MR Microinsurance_2012_03_29.indd - International Labour ...

Protecting consumers while promoting microinsurance
of advice, including comprehensive “fact fi nds”. 20 Some markets have found ways
to work around such limitations, but it would be preferable for the regulation to
recognize the diff ering needs of diff erent market segments (see Box 26.3).
Box 26.3 South African rules on advice
In South Africa, the Financial Advisory and Intermediary Services Act (FAIS
Act) requires the intermediary to provide enough information to enable the con- con-
sumer to make an informed decision. Where advice is provided, there are specifi c
and relatively onerous rules as to how this is to be done and by whom. In partic-
ular, the intermediary must be a registered fi nancial adviser, carry out a fi nancial
needs analysis of the prospective buyer, and ensure that the consumer under-
stands the advice given.
Th is requirement could have limited the development of low-cost microin- microin-
surance. In practice, insurers have been able to develop a “tick a box” no-advice
category of tied agency (e.g. for simple, standard products sold through retail
stores), employing an interpretation of a provision of the Act that was intended
for a diff erent purpose. Ideally, such adaptive strategies would not be required.
Source: Adapted from Bester et al., 2006.
It is noteworthy that the India and Philippines laws explicitly provide for a
defi ned category of tied microinsurance agent that is subject to less onerous
requirements than a normal broker or tied agent. Microinsurance agents are typically
required to have specifi ed experience in dealing with the economically active
poor and to have received a minimum amount of training, and in the case of
aggregators, to be not-for-profi t organizations. Th ey may be expected to carry out
a wider range of functions than a mainstream agent, and be remunerated accordingly.
However, they may be exempted from the need to pass examinations and
have extensive formal educational qualifi cations. Th is seems a practical solution.
26.4 Non-legislative and non-regulatory consumer protection
26.4.1 Complementary role of industry codes of conduct and standards
Poor market conduct by insurers and intermediaries can result in overly intrusive
and expensive consumer protection regulation. Such a regime can be problem-
20 A “fact fi nd” is a questionnaire that demonstrates that the intermediary has made suffi cient enquiries
to be able to recommend an appropriate product and sum insured/premium level (i.e. a fi nancial
needs analysis).
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