3.3 Consumer Protection: PIDM (TIPS) and the Financial Markets Ombudsman Service (FMOS)

Consumer Protection: PIDM (TIPS) and the Financial Markets Ombudsman Service (FMOS)

Quick Summary: Two safety nets protect Malaysian insurance consumers. Perbadanan Insurans Deposit Malaysia (PIDM) protects policyholders if an insurer fails, through the Takaful and Insurance Benefits Protection System (TIPS), which covers most protected benefits up to RM500,000 and healthcare benefits in full. For disputes with an insurer that is still operating, the Financial Markets Ombudsman Service (FMOS), which took over from the Ombudsman for Financial Services (OFS) on 1 January 2025, resolves claims of up to RM250,000 free of charge.

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1. Perbadanan Insurans Deposit Malaysia (PIDM) and TIPS

Perbadanan Insurans Deposit Malaysia (PIDM) is a statutory body established in 2005. It now operates under the Malaysia Deposit Insurance Corporation Act 2011 (Akta PIDM) and reports to the Minister of Finance. While Bank Negara Malaysia (BNM) supervises insurers day to day, PIDM is the safety net and resolution authority if a member institution fails. It runs two protection systems:

1. Deposit Insurance System: Protects bank depositors up to RM250,000 per depositor per member bank.
2. Takaful and Insurance Benefits Protection System (TIPS): Protects eligible benefits under insurance policies and takaful certificates if an insurer member or takaful operator can no longer operate.

Key Features of TIPS

• Compulsory membership: Every insurance company licensed under the FSA 2013 to carry on life or general business, and every takaful operator licensed under the IFSA 2013 for family or general takaful, is automatically an insurer member of PIDM. Members must display the PIDM membership sign at their offices.
• Automatic and free: Protection applies automatically. Policyholders do not apply, register or pay for it; insurer members pay levies to PIDM.
• What PIDM does if an insurer fails: PIDM acts first to keep policies and certificates in force, for example by arranging a transfer to a healthy insurer. If the insurer is closed down, PIDM pays the protected benefits on valid claims.
• Contract terms still apply: Claims remain subject to the conditions and limits in each policy; TIPS limits only cap what PIDM itself pays.

Who Is Not a PIDM Member?

• Reinsurance companies and retakaful operators.
• International takaful operators licensed under the IFSA 2013.
• Financial guarantee insurers such as Danajamin Nasional Berhad.
• Offshore insurance companies.
• Other industry players such as insurance brokers and loss adjusters.

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2. TIPS Protected Benefits and Limits

PIDM's current limits (set under its 2020 TIPS regulations and limit order) apply to individual and group policies alike:

How the Limits Are Applied

Claims are aggregated when they involve the same policy owner, the same insurer member, the same risk event and the same life insured or property. PIDM's own example: Mr. Lim owns a whole life policy and an endowment policy (RM300,000 each) with the same insurer and is also covered for RM200,000 under his employer's group term policy. When he dies, his two personal policies are aggregated and capped at RM500,000, while the group policy, owned by his employer, is protected separately up to RM200,000.

Different policy owners are not aggregated. If Mr. and Mrs. Tan each insure their son Adam with the same insurer, Adam's death is protected separately under each parent's policies.

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3. The Financial Markets Ombudsman Service (FMOS)

Most disputes arise with insurers that are financially sound: a claim is rejected, a settlement looks too low, or a policy term is disputed. Court action is expensive, so Malaysia provides a free, independent ombudsman.

From OFS to FMOS

The Ombudsman for Financial Services (OFS), which began operating in 2016 as the successor to the Financial Mediation Bureau, was consolidated with the Securities Industry Dispute Resolution Center to form the Financial Markets Ombudsman Service (FMOS) on 1 January 2025. FMOS operates as an approved financial ombudsman scheme under Section 126 of the FSA 2013 and Section 138 of the IFSA 2013, and also covers capital market disputes.

• Members: Banks, insurers and takaful operators, development financial institutions, financial advisers, insurance and takaful brokers, payment instrument issuers and capital market intermediaries licensed or approved by BNM or the Securities Commission.
• Who may complain: Financial consumers using products for personal, domestic or household purposes or in connection with a small business, and individual investors.
• Cost: Free for complainants, who do not need a lawyer.

Jurisdiction: Up to RM250,000

FMOS accepts disputes involving direct financial losses of up to RM250,000, including insurance and takaful claims on life, medical, motor, general non-motor and travel policies, and third-party property damage claims. The same RM250,000 limit applies to banking and capital market disputes.

Disputes FMOS Cannot Handle

• Claims above RM250,000, unless both parties agree in writing.
• Claims arising from third-party bodily injury or death, which must go to court.
• Commercial decisions within the member's discretion, such as pricing, fees, product features and underwriting decisions, unless non-disclosure or mis-selling is alleged.
• Disputes about the actuarial standards used for long-term policies, such as how surrender values, paid-up values, automatic premium loan interest or bonus rates are calculated, except guaranteed amounts stated in the policy.
• Disputes about payment of policy moneys made in accordance with Schedule 10 of the FSA 2013 or IFSA 2013.
• Disputes already filed in court or arbitration, or already decided.
• Disputes referred more than six months after the member's final decision (unless FMOS extends the time) or outside the Limitation Act periods.

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4. The FMOS Dispute Resolution Process

Step 1: Complain to the Insurer First

The consumer must first lodge a formal complaint with the insurer. The insurer's final decision must be in writing and must tell the complainant that FMOS is available if they are dissatisfied.

Step 2: Refer the Dispute to FMOS

The complainant may go to FMOS within six months of receiving the insurer's final decision, or if the insurer fails to respond within 60 days of the complaint.

Step 3: Case Management

A Case Manager checks eligibility, investigates, and works toward a settlement through mediation, negotiation or conciliation. If no settlement is reached, the Case Manager issues a written Recommendation within 30 days.

• If both parties accept the Recommendation, the dispute is resolved.
• Either party may refer the matter to an Ombudsman for adjudication within 30 days.
• If the complainant does not respond within 30 days, the dispute is treated as not referred to adjudication. If the member does not respond within 30 days, it is deemed to have accepted the Recommendation.

Step 4: Adjudication

The Ombudsman reviews the whole dispute independently and issues a final Decision within 14 days of receiving complete documents from both parties.

Legal Effect of the Ombudsman's Decision

• Binding on the member: The Decision binds the insurer. If the complainant accepts it, the parties enter a settlement agreement, and the member must comply within 14 days of being told of the acceptance. There is no appeal.
• Not binding on the complainant: A complainant who is unhappy with the Decision may reject it and pursue other avenues, including court action.