The launch of the Brunei Insurance and Takaful Association (BITA) in November 2013 was a major event for the insurance industry and a highly anticipated one since plans for its formation were agreed upon in 2011. Bringing for the first time conventional and takaful insurers under one group, BITA is expected to unify the industry, especially in its relations with regulators. Until 2013, conventional insurers were grouped under the General Insurance Association of Brunei (GIAB), while takaful insurers had no industry association. Both insurers were unhappy with that arrangement, as it tended to pit conventional insurers in the GIAB against the takaful insurers outside it, limiting the industry’s ability to present a common face to authorities.

In the BITA, takaful insurers have been given the leading role with the election of Osman Jair, managing director of Insurans Islam TAIB, as BITA chairman. Paul Kong, managing director of Standard Insurance, told OBG the arrangement reflects takaful’s strengthening position. “It’s easier to have a common position under one umbrella. With a conventional insurance leading, takaful wouldn’t follow. With takaful leading, we conventional insurers will follow,” Kong said.

Agent Regulation

BITA immediately began working on a longstanding issue for insurers, the lack of regulation of insurance agents. Insurers have pressed the government to cap agent commissions, which they say can leave too little income for insurers to cover claims. However, the industry’s regulator, the Autoriti Monetari Brunei Darussalam (AMBD), Brunei Darussalam’s central bank, has been reluctant to do that, arguing that agents need to earn solid incomes to ensure that the field attracts skilled, full-time professionals.

In June 2014 the AMBD and BITA jointly announced a new General Agent Registration Framework, which requires all independent individual insurance agents to register as sole proprietors and also regulates commissions. AMBD officials told OBG they were concerned about increasing the level of knowledge among consumers about insurance products, and that meant also ensuring that agents were well informed about the products they were selling. Mahani Mohsin, executive director of insurance/takaful and capital markets supervision at the AMBD, told OBG the AMBD recently completed a survey of consumers’ awareness of insurance products, receiving more than 2000 responses. “Our preliminary analysis has shown that there is a lack of understanding of insurance and takaful concepts and their benefits. Hence, some respondents do not appreciate the importance of insurance and takaful in their lives.” The AMBD is working with insurers to develop a layman-oriented frequently asked questions booklet for the main types of consumer insurance to provide customers with a clearer picture of the basics of products and coverage and how to make a claim.

No Cap On Third-Party Liability

Another issue where insurers are hoping BITA can help press for regulatory reform is car insurance third-party liability, which cannot be capped. Reinsurers generally will not take such unlimited liability, leaving the Sultanate’s insurers with the risk of facing a very high award. Insurance executives complain that increasingly aggressive personal injury lawyers have driven up awards, with one recent award setting a record at BN$3.8m ($3m). For smaller Brunei insurers with capital close to the BN$8m ($6.3m) legal minimum, such high awards have made issuing auto insurance “a lot like playing Russian roulette”, Kong said. AMBD officials told OBG they were aware of the issue and were studying it.

Insurers are also looking to BITA to improve industry statistics. AMBD publishes only limited data. The GIAB previously published much more detailed statistics for conventional insurers. However, takaful insurers did not report to GIAB, which left holes in the data. During 2014, as the industry was making the transition, no such detailed data was available. “All the conventional insurers gave their figures to GIAB, but takaful gave their figures directly to regulators, and we conventional insurers never saw them. With BITA we hope to see good industry-wide data for the first time,” Kong said.