muhammad bin ibrahim : building trust in the insurance industry speech by mr muhammad bin ibrahim, deputy governor of the central bank of malaysia ( bank negara malaysia ), at the malaysian insurance & takaful industry distinguished partner awards dinner 2015 “ building trust in the insurance industry ”, kuala lumpur, 23 october 2015. * * * it brings me great pleasure to be here tonight at the inaugural malaysian insurance and takaful industry distinguished partner awards dinner. since the central bank assumed regulatory role of the industry 27 years ago, the insurance and takaful landscape has transformed significantly. the insurance and takaful penetration rate, measured by the number of policies per population, has increased four - fold from 11 % in 1988 to 56 % today, and the total paid - up capital of direct insurers has grown twelve - fold from rm635 million to rm8 billion over the same period. today, the industry has emerged much stronger than when we first started the journey together in 1988. we should take pride in our historical track record the various changes that we had made, the difficult but satisfying journey that we embarked on to realise the full potential of the industry. it is indeed a transformational change that enable the industry to be in the strong position they are now. but at the same time we should not believe that the same thinking and strategy that drove yesterday ’ s solutions will be as effective tomorrow. we have witnessed many brand names that had disappeared because they have not changed and have not been sensitive to the ever changing operating environment surrounding their businesses. the message is simple, if we do not change, do not transform ourselves and we remain static, we will be left behind and eventually perished. and the rapidly changing economic and operating environment shall ensure this eventuality if we remain static. despite the many structural changes over the last 3 decades, one principle will always remain, trust. the malaysian insurance and takaful industry can make a difference by building a strong brand in trust and a firm conviction that the industry ’ s existence is to serve for the betterment of society. a policyholder buys a policy predicated on one sole reason, the trust he places on the industry ’ s ability to protect his financial interest. building trust is not an option, it is a cardinal rule. tonight, i would like to share with you seven points which i believe would increase the level of trust in the industry. continue to strengthen capacity to fulfil objectives the industry today has achieved many milestones as a result

of the efforts to enhance efficiency and thus alleviate the level of competitiveness, significant strategies were initiated during the year. this included the consolidation, the rationalisation of common functions and operations across institutions in the group, outsourcing of non - core activity and leveraging on cross - selling of the products and services within the group. following the consolidation of the 54 domestic banking institutions into ten banking groups, there was significant rationalisation of the wide range of common functions and operations across institutions in the group. six banking groups have also now leveraged on cross - selling of their products and services across institutions in the group. a further impetus towards achieving this would be the merging of the commercial banking and finance company businesses in the banking group into one single entity. in this phase of development of the financial system, the commercial bank in the banking group would hold two licences, a commercial banking licence and a finance company licence. under this arrangement, the domestic commercial banking institutions would in addition to its banking business, be able to undertake finance company business. commercial banks would therefore be able to leverage on the opportunities presented by the two licences to take advantage of economies of scale, diversify and strengthen their earning base and create an enhanced market presence. other areas of improvement in respect of operational efficiency was in terms of the average core system downtime which showed that for the first quarter this year, seven domestic banks did not experience any computer downtime or disruptions in their payments system matching the performance of the foreign banks. of significance is that in the operations of the atm networks where seven domestic banks reported downtime of not exceeding 2 hours compared to four foreign banks. in terms of turnaround time for retail loan applications, an indicator of customer service standards, during the final quarter of 2001, the top quartile domestic banks took 2 days on average to approve a housing loan application compared to 2. 5 days taken by the top quartile foreign banks. meanwhile, lost credit cards were replaced within a day for both the domestic and foreign banks in the top quartile. while the gaps in operational efficiency and productivity have improved, there remains great scope for further improvement particularly in areas where the domestic banks are evidently behind the foreign banks. for instance, productivity standards of the counter personnel as measured by the number of counter transactions per counter employee for the domestic banks averaged approximately 5, 000 compared with 11, 000 for the foreign banks. meanwhile, the number of domestic banks that did not experience any disruption in their retail