MR Microinsurance_2012_03_29.indd - International Labour ...

560 Infrastructure and environment for microinsurance
for any defi ciency in these operations. Reporting has been simplifi ed and provid-
ers now now only only need to furnish the SBS SBS with a quarterly report detailing the
number of of policyholders, premium volume volume and claims. In addition, a “fi le and
use” product product approval process is now used used and if SBS has no objection the
insurer can can market market the product. Th e impact impact of these changes has been signifi -
cant, as they they have facilitated access to insurance for low-income women, farmers
and entrepreneurs through NGOs, NGOs, MFIs and and banks.
Sources: Adapted from Gomez, 2007; Burns and Caceres, 2010; Villegas, 2010.
Despite eff orts to keep microinsurance products simple, the promotion of
fi nancial inclusion has also introduced more complex products, such as indexbased
insurance (see Chapters 4 and 11) to manage risks in rural areas, where farmers
are vulnerable to weather risks or other natural events. Th e complexities of
contract design and basis risk are signifi cant constraints for such products. In
many countries, the laws and regulations necessary to accommodate index-based
products are simply not in place. Such regulation will need to be consistent with
international standards to improve insurers’ chances of gaining access to reinsurance
and other alternative risk transfer instruments.
Proportionality – Tailor regulation to the risk character of the product
Under a proportional regulatory framework, requirements vary with the benefi ts
and risks associated with the insurer or the intermediary, providing regulators
with the fl exibility to tailor prudential and market conduct regulations to the
characteristics of the market. Regulators should consider developing rules proportionate
to the risks incurred for microinsurance that refl ect the limited business
risk and enable smaller players that cannot comply with one-size-fi ts-all
regimes to participate. Proportionality in regulation can be accomplished, for
example, by correlating requirements with the diff ering levels and types of risk
involved.
When revising regulation, policymakers should consider the extent to which
current regulations inhibit the underwriting and/or distribution of insurance
products for low-income markets. High compliance costs could prevent the
entry of new providers, squeeze out those attempting to introduce new business
models, products and services, or force customers to use informal providers. A
balance needs to be struck between reducing the compliance burden and maintaining
suffi cient standards to protect clients.
Allow microinsurance underwriting by a number of entities – A tiered approach
In countries where the legislation allows, regulators generally opt to provide regulatory
exemptions for a microinsurance line of business. Existing insurers (or