Access to Insurance Initiative Newsletter: Issue 5 - 2014

Welcome to our newsletter, where we update insurance regulators and supervisors on the work of the Initiative, inform you about events and publications, and share experiences and learning across jurisdictions.

We are glad for the feedback we are receiving regarding this newsletter and our technical outputs more broadly. There is a strong demand for easy to digest contents that speak to the day to day challenges of supervisors. We have recently published some technical documents that aim to do just that. This issue is dedicated to an overview of the key messages from these outputs.

Do you have anything to share? Please send us feedback, information or tips for the next issue.

Visit us at www.access-to-insurance.org.
- Access to Insurance Initiative Secretariat Team

International top insurance representatives and supervisors meet in Amsterdam

On October 23- 24, 2014 the 21st Annual Conference of the International Association of Insurance Supervisors (IAIS) will take place in Amsterdam, the Netherlands. The IAIS 2014 Conference will bring together a diverse group of international financial supervisors and representatives of the insurance industry. Last year almost 600 persons participated.

The event provides a valuable opportunity to exchange views and experience on insurance-related issues and initiatives. The theme of the IAIS 2014 Conference will be: ’Enhancing policyholder protection and financial stability through governance and risk management’.

The keynote speaker on the first day of the Conference will be the president of the Eurogroup Mr. Jeroen Dijsselbloem, who is also the minister of Finance of the Netherlands.

Other important speakers and panelists are, amongst others, Jeroen van der Veer (chair supervisory board of ING), Tidjane Thiam (Group CEO Prudential), Gabriel Bernardino (chairman EIOPA) and Joanne Kellermann (director DNB).

In the afternoon of the first Conference day, the A2ii Chairman, Jonathan Dixon of the Financial Services Board of South Africa will chair a panel on the topic of financial inclusion.

The organizers look forward to hearing from you and hope you can join them in Amsterdam. For more information and to subscribe, visit: www.iais2014.org.

Click here to download the invitation video

Overview of recent A2ii knowledge products: in brief
IAIS-A2ii Training Module on Inclusive Insurance Markets

Why an inclusive insurance training module? More and more supervisors are faced with the challenge of “doing something” to build an inclusive insurance market. But where do you begin and what considerations should you take into account? How can the Insurance Core Principles be applied in a proportionate way? The 2012 IAIS Application Paper on Regulation and Supervision Supporting Inclusive Insurance Markets (IAIS, 2012) provides answers – but how do you apply the guidance in practice?

In 2013, the IAIS and the A2ii developed a Training Module on regulation and supervision supporting inclusive insurance markets. It is a practical tool for supervisors to implement the concepts set out in the Application Paper.

Is it relevant for you? Inclusive insurance and proportionality are relevant topics for all developing and many developed countries. The module does not require specific prior knowledge of the topic. It should be useful to either new insurance supervisors or experienced supervisors who have not dealt extensively with the topic or are simply seeking to refresh and update their knowledge.

What will it enable you to do? The module seeks to enhance supervisors’ understanding of what it takes to achieve a more inclusive insurance market and their ability to apply this understanding in the context of their own jurisdiction. After having absorbed the material, supervisors should be able to:

• Understand what an inclusive insurance market is (including the differences in products, services, channels and insurers vis-à-vis traditional formal insurance markets), why it’s important, as well as what the common barriers to inclusive insurance markets are.

• Identify the specific barriers in their jurisdiction, the challenges that they face in regulating and supervising the distinct nature of inclusive insurance markets, and their roles and responsibilities in creating and maintaining a more inclusive market.

• Understand how they can apply the concept of proportionality to support the inclusiveness of the insurance market in their jurisdiction, including with regard to topics such as the solvency regime, prudential supervision, intermediation and conduct of business requirements.

• Address the tricky question of whether to define “microinsurance” in regulation and the possible implications of an inappropriate definition, as well as how to treat mutual, cooperative or community-based organizations vis-à-vis commercial insurers.

• Understand issues arising with respect to the licensing of entities providing insurance in an inclusive market, including minimum size, mixed entities (for example a credit or funeral service provider that also provides insurance), pilots and the need for formalization.

The module recognizes that insurance supervisors often need to deal with other regulatory authorities (for example cooperatives or telecommunications) with institutional jurisdiction over entities providing or distributing insurance and discusses the steps in dealing with such authorities. All of this will place additional demands on supervisory capacity - hence the module discusses the possible implications for supervisory resources.

How to use the module? The IAIS A2ii Training Module on Financial Inclusion is available for download on our website. It consists of topic-by-topic explanatory materials interspersed with hands-on activities for those working through it to complete. The activities are intended to provide a checkpoint from time to time so that readers can more readily absorb and understand the material.

Hands-on training based on the module is provided by the A2ii in cooperation with the Toronto Centre through a regional training program. If you wish to host such a program for you and your regional colleagues, please email us at secretariat@a2ii.org.

Business models, risk and regulaory approaches: emerging cross-country insights

The first phase of our work rendered a wealth of country-level insights across 18 access to insurance diagnostic studies. Over the past year, we synthesized that learning to draw out cross-country insights that can help regulators and supervisors understand their domestic market realities - and their response to it - in the context of observed global trends.

