MR Microinsurance_2012_03_29.indd - International Labour ...

Access to insurance and fi nancial sector regulation
new insurers able to comply with the existing entry requirements) can then off er
microinsurance products because of the reduced requirements. Th is would typically
include an adjustment to market conduct regulations, for example by
exempting microinsurance product lines from commission caps or allowing
alternative distribution channels to be used for sales. Th is approach, however,
generally restricts the universe of providers to companies that are already
licensed.
Regulators in some countries have preferred to go for a more extensive intervention
by creating a second tier of insurance licence regulatory requirements
tailored to microinsurance. Tailored capital, solvency and investment requirements
can be stipulated to facilitate the entry of dedicated insurance providers
that wish to participate in this niche market (see Box 25.4). Th e supervisor may
prescribe less costly risk management and underwriting systems that are within
the capacity of smaller operators. Moreover, since life and non-life microinsurance
business is often underwritten on a short-term basis, and since single channel
distribution reduces cost and promotes positive insurance discovery, a few
countries are considering the removal of the demarcation between life and nonlife
for microinsurance.
Box 25.4 Proposed framework for dedicated microinsurance companies in South Africa
Th e South African Government plans to introduce a dedicated legislative frame- frame- frame-
work to foster the provision of low-cost, simple and standard insurance. Detailed
policy proposals for a microinsurance regulatory regime were mapped out in a
paper released by the Treasury in July 2011, with the goal of broadening access to
insurance for low-income earners.
Microinsurers would have their own dedicated licence and be subject to lower
capital requirements and less onerous regulations. Th e compliance regime for
microinsurance licences will be lighter than for other insurance products because
of the lower risks. For a policy to qualify as microinsurance, the benefi ts payable
must be capped at R50 000 (US$6 200) per individual risk per year for life products
and R100 000 (US$12 400) for asset products; the term of the contract can-
not exceed 12 months; and the product is limited to risk only, excluding savings.
Unregistered insurance businesses such as burial societies, funeral parlours
and those involved in “assistance business” would be expected to become formalized,
while formal insurers could take out a dedicated licence to enter microinsurance.
Th e new regime is expected to combat the abuse of consumers, particu-
larly by funeral parlours.
Source: Adapted from National Treasury, 2011.
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