MR Microinsurance_2012_03_29.indd - International Labour ...

578 Infrastructure and environment for microinsurance
cerns. 5 The consumer may have no choice but to purchase the policy or may not
be able to choose the provider. Yet bundled or tied products can also extend
access and yield benefits such as cost reductions as a result of marketing synergies,
the larger risk pool, avoidance of anti-selection, and simplified administration.
From a regulatory standpoint, it might be appropriate to permit bundling
and compulsory purchase, as long as safeguards are in place to ensure adequate
disclosure and value for money. Rather than prohibiting practices such as tying,
“no advice” sales or narrow cover, proportionate regulation would thus aim to
balance protection of consumers with the economic realities of providers trying
to reach these new markets.
Additional consumer protection challenges can arise at the sales, premium
collection and claims stages of the value chain. Aggressive sales techniques are a
common complaint, including but not limited to door-to-door sales models.
Intermediaries such as agents or brokers can play a critical role in reaching and
servicing new microinsurance policyholders (see Chapter 23). Yet they do not
always receive adequate training or supervision from the insurer, and indeed, it
can be unclear whom the intermediaries are working for and what incentive they
have to serve the policyholder well once the policy has been issued. Sometimes
the person who sold the policy disappears altogether (Collins et al., 2009), with
no guarantee that the premiums were ever forwarded, that collections will
continue and that the policy will be honoured.
Claims handling and the lack of effective complaints and recourse mechanisms
can also undermine new consumers’ trust in formal microinsurance.
Sometimes the claims process is neither timely nor fair, as when claims are
rejected on the basis of exclusions that were not made clear at the time of sale.
Sometimes there is no formal process for lodging and resolving complaints.
When it does exist, it is sometimes cumbersome or the complaint is unlikely to
be resolved in the policyholder’s favour.
In summary, policymakers must balance the goals of financial inclusion,
innovation and consumer protection in setting market conduct rules for microinsurance.
In doing so, regulation may need to accommodate a more flexible
approach to permissible product design, packaging and distribution, while
requiring high standards of disclosure and service provision combined with
strong recourse mechanisms.
5 Bundling occurs when several distinct products are sold at the same time in a linked transaction. The
concept of adhesion may apply in these situations whereby a single contract is deemed to exist. Tying
occurs when the organization selling the primary product (e.g. credit) also sells complementary but
separate products in a non-competitive manner. Bundling may be vouluntary (as in the option to take
out supplementary funeral insurance) or compulsory (e.g. where insurance is sold as part of a credit
product).