Foreign insurance companies are believed to have submitted a proposal to Bank Negara Malaysia to contribute part of their 10-year forecast profit to the setting up of a healthcare trust for the poor in the country.
The proposal, according to sources, is an alternative route for insurance companies that are wholly owned by foreigners to fulfil their commitment to pare down shareholdings of foreign investors to at most 70% before a 30 June deadline, reports The Edge.
Under the proposal, the insurance companies will not dispose of their stakes as required by Bank Negara, but will instead contribute 30% of their 10-year forecast net profit to the setting up of a healthcare trust to provide basic health insurance for low-income groups, namely the bottom 40% of the population (B40). Currently, most of the B40 cannot afford to have healthcare insurance as they are living from hand to mouth.
The healthcare trust is expected to help reduce the burden on the government, which is bearing the growing cost of public healthcare services.
In a reply to The Edge, Bank Negara says, “The bank welcomes any initiative by insurers that would benefit the Malaysian economy and the general public, as expected of any ordinary responsible corporate citizen that operates in the country.
“Despite a long presence in Malaysia, the contribution of the foreign insurers to the overall development of the domestic insurance industry has not been at the level expected. For example, there has been minimal improvement in insurance penetration, compounded by the lack of breadth in products (especially for the lower-income segments) and concentration of high-cost distribution models.
“The Bank would like to stress that the agreed foreign shareholding level was a commitment provided by the foreign shareholders in being granted a licence to operate in the country. The foreign insurers were given the licence to operate in the domestic market on the basis of the specific commitments and assurances given. A licence would not have been given if the commitments had not been made.
"Over the years, ample opportunities and flexibilities have already been conceded to accommodate actions that should have been taken by shareholders to deliver on their commitments. The Bank therefore fully expects shareholders to honour an explicit promise made, and to operate in Malaysia in a manner that benefits the development of the domestic insurance market and the economy generally. This should be commensurate with the significant returns accruing to foreign insurers from the Malaysian market.”
Currently, 11 insurers — including Great Eastern, AIA and Tokio Marine — are wholly owned by foreign firms.