I’m just a lay person where insurance is concerned but I’d like to share here whatever little that I know about the newly introduced Financial Services Act 2013 vis-a-vis the insurance industry. If I am wrong, I am willing to be corrected within this blog.
The FSA 2013 by the Malaysian Parliament last year and came into effect on 30 Jun 2013. When it was implemented on this date, among the old laws that it repealed included the Insurance Act 1996.
The FSA 2013 is a very thick slab of legislation, numbering 272 pages in all. The important section that should be of interest to insurance policy owners is Schedule 10 that touches on payment of policy moneys under life policy and personal accident policy (starting from page 255).
But first, section 272(e) of the FSA 2013 has this to say:
“without limiting the generality of paragraph (d), all insurance policies issued, all transactions or dealings lawfully executed or entered into, and all business lawfully done under the repealed Insurance Act 1996 by a person who was licensed under that repealed Act and who is authorized or registered under this Act with any policy owner, customer, creditor, debtor or other person shall be deemed to have been lawfully and validly executed, entered into, or done, under and in accordance with this Act, and any right or liability under the transaction, dealing or business existing before the appointed date shall be deemed to continue to be lawful and valid under this Act;”
So all policies issued prior to the 30th of June would still continue to take effect, which should be a great relief to all policy holders. I know that I am, because it would now be too expensive for me to sign up for any new life policy.
But back to Schedule 10. It is not for me to elucidate everything that is stated here but my reading and understanding of what’s documented in section 5(3) of this Schedule is that once a nomination is made to create a statutory insurance trust under this section of the FSA 2013 (or under the old section 166 of the repealed IA 1996 for existing policies), the policy owner basically loses a considerable amount of control of his policy because:
- The policy owner is no longer the Trustee of his policy money;
- In the event that a Trustee is not appointed, a competent nominee in the policy shall be automatically made the Trustee; and
- The policy owner cannot revoke a nomination or add a nominee (other than his spouse, child or parent) without the Trustee giving a written consent.
Thus, almost everything a policy owner does, he would need to go back to the Trustee of his policy to get the changes approved. So who controls the policy from now on? The one paying the money to keep the policy in force or the person standing to benefit from it? Of course, there are pros and cons: the new Act ensures that an existing nominee does not lose out should a policy owner quietly changes the nomination in his policy, but – call me pessimistic if you want – there are also potential slip-ups.
For instance, if a husband and wife are no longer on good terms with one another, do you think the spouse (who is now the Trustee of a policy) will agree to any change that reduces or removes her benefit?
It just makes me scratch my head whether this peculiar situation was what the people who drafted this new legislation wanted. It also makes me wonder who were our clever law makers in Parliament who allowed this new FSA 2013 to be passed. How much debate or deliberation actually went into discussing this new legislation? Did they cover all the bases adequately? And all this doubts coming from me, speaking as a lay person!