MR Microinsurance_2012_03_29.indd - International Labour ...
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MR Microinsurance_2012_03_29.indd - International Labour ...

MR Microinsurance_2012_03_29.indd - International Labour ... MR Microinsurance_2012_03_29.indd - International Labour ...

ilo.org
10.12.2012 Views

592 Infrastructure and environment for microinsurance 26.5 Emerging good practices A number of emerging good practices have been identified that might form the core of a proportionate consumer protection regime for microinsurance. Before they could form the basis of any normative regulatory recommendations, however, they would need to be tested on the ground and tailored to context. The practices are categorized under the three broad consumer-protection goals of transparency, fair treatment and effective recourse. 1) Transparency: – Require that the client knows who the ultimate insurer is, e.g. when the insurer’s name is clearly stated in the sales documents, the policy and any “Key Facts” documents. – Require adequate and comprehensible disclosure of the price of the policy, what it does (and does not) provide, the premium payment obligations, when and how a claim can be made under the contract, and for how much, including any exclusions or limitations on cover arising out of explicit or implied warranties. – Require adequate and comprehensible disclosure of claims procedures and how to access recourse mechanisms if things do not go as expected. – Given the profile of microinsurance consumers, such disclosures will need to be as simple, comprehensible and accessible as possible to those with lower levels of income, experience and formal education. Standardization of disclosure formats and wordings can help facilitate consumer understanding and comparison of the different products available. 2) Fair treatment: – Require mechanisms to be in place that will mitigate the impact of high-pressure sales practices by ensuring that potential consumers have time to consider the suitability and value for money of the product(s) on offer. Examples of such mechanisms include post-sale call-back by the insurer (using electronic means where possible) and free look periods (see section 26.3). – Give attention to the effect of overly obtuse wording, especially if it limits the delivery of insurance services when customers might otherwise expect that they would be delivered, and consider encouraging operators to offer relatively simple products (e.g. those with standard wordings or restrictions on arcane exclusions and warranties). – Allow product bundling when it affords benefits (e.g. cost savings or convenience) to customers as well as the provider, subject to suitability and disclosure requirements being met. 23 23 While bundling may occur at point of sale, the different products may still be effectively provided by different institutions.

Protecting consumers while promoting microinsurance – Require that all intermediaries be formally licensed or registered, 24 and that they comply with appropriate and proportionate regulation adapted from mainstream markets. – Make insurers responsible for the actions of their tied agents in delivering and servicing the product(s). – Ensure client moneys are secured and properly recorded. – Monitor claims settlement performance through such measures as loss ratios and time between claim notification and payment. 3) Recourse: – Require insurers or affiliation groups that intermediate for them 25 (i.e. aggregators) to establish internal complaints-handling procedures that are timely and easily accessed by microinsurance consumers. For example, complaints procedures that are timely, free and convenient, and can be accessed in person and without onerous paperwork. To the extent feasible, the supervisor should oversee the effectiveness of internal dispute resolution systems and have insurers or affiliation groups report data on the outcomes of complaints and dispute resolution. – If economic considerations permit, appoint an independent consumer representative such as an ombudsman. Alternatively, ensure that consumers have access to a consumer protection unit within the relevant supervisor’s office or an independent industry body. – Require “free look periods” (post-sale periods during which the new policyholder may terminate the contract and receive an equitable refund) for long-term or complex products – particularly if they contain significant exclusions or warranty wordings. 26 Research shows that the policy environment can have a major impact on insurance sector development at all levels. Regulators can draw upon these emerging good practices selectively, according to product type, consumer context, level of market development and supervisory capacity. If applied appropriately, these good practices should significantly contribute to financial inclusion through the development of value-adding and sustainable microinsurance markets. 24 Subject to supervision by the regulator, this could be done through approved insurers for individual tied agents. 25 For example, MFIs or self-help groups. 26 If included in policy wordings, this could also be categorized under fair treatment. 593

Protecting consumers while promoting microinsurance<br />

– Require that all intermediaries be formally licensed or registered, 24 and that they<br />

comply with appropriate and proportionate regulation adapted from mainstream<br />

markets.<br />

– Make insurers responsible for the actions of their tied agents in delivering and<br />

servicing the product(s).<br />

– Ensure client moneys are secured and properly recorded.<br />

– Monitor claims settlement performance through such measures as loss ratios and<br />

time between claim notification and payment.<br />

3) Recourse:<br />

– Require insurers or affiliation groups that intermediate for them 25 (i.e. aggregators)<br />

to establish internal complaints-handling procedures that are timely and<br />

easily accessed by microinsurance consumers. For example, complaints procedures<br />

that are timely, free and convenient, and can be accessed in person and<br />

without onerous paperwork. To the extent feasible, the supervisor should oversee<br />

the effectiveness of internal dispute resolution systems and have insurers or affiliation<br />

groups report data on the outcomes of complaints and dispute resolution.<br />

– If economic considerations permit, appoint an independent consumer representative<br />

such as an ombudsman. Alternatively, ensure that consumers have access to<br />

a consumer protection unit within the relevant supervisor’s office or an independent<br />

industry body.<br />

– Require “free look periods” (post-sale periods during which the new policyholder<br />

may terminate the contract and receive an equitable refund) for long-term or<br />

complex products – particularly if they contain significant exclusions or warranty<br />

wordings. 26<br />

Research shows that the policy environment can have a major impact on insurance<br />

sector development at all levels. Regulators can draw upon these emerging<br />

good practices selectively, according to product type, consumer context, level of<br />

market development and supervisory capacity. If applied appropriately, these<br />

good practices should significantly contribute to financial inclusion through the<br />

development of value-adding and sustainable microinsurance markets.<br />

24 Subject to supervision by the regulator, this could be done through approved insurers for individual<br />

tied agents.<br />

25 For example, MFIs or self-help groups.<br />

26 If included in policy wordings, this could also be categorized under fair treatment.<br />

593

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