MR Microinsurance_2012_03_29.indd - International Labour ...

586 Infrastructure and environment for microinsurance
Free look periods
Recourse options can be reinforced by regulation requiring “free look” periods
for longer-term or more complex products (particularly if they contain exclusions)
where, once a policy is purchased, consumers have a defined period in
which to change their mind, cancel the policy for any reason whatsoever and
receive an equitable refund. This approach is gaining ground, 15 and in some
countries the free look is being built into the policy wording, which also helps to
advance the fairness objective.
26.3 Designing and implementing special consumer protection regimes for
microinsurance
The previous section discussed typical consumer protection issues in microinsurance
and regulatory options to address them, including some reference to how
these differ from those in more conventional insurance markets. The mandate,
authority and structure of the insurance authority or other entity responsible for
designing and implementing such rules is likely to vary from country to country.
This has implications for implementation of a consumer protection regime for
microinsurance. Where policymakers decide to create an alternative regulatory
regime for microinsurance, a number of legal and practical issues need to be considered.
26.3.1 Consumer protection implications of microinsurance definitions
and regulation
Once the policy decision for adapted or specialized rules has been taken, there
are a number of options for embodying this in law and regulation and achieving
the appropriate access/protection balance in market conduct rules. One is to
explicitly exempt microinsurance from certain requirements of the mainstream
law and regulations. Another is to promulgate a special law or regulation, as in
India and Peru. The special treatment of microinsurance may then be framed as
broad principles or specific rules. Though a principles-based approach allows for
maximum flexibility, in practice a rules-based approach is probably preferable
while the microinsurance sector is in its development stage. Specific rules are
likely to be applied more effectively by developing country supervisors facing
capacity constraints, particularly where their actions may be challenged by politically
connected special interests or the judicial system is still developing.
15 The requirement in South Africa is 30 days and this appears to be workable.