Bank Negara Malaysia consults on new insurance advice rules, with no telemarketing sales

A telephone call may be used to introduce an insurance policy, but not to conclude the sale. This is one of the proposals in the exposure draft Proper Advice Practices for Insurance and Takaful Business (reference BNM/RH/ED 028-41), issued by Bank Negara Malaysia (BNM) on 30 September 2026.

The document runs to 37 pages and 13 sections. BNM says it aims to strengthen needs-based assessment, product suitability and affordability assessments, sales quality reviews and telemarketing safeguards, in order to improve customer outcomes and public confidence in financial advice. BNM will accept written feedback until 31 January 2027; the effective date has not been set.

Seven types of institution and individual protection products

The cover page lists seven types of applicable institution: licensed banks, licensed Islamic banks, licensed insurers, licensed takaful operators, prescribed development financial institutions, approved financial advisers and approved Islamic financial advisers, and approved insurance brokers and approved takaful brokers. BNM's web page lists the applicable legislation as the FSA, IFSA and DFIA.

The product scope covers all individual life insurance and family takaful products and all medical and health insurance/takaful (MHIT) products, including MHIT riders, as well as replacements or switches of existing policies that increase benefits or materially change product features. Products sold through digital or mail channels, group life, business insurance, simple term cover ancillary to loans, top-ups, renewals and reinstatements of in-force policies, and Perlindungan Tenang plans are excluded.

If implemented, the new requirements would supersede BNM's Guidelines on Proper Advice Practices for Life Insurance/Family Takaful Business (BNM/RH/GL/010-16), issued on 17 August 2012.

Understand the customer before recommending

The draft defines "intermediaries" to include representatives, agents and their related parties, covering the individuals and firms involved in recommending, arranging or selling insurance products for an insurer. Under paragraph 9.9, before recommending any product an intermediary must assess the customer's personal and financial circumstances, including needs, objectives, priorities and risk appetite. Paragraph 9.10 requires the assessment also to consider existing coverage, risk profile, whether the customer is identified as vulnerable, and affordability.

The Customer Fact-Find form must collect at least simplified personal information, a vulnerable consumer identification questionnaire, a risk questionnaire, income, existing coverage and the budget for new coverage. If a customer declines to provide the required information, the intermediary must tell them that the sale cannot proceed without complete information. BNM is also considering replacing the three "Client's Choice" options in the 2012 guidelines with a standardised Complete Customer Disclosure requirement.

If no authorised product suits the customer's needs and affordability, the intermediary shall not recommend any product and must record this. BNM says this proposal would replace the current practice under which an intermediary may still give information on other products after warning the customer that the product may not meet their needs.

Every recommendation must be recorded

Recommendations must be set out in the Record of Advice section of the fact-find form, stating the product types, policy term, sum assured and the reasons the product is likely to meet the customer's needs. Where a customer terminates or surrenders an existing policy to take out a replacement, the record must state the reasons, surrender or termination charges, new entry charges, lost benefits, new waiting periods or exclusions, and the implications of changes in age or health.

The insurer must issue a Confirmation of Advice with the policy and retain the version signed by the intermediary for the duration of the policy, for use in complaints or disputes.

At product level, insurers must build suitability and affordability assessment into the product lifecycle, with regard to risks such as repricing, medical inflation, adverse investment performance and step-up premiums. BNM stresses that this does not replace the customer-level affordability assessment made at the point of advice.

Vulnerable customers: no refusal of sale, but extra safeguards

Appendix 1 requires the vulnerable consumer questionnaire to gauge the customer's language proficiency, any long-term disability of the customer or dependents, and the ability to withstand financial shocks, for example how many months of emergency funds the customer holds. A footnote states that a provider shall not refuse a sale solely because a customer is identified as vulnerable; the purpose of identification is to facilitate appropriate assistance and advice, subject to underwriting and eligibility requirements.

For investment-linked products, an intermediary may recommend them to a vulnerable customer only if the customer has prior experience with financial products or has expressed interest in them, and consents to audio or video recording of the rest of the sales journey. Otherwise, such products shall not form part of the recommendation.

Telemarketing: information only, no concluding sales

Paragraph 13.1 allows institutions to market insurance products through telemarketers and to give information on key features and terms. However, paragraph 13.2 bars them from letting telemarketers conclude a sale over the phone, whether as a standalone policy or a rider. Interested customers must be referred to a qualified intermediary, who conducts the needs-based assessment under sections 9 and 10.

• Explicit customer consent is required before a referral or transfer to an intermediary.
• The call must disclose its purpose, key features, exclusions and risks, charges, and free-look and cancellation rights, and state clearly that the sale of an advisory product cannot be concluded by telemarketing.
• Calls must be recorded and the recordings kept for at least seven years; institutions must also review recorded calls periodically on a risk basis.

Institutions remain accountable for intermediaries

Paragraph 7.9 states that the institution remains accountable for compliance even if its intermediaries fail to comply with the requirements. Paragraph 7.10 requires independent oversight to review complaint trends, persistency, lapses and early surrenders, sales quality assurance findings, and the quality of fact-finds and needs analyses.

Effective date still undecided

The effective date in paragraph 4.1 of the draft is left blank. In its consultation questions, BNM says it is considering bringing the requirements into effect six months after the final policy document is issued, and asks the industry about implementation challenges and the top three areas needing the most system or process change. The Malaysian news site Wilayah also reports that BNM has not said when the final requirements would take effect. Feedback must be submitted electronically, and queries may be emailed to conductpolicy@bnm.gov.my; submissions may be made public unless confidentiality is requested.

Analysis: what it means for recruiting teams

This is still an exposure draft, and any provision may change. The draft's definition of intermediaries includes agents and their related parties. On the text, needs assessment, the record of advice and the identification of vulnerable customers all sit within the intermediary's sales process, and institutions must not only answer for intermediaries' breaches but also review the quality of fact-finds and needs analyses.

For managers leading teams in Malaysia, the safer course at this stage is to read sections 9, 10 and 13 of the original document closely, and to watch for when BNM publishes the final policy document and effective date after the consultation closes on 31 January 2027.

Compiled by the F50 Editorial Team from public sources, for general reference only and not professional advice. Details are correct as of the publication date and may change.