delivery channel also remained significant, with commissions and agency remunerations consistently accounting for more than 70 % of the net investment income of the industry. this trend reflects the attractive payouts a productive agent can potentially earn, although the industry ’ s commission structure is bound by the limits specified in the operating costs control guideline ( occ guideline ) issued by the bank. benchmarked against selected countries within the region which do not regulate commission payment, the commission rate currently earned by malaysian agents remains relatively high compared to the benchmarked rates of between 140 % to 150 %, as seen in other jurisdictions. this excludes other agency - related benefits which are also allowable under the occ guideline. bis central bankers ’ speeches some have argued that the current commission levels are too low as the commission structure has not been revised since the guidelines were first introduced in 1996. however, closer scrutiny shows that agency income from commissions had increased in absolute terms in line with the increase in average premiums size. the average size of new business grew by 9 % per annum over the last decade while in - force premium size recorded a compounded annual growth rate of 5 %. hence, the commission income of productive agents has in fact been growing in excess of the consumer price index and national average wage inflation. the world is constantly changing, the transformation that is taking place in the financial sector landscape also warrants a suitable change in the regulatory framework which the industry must be prepared to embrace and adapt to, going forward. the occ had served its objectives well to keep operating costs reasonable to ensure policyholders ’ interests are preserved. to enhance greater efficiency and facilitate a more competitive market environment, the bank will accord greater operational flexibility to the industry in determining amongst others, the commission structure for its agents and other intermediaries. based on statistics made available to the bank, commission and agency remuneration have consistently accounted for approximately 40 % of the total net premium income of life insurers since 1997. with the proposed flexibility, individual insurers will have the ability to determine the remuneration of its intermediaries but subject to appropriate safeguards being put in place such as a more robust disclosure framework for greater transparency. these operational flexibilities will be implemented in a gradual manner, with some measures being introduced by the end of this year. this is to minimize the risk of adverse impact on the efficient delivery of insurance products and services to consumers. with the fundamental changes taking place around us

muhammad bin ibrahim : charting new frontiers – financial advisers the future keynote address by mr muhammad bin ibrahim, deputy governor of the central bank of malaysia, at the inaugural conference of the association of financial advisers “ charting new frontiers – financial advisers the future ”, kuala lumpur, 31 october 2012. * * * i would like to congratulate the association and its members for your commitment, which has resulted in the successful formation of the afa to champion and promote the interests of all licensed financial advisers in malaysia. the formation of afa is most timely, and marks a significant milestone in the progressive maturing of the financial advisory industry. since the introduction of fas in 2005, we have seen commendable growth within the industry, with the number of licensed fas rising from 2 to 17, and the number of licensed fa representatives increasing from 17 to 229 today. the formation of the afa is timely as it provides a platform to encourage greater collaboration among fas to instill greater professionalism among its members and i expect the afa to play an important role in coming up with clear strategies to propel the financial advisory sector towards greater progress and growth. developments in the insurance and takaful sectors there are some broad developments within the economy and the financial sector that will expand the opportunity for growth in the provision of independent financial advisory services. first, the insurance and takaful sectors have seen positive and continuous growth over the last five years, with total insurance premiums transacted and takaful contributions recording an average annual growth of 4. 9 %, with annual growth peaking at 13 % in 2010. in terms of insurance penetration, in 2011, 67 out of 100 malaysians had some form of life insurance or family takaful coverage as compared to only 59 out of 100 malaysians in 2006. this means there remains a large untapped segment of the population with no life insurance or family takaful protection that the profession can further develop. second, in terms of distribution channels, the agency force is still the dominant intermediation point for the insurance industry. at present, the market share of financial advisers as a delivery channel is still low and therefore, the prospect of growth is tremendous. the prominence of the agency force as a delivery channel of choice for the distribution of life insurance business is evidenced from the more than 10 % growth in the number of life insurance agents enrolled between 2006 and 2011. consistent with the increase in the agency force, the expenditure dedicated to maintain this