on the benefits of insurance and the advantages of purchasing insurance while one is young and healthy. In this regard, the industry should come together and address the reasons for the low take up of annuity products despite the tax relief and incentives provided by the Government in 2012. Initiatives should be pursued to expand affordable product offerings for lower income groups that are most vulnerable to income shocks or unanticipated expenditures. Another area that is becoming significant because of medical inflation is ensuring that medical and health insurance provides adequate protection and remains affordable through well designed products, proper underwriting and effective control of claims costs should be a priority. The issues I had outlined are formidable and these cannot be accomplished without concerted effort by all of us here.