suhaimi ali : elevating the insurance value proposition at the intersection of iot and ecosystems keynote address by mr suhaimi ali, assistant governor of the central bank of malaysia ( bank negara malaysia ), at the insurtech leaders summit, damansara, 18 may 2022. * * * introduction distinguished guests, ladies and gentlemen. a very good morning. i would like to express my thanks to the organisers of the insurtech leaders summit for inviting me to deliver the keynote address today. the theme of this year's conference is highly relevant – " elevating the insurance value proposition at the intersection of iot and ecosystems ". many aspects of our lives are now done online and digitally. consumers today have higher expectations for round - theclock services, seamless lifestyle interactions and personalised one - stop - shop experiences. digital ecosystems enable this – for example, partnerships in wider crossindustry ecosystems give providers the agility and reach to thrive in an era where customer - centric value proposition is key. by 2025, it is estimated that 75 % of asia - pacific business leaders will leverage on digital platforms and ecosystem capabilities to adapt their value chains to new markets 1. in malaysia, similar trends are also unfolding. for example, 67 % of consumers expressed interest in using online channels to purchase insurance in the future 2. the potential of this digitalisation era has been compared to the era of enterprises in the post wwii period. during that time, the world saw a flourishing of technology and innovation. however, a key challenge observed was that workers became siloed in their various specialties, thus impeding collective innovation goals. michael tushman, a harvard business school professor known for his work on organisation design, was an early researcher into efforts to overcome this challenge. from there, he coined the term'boundary spanners'3 – individual connectors with the ability to bridge information from different verticals of an organisation to unlock innovation value. since 1958, the boundary spanning role has been popular throughout academic research into innovation systems. with hindsight, we know that period ended up as the golden age of capitalism, marked by greater organisational efficiency, specialised production and trade expansion. it is intriguing to find insurance at a similar crossroad today. consumer activity is becoming entrenched in digital ecosystems. critical sources of information which were previously unconnected are becoming more connected. this has the potential to not only deepen protection, but

when managing the risks to the government. 4. protecting the taxpayer any government - insured mortgage offered under a refinancing program needs to be prudently underwritten, regardless of whether a principal write - down is part of the deal. first and foremost, this means establishing a meaningful amount of homeowner equity. second, it means using sound underwriting criteria to ensure that borrowers are reasonably likely to be able to repay the government - insured loan on a sustained basis. third, it means allowing the fha to engage in sensible risk - based pricing of its mortgage insurance products, including substantial flexibility in setting its initial premium and annual premiums. 5. negotiating junior liens from one - third to one - half of all subprime mortgages pertain to properties that also have junior liens. when held by an entity other than the first lien holder, these junior liens present a variety of serious obstacles to a successful refinancing, especially one involving a principal write - down. typically, the junior lien holder must agree either to remove his lien in return for a portion of the proceeds from the refinancing or re - subordinate his claim to the new loan. the valuation of the junior lien holder's claim on the property is often difficult to negotiate. one way of dealing with this problem in the case of a restructuring with an fha - insured mortgage is to offer a junior lien holder a specified share of the government's or investor's " soft second. " another way of dealing with junior liens is to provide the servicer with financial incentives to aggressively negotiate with the junior lien holder while capping any potential payout available to the junior lien holder from the government program. elements of these considerations are already reflected in the discussion draft. for example, title i of the discussion draft includes exit fees and shared appreciation mortgages to address concerns about borrower moral hazard. it also contains features to protect the taxpayer, such as widening the range of insurance premiums and creating a meaningful amount of borrower home equity. as for adverse selection, risk - based insurance premiums paid by the servicer are crucial, and title i could be clearer about the fha's authority to use risk - based premiums. other steps to guard against adverse selection could include a loan seasoning requirement or other forms of warranties given by the lender to the government about loan performance. given the magnitude of