The insurance penetration rate is traditionally calculated based on total premiums as a percentage of Gross Domestic Product (GDP). This has served as a useful high-level measure of insurance development, while providing a good basis for international comparison. However, supervisors pursuing more specific policy goals, such as financial inclusion or client value, may find that this measure on its own does not provide enough meaningful information to guide policy strategies.
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In response to requests from the IAIS Executive Committee as well as Latin American supervisors the next A2ii-IAIS Consultation Call will be on the topic of reinsurance. The call focused on reinsurance from a host jurisdictions perspective and will examine questions around enforcement of contracts, direct and indirect supervision of reinsurers and contract oversight among other issues.
On the topic: With access to insurance high on the financial inclusion agenda, efforts are being undertaken to develop inclusive insurance regulatory frameworks in many jurisdictions. Effectively implementing such frameworks requires a multifaceted approach involving numerous stakeholders and proportionality considerations.
On the topic: Regulatory incentives to foster the growth of inclusive insurance are important. Regulation needs to be proportionate to the nature, scale and complexity of risks inherent in individual insurance business and strike a balance between “motivating the industry” and “protecting the consumer” if it is going to achieve its intended objectives and expand access to insurance for low income consumers.
Incentives for insurers and examples of a proportionate approach include:
On the topic: Given the typically low margins on low value policies, most successful microinsurance business models innovate distribution channels in order to minimise distribution costs and scale up the number of policies sold, either by leveraging groups or the infrastructure and reach of aggregators. These new ways to sell insurance typically result in long distribution chains involving a variety of entities and their employees, some of which may not traditionally be regulated by the insurance supervisor.
Drawing on the experiences of Ghana, Mexico and the Philippines, the report “Proportionality in practice: Distribution" examines the practical aspects of distribution where insurance supervisors are flexible and adjust certain supervisory requirements in order to encourage the insurance industry to offer insurance to the underserved or those excluded from insurance services while protecting consumers.
The report “Proportionality in practice: Disclosure of information” draws on the experiences of Brazil, Pakistan, Peru and El Salvador and examines the practical aspects of disclosure in which supervisors adopt proportionate regulation in order to encourage the industry to offer inclusive insurance while ensuring consumer protection.
This paper considers the various regulatory approaches implemented by insurance regulators and supervisors globally in order to achieve the objective of inclusive insurance market development. The primary question that this paper seeks to address is: what is the optimal regulatory approach to be followed by a particular country to promote increased access to insurance in a particular product market or across multiple product markets?
The A2ii published an article in the new annual Microinsurance Network publication ‘The state of Microinsurance 2016’. In the article the A2ii gives an overview of its work in Peru, Columbia and Jamaica helping microinsurance market development though supporting the supervisory authorities in establishing an enabling regulatory environment.