An insurance sale can pass through several hands before a policy reaches a customer: A product team designs it, a distribution partner promotes it, an intermediary recommends it, and an internal system processes the application. If a recommendation proves unsuitable, the central regulatory question is where the failure occurred and whether the institution had controls capable of detecting it.
Bank Negara Malaysia’s exposure draft on Proper Advice Practices for Insurance and Takaful Business, issued on 30 September 2026, places greater attention on that chain of responsibility. The proposal is open for feedback until 31 January 2027 and is not yet a final policy. Its significance lies in the specific sales practices it seeks to scrutinise, particularly investment-linked products, telephone-based selling and the checking of sales after a recommendation has been made.
Investment-linked insurance combines protection with investment exposure. That structure can make the product harder to assess than a straightforward protection policy because a customer must understand both the insurance features and the investment risks, alongside the costs and conditions attached to the plan.
BNM’s draft proposes additional safeguards where such products are recommended to vulnerable consumers. As reported by The Edge Malaysia, the proposed conditions include prior financial experience or an expressed interest in the product, together with consent to audio or video recording of the sales interaction. The intention is to strengthen scrutiny around recommendations where the customer may face a heightened risk of detriment.
The operational challenge for providers will be to make these safeguards meaningful. Recording a conversation may preserve evidence of what was said, but it cannot by itself establish that a customer understood the product, that the recommendation fitted the customer’s circumstances or that the risks were adequately explained. Institutions will need processes that connect the recorded interaction to the assessment and recommendation that justified the sale.
The draft also proposes tighter controls on telemarketing. Under the approach reported by The Edge, a sale would not be concluded over the phone; the prospective customer would instead be referred to a qualified intermediary for a full needs-based assessment.
That proposal would alter the role of telephone-based sales teams. Rather than treating a successful call as the endpoint of the transaction, providers would need a clear handover process, with responsibility for the customer’s next steps and the subsequent advice made explicit. The practical test will be whether the referral results in a genuine assessment or simply adds another procedural step before the same product is sold.
The distinction matters in high-volume sales environments, where short calls and standardised scripts can limit the opportunity to understand a customer’s financial position. The final rules will need to make clear how firms should evidence the referral, the later assessment and the basis of the eventual recommendation.
BNM’s proposal also envisages pre-issuance verification for specified high-risk sales, including cases involving vulnerable consumers, high-premium products or policy replacements. Post-issuance sales-quality reviews would be carried out by independent units not involved in direct selling. These arrangements are intended to identify problems before a policy is issued where possible, and to test the quality of sales after completion.
Independence is important because a review conducted by the same team responsible for meeting sales targets may struggle to challenge the assumptions behind a recommendation. But independence on an organisational chart is not enough. Reviewers need access to customer assessments, the recorded rationale for the recommendation and the ability to escalate recurring weaknesses without commercial pressure.
The draft’s wider governance provisions make boards and senior management responsible for oversight of sales and advisory practices. It also calls for attention to the way remuneration, business objectives and distribution arrangements may create risks. This places the question of sales quality within institutional governance rather than leaving it solely to the conduct of individual agents.
The proposed framework covers individual life insurance, family takaful and medical and health insurance or takaful, subject to specified exclusions. BNM is considering a six-month transition period after the final policy is issued, but the commencement date remains undetermined.
For the industry, the consultation is an opportunity to identify where the proposed controls need clearer definitions, workable thresholds or more precise implementation guidance. For customers, the measure of success will be whether the safeguards improve the quality of advice they receive, rather than simply expanding the volume of records generated during a sale.