Emerging Insight: Eliminate the easy way out
11 December 2017
A new paper on regulatory impact assessments by Access to Insurance Initiative and the ILO’s Impact Insurance Facility describes how the Peruvian insurance regulator, SBS, has over time introduced multiple regulatory frameworks for inclusive insurance. It did so with two policy objectives in mind: to create access to insurance specifically for the low-income segment through microinsurance, and to widen the distribution channels available to mass insurance to improve access to insurance in general.
These frameworks were not reconciled under one overarching framework for microinsurance or inclusive insurance. This created issues a lack of clarity around which regulatory requirements applied to microinsurance as well as regulatory arbitrage, in which companies used this lack of clarity to avoid parts of the regulation they found unfavourable.
A large proportion of inclusive products (77 per cent) remained outside the microinsurance regulation. Many insurers preferred to continue distributing under bancassurance or group policies and not to take advantage of the increased distribution channels allowed through the microinsurance regulation in order to avoid registering their products as microinsurance. With the introduction of the role of mass insurance marketer in 2010, insurers chose to distribute inclusive products as mass insurance. In this way, insurers did not have to comply with the microinsurance consumer protection regime intended to ensure that low-income households adequately understand and use microinsurance products.
SBS has since taken steps to streamline microinsurance and mass insurance regulations and to incentivize the registration of microinsurance products in its new microinsurance regulations issued in May 2016. To promote consistency and mitigate regulatory arbitrage, an overarching regulatory framework for microinsurance may be more effective. For example, in the Philippines the regulator published an overarching regulatory framework for microinsurance and all subsequent microinsurance regulations (including over 20 different circulars and other legal instruments) were anchored into this framework.
Find out more about how the two countries tackled microinsurance regulation in the paper “Regulatory Impact Assessments: Microinsurance Regulations in Peru and the Philippines”.
These frameworks were not reconciled under one overarching framework for microinsurance or inclusive insurance. This created issues a lack of clarity around which regulatory requirements applied to microinsurance as well as regulatory arbitrage, in which companies used this lack of clarity to avoid parts of the regulation they found unfavourable.
A large proportion of inclusive products (77 per cent) remained outside the microinsurance regulation. Many insurers preferred to continue distributing under bancassurance or group policies and not to take advantage of the increased distribution channels allowed through the microinsurance regulation in order to avoid registering their products as microinsurance. With the introduction of the role of mass insurance marketer in 2010, insurers chose to distribute inclusive products as mass insurance. In this way, insurers did not have to comply with the microinsurance consumer protection regime intended to ensure that low-income households adequately understand and use microinsurance products.
SBS has since taken steps to streamline microinsurance and mass insurance regulations and to incentivize the registration of microinsurance products in its new microinsurance regulations issued in May 2016. To promote consistency and mitigate regulatory arbitrage, an overarching regulatory framework for microinsurance may be more effective. For example, in the Philippines the regulator published an overarching regulatory framework for microinsurance and all subsequent microinsurance regulations (including over 20 different circulars and other legal instruments) were anchored into this framework.
Find out more about how the two countries tackled microinsurance regulation in the paper “Regulatory Impact Assessments: Microinsurance Regulations in Peru and the Philippines”.