MR Microinsurance_2012_03_29.indd - International Labour ...

Protecting consumers while promoting microinsurance
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Each of these features of the rapidly evolving microinsurance market – client
segments, products and product mixes, distribution systems, technology and
business models – may raise consumer protection questions, with answers somewhat
diff erent from those appropriate for conventional markets.
Market conduct concerns tend to focus on challenges faced by consumers
specifi c to prevalent product features and practices at key points in the value
chain. Policymaking and rules-writing will benefi t from consumer research into
the actual nature, incidence and consequences of consumer protection problems
experienced by microinsurance policyholders (see Box 26.1).
Box 26.1 What can go wrong? Kenya consumer research fi ndings
What consumer protection issues arise for microinsurance policyholders? A
recent consumer protection diagnostic study in Kenya drew upon focus group
discussions and a national survey of mass-market consumers, including insur-
ance users. While penetration rates are very low and many respondents did not
have formal, private insurance, the research revealed that those who did were
often dissatisfi ed. Many complaints centred on salespeople not explaining prod-
ucts clearly and the lack of understandable documents. As one man explained,
“It is like they have used anyone to sell insurance and they don’t know the prod- prod- prod-
ucts so you sign for a product then when the policy comes you fi nd that it is
totally diff erent.”
Th irteen per cent of insurance users said the details were not explained in
writing and 11 per cent said they did not understand such details as the policy
cost, what was and was not covered, and how much they would receive in the
event of a claim. Respondents also described problems with claims processing
and disputes; 26 per cent of policyholders in the survey who had made a claim
reported that it was not processed quickly.
Insurance policymakers in developing countries typically face signifi cant
capacity constraints. Research of this type can help them focus consumer protec-
tion regulation and supervision on the most important concerns and test
whether proposed rules and other measures are likely to work as intended.
Source: Adapted from Flaming et al., 2011.
One risk that can undermine consumer protection is microinsurance
policies that are overly complex, or with prices and key terms that are
diffi cult to understand or are even deceptive. Th e relatively common practice
of “bundling” or “tying,” often in combination with compulsion (as can
be the case with credit life insurance), can raise consumer protection con-