We recently published two cross-country synthesis documents for consultation:

• Evolving microinsurance business models and their regulatory implications

• Different approaches taken by regulators to catalyse microinsurance markets and the impact thereof

Key messages include:

• Microinsurance business models are driven largely by distribution – in an effort to leverage third party infrastructure and sales forces to achieve the necessary scale to make low-premium distribution viable. Other key drivers include public provision or compulsory insurance.

• Microinsurance is not just about quantity, but also about quality: as microinsurance business models evolve, consumer value is increasingly in the spotlight. The involvement of third party client aggregators in the microinsurance value chain (for example a retailer, utility, mobile network operator, cooperative or microfinance institution) gives rise to particular consumer protection risks that supervisors have not previously been confronted with.

• The involvement of multiple parties in delivering insurance products, many of them not traditionally under the jurisdiction of the insurance supervisor, and the different skills set of their sales people require supervisors to: (i) coordinate with other supervisory authorities responsible for e.g. telecommunications regulation; and (ii) adapt intermediary entry and ongoing requirements in line with new market realities; in order to (iii) find the balance in allowing a broader set of intermediaries while ensuring consumer protection.

How do regulators respond to support inclusive insurance market development?

Various regulatory approaches are emerging, internationally, to the challenge of regulation and supervision for inclusive insurance markets. These approaches can be classified along a continuum according to the degree of state intervention, on the one hand, and reliance on market forces, on the other:

Importantly, more than one approach can be applied between different product markets within a country. For example: the state may find that direct provision is the best option in the health insurance market, but may apply a concessionary approach to life or asset insurance.

So what is the optimal approach to promote increased access to insurance in a particular product market or across multiple product markets? The answer rests, at least in part, on the existing market environment and risks in the particular country. For more details, please download the synthesis papers.

Do any of the above approaches ring true in your jurisdiction? Please send us feedback!

In brief

Coming up

• The 5th IAIS – A2ii Consultation Call will take place on 28 August at 10am and 4pm CEST. Please register by sending an email to consultation.call@a2ii.org. 
• 2014 Global Policy Forum (GPF) hosted by AFI and the Central Bank of Trinidad and Tobago will take place on 09- 11 September in Port-of-Spain, Republic of Trinidad and Tobago. The A2ii is glad to join hands with the Alliance for Financial Inclusion (AFI) on the panel: “Mainstreaming inclusive insurance: Innovative applications of mobile technology” on Wednesday, 11 September from 11:45-13:15.

Recent events

• 3rd Consultation Call on Consumer Protection, May 22nd at 10am and 4pm CEST. This is a supervisor-only forum.
• 30th International Congress of Actuaries, Washington DC, 31 March-4 April.
• FSI/IAIS 12th Regional Seminar for Supervisors in the Middle East and North Africa, 8-10 April, Abu Dhabi. Hosted by the UAE Insurance Commission and titled “Early Detection of Problems and Dealing with Troubled Insurers”.
• 2nd SAARC Insurance Regulator's Meet & International Conference, 14 - 16 April 2014, Karachi, Pakistan. For the presentation click here.

Meet

New leadership for IAIS FISc

Sriram Taranikanti, Executive Director at the Insurance Regulatory and Development Authority (IRDA) India, is the new chair of the IAIS Financial Inclusion Sub-committee (FISc). The vice-chair is Ms Rosemary Henry from the Financial Services Commission in Jamaica.

Mr. Taranikanti has been with IRDA for about three years and is overseeing matters relating to Sectoral Development, Information Technology and Legal issues.  He is also driving the Development initiatives of the Authority aimed at Insurance growth. He came to IRDA with wide experience in State Governments and Government bodies in different fields including Rural Development, Infrastructure and Technology.IRDA was established in 2000 to protect the interests of policyholders and ensure orderly growth of the insurance Industry in India. Since IRDA‘s inception, the insurance industry in India has grown eight fold. IRDA has a specific focus on consumer education and consumer protection. Its initiatives in this regard include a dedicated website www.policyholder.gov.in. It has also conceived and implemented an Integrated Grievance Management System (IGMS), a one of its kind initiative that enables complaints resolution across Insurers on a country wide platform.

An interesting read

Lack of actuarial capacity is a challenge for many developing countries and the level of actuarial skills required is a key consideration for supervisors when devising regulation and supervision supporting inclusive insurance market development.

The International Actuarial Association (IAA) recently released an Issues Paper on „Addressing the Gap in Actuarial Services in Inclusive Insurance Markets“ that outlines the issues and seeks to answer some of the burning questions.

Consultation Call update

• Report: innovations in insurance distribution and their regulatory implications. The summary report for the April consultation call on regulatory implications of distribution innovation is now available. Click here.

• Consumer protection in inclusive insurance regulation and supervision. The 3rd Consultation Call took place on Thursday, May 22nd and dealt with consumer protection issues. Click here to download the presentation and notes from the call.

• Agricultural Insurance. The 4th Consultation call took place on Thursday, June 26th and dealt with agricultural insurance. Click here to download the presentation from the call.

The calls are a supervisor-only platform to share experiences.

Share

Do you have an experience to share? Click here to let us know of any new microinsurance regulatory developments or lessons in your jurisdiction, or join our LinkedIn group and post discussion topics or questions.