It has been reported (Law360) that the International Association of Insurance Supervisors has urged governments to make sure that insurers selling basic cover to the world’s poorest communities keep their products simple to prevent misselling and to avoid excessive costs.
According to the IAIS ‘inclusive insurance products and their distribution need to be easily understood in order to avoid misselling. This can be achieved by making inclusive insurance products “simple, understood and appropriate.”’
Such products will help people survive in developing countries in the aftermath of natural catastrophes such as earthquake, flood or typhoon. Micro-insurance can protect small farmers against failing crops or guarantee payment of labourers for injuries on building sites. Householders insurance for people living in informal housing where fires run through a settlement can benefit from such products.
Standardised insurance products could help keep things simple and attract more providers to enter the market. There is, for instance, a consortium of eight insurance companies offering crop insurance to maize farmers in a pilot project in Zimbabwe insuring the credit they used to buy seeds and fertilizer.
There is a crying demand for simplified products to bring people into the insurance market.
We also hope that global supervisors do the same with their regulations. Insurance regulation is not known for being simple, understood and appropriate and compliance burdens and costs are retarding the industry. The light at the end of the tunnel is blocked by piles of government gazettes.