Bank Negara Malaysia invites industry feedback by 31 January 2027 on a draft framework covering advice, product recommendations and sales conduct Bank Negara Malaysia (BNM) is seeking industry feedback on a proposed overhaul of the standards governing insurance and takaful advice, with the consultation expected to shape how financial service providers assess customer needs, recommend products and monitor sales practices.
The central bank issued its Exposure Draft on Proper Advice Practices for Insurance and Takaful Business on 30 September 2026. Written submissions are due by 31 January 2027, with respondents asked to support their feedback with clear reasoning, evidence or practical examples. The proposals remain under consultation and should not be treated as final requirements.
The draft is intended to replace BNM’s 2012 guidelines on proper advice practices for life insurance and family takaful. Its stated objective is to strengthen sales conduct and improve the suitability of advice given to customers, while clarifying the accountability of institutions and intermediaries involved in the sales process. The proposed framework is issued under Malaysia’s Financial Services Act 2013, Islamic Financial Services Act 2013 and Development Financial Institutions Act 2002.
The requirements are proposed to cover licensed banks and Islamic banks, licensed insurers and takaful operators, prescribed development financial institutions, approved financial advisers and Islamic financial advisers, and approved insurance and takaful brokers.
The product scope includes individual life insurance, family takaful and medical and health insurance or takaful. The draft identifies exclusions, including group life and family takaful arrangements, business insurance, certain simple protection products linked to financing, specified employee-benefit products, Perlindungan Tenang plans and products sold through digital channels where no intermediary advice or recommendation is provided. Digital tools used by staff or intermediaries in an advised sale would not, merely by being digital, place that activity outside the proposed framework.
Among the proposed requirements are customer suitability and affordability assessments, a structured customer fact-finding process, disclosures before sale, documented product recommendations and confirmation of advice. The draft also addresses governance, internal controls, investment-linked products, independent sales-quality reviews and telemarketing.
BNM is proposing that boards and senior management take responsibility for the effectiveness of sales and advisory controls. The draft calls for institutions to examine whether their business objectives, distribution arrangements and remuneration practices could encourage unsuitable recommendations. It also envisages monitoring of customer outcomes through indicators that include complaints, claims experience and policy persistency.
Separate controls are proposed for investment-linked products and telephone-based sales. The draft sets out safeguards for recommendations involving vulnerable consumers and proposes restrictions on concluding insurance and takaful sales through telemarketing. It also provides for pre-issuance verification in specified higher-risk cases and post-issuance reviews by units independent of direct sales.
The consultation also asks industry participants to identify implementation challenges. BNM is considering a six-month transition period from the issuance of the final policy document, allowing providers time to adjust systems and processes. The final commencement date has not been determined.
The consultation now gives banks, insurers, takaful operators, advisers, brokers and other stakeholders an opportunity to identify operational difficulties, propose clarifications and provide evidence on how the draft requirements would work in practice. BNM’s eventual policy document will determine the final obligations and implementation timetable.