Market Conduct and Consumer Protection

New distribution avenues challenge supervisory practices. Distribution is key to providing suitable insurance coverage to low-income and excluded populations. As insurers are faced with low profit margins, they need to find low-cost channels that can reach large numbers of clients, while making sure that the client is properly informed about the product. Alternative distribution channels operating as client aggregators include all kinds of non-traditional intermediation modes such as e-money providers or non-financial intermediaries such as retailers, utility companies or Mobile Network Operators (MNOs). Many of them act as a group policyholder and some of these business models involve a third party, e.g. a technical service provider (TSP), who assumes various functions from product design to claims administration. Some TSPs are even licensed as intermediary, often using call centres and own sales staff or agents for distribution. This results in a more complex value chain with a variety of insurance and non-insurance stakeholders involved that assume different roles. The longer value chain often comes with a power imbalance against the insurer being the client aggregator and the party that dominates the client relationship, hence the partnership. Commissions in alternative distribution vary considerably, ranging from 10% to 60% with a median of around 30%. All these challenge traditional supervisory approaches in multiple ways.