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Enhancing Value in Community-Based Micro Insurance: An MIA Innovation Workshop May 17, 2010 New Delhi. MCCO REGULATION: TRENDS AND CHALLENGES. DR. IAN WEBB . Outline of Presentation. Challenge of Regulating MCCO’s IAIS-MIN Draft Issues Paper
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Enhancing Value in Community-Based Micro Insurance: An MIA Innovation Workshop May 17, 2010 New Delhi MCCO REGULATION: TRENDS AND CHALLENGES DR. IAN WEBB
Outline of Presentation • Challenge of Regulating MCCO’s • IAIS-MIN Draft Issues Paper • MCCO Regulatory Approaches Philippines, Peru • MCCO TA Support Institutions, Philippines, Peru, Colombia, D.R. • Where Do We Go From Here?
I. Challenge of Regulating MCCO’s • Cost – benefit equation is different • Cost of regulation should be less than the benefit • Level of resources makes compliance with regulations difficult • Variety of MCCO models, cultures and objectives complicates using a single approach • Different regulatory agencies may claim jurisdiction • Inadequate data on the number and types of MCCO’s existing • Little insurance supervisory experience with MCCO’s
II. MCCO Surveys, Studies & Papers • Joint Working group – IAIS & CGAP (MI Network) • Issues paper on Microinsurance (2007) • Survey on the role of mutuals, cooperatives and community-based organizations (2008) • Issues paper Regulation & supervision of MCCO’s in increasing access to insurance markets (expected 2010.) • Next => “More elaborative standards and guidance with respect to issues of access to insurance” (2011 +) • ICMIF • Planning a survey on mutuals and coops around the world (2010) • Planning an analysis of “success stories” behind mutual insurers that started out as microinsurance providers (2010) • Publication of ICMIF mutual survey 2008 – size of formal mutual insurance market in each country (2010)
IAIS-MI Draft MCCO Paper: Highlights • Yes • Implications for regulation/supervision (ICP’s) arising from mutual nature of organization • Grounds and scope for different regulatory/supervisory treatment due to MCCO characteristics • Emphasizes positive role MCCO’s play in increasing access to insurance • Highlights need to formalize supervision of MCCO’s beyond supervisory radar • No • Regulatory/supervisory issues arising from microinsurance, or small insurers • Specific guidance on how to regulate MCCO’s • Guidance on how to address lack of adequate supervision for many MCCO’s • Viewpoints and concerns of MCCO’s
IAIS-MI Draft MCCO Paper: Contents • Defining Characteristics of MCCO’s • Member ownership • Democracy • Solidarity • Created to serve a defined group or purpose • Role of MCCO’s in providing access to MI • Geographic challenges • Cultural challenges • Business model challenges • Service and product design challenges • Socio-econoic circumstances challenges
IAIS-MI Draft MCCO Paper: Contents • Supervisory arrangements • Licensing • Suitability of persons • Changes in control and portfolio transfers • Corporate Governance • Internal Control • On-going Supervision • Prudential Requirements • Capital Adequacy and Solvency • Markets and Consumers • Intermediaries • Consumer Protection • Information, Disclosure and Transparency towards the market
III. Insurance Regulatory Environment MCCO’s • Philippines • Formal MI regulatory framework • Licensing structure expanded to incorporate varoius kinds of MI-related activity including conventional insurers, MBA’s, cooperative insurance socieites, pre-need companies & health maintenance organizations. • Required simplified and favorable contractual terms, and facilitates commercialization by MCCO’s and others, when definition of MI met • Peru • Formal MI regulatory framework • Superintendency Banks & Insurance and Pension Funds (SBS) 1 tier licensing - only for conventional insurers • Required simplified and favorable contract terms, and facilitated commercialization by MCCO’s, when definition of MI met
IV. Technical Assistance for MCCO’s • Philippines • RIMANSI offers thorough and sustained TA support for MBA’s. Insurance companies, through partner-agent model, also provide some TA and product development support for distribution partners. Cooperatives, pre-need companies, HMO’s ’s receive little and scattered TA support from other sources. • Peru • Insurance companies, through partner-agent model, provide most of the TA and product development support to MCCO’s. Health clinics (Micro-Health), cooperatives, and labor unions receive little and scattered TA support from other sources. • Dominican Republic (COOPSEGUROS) & Colombia (La Equidad) • Member-owned cooperative insurers licensed by the insurance supervisor provide substantial TA and product development support to cooperatives. • Insurance companies through partner-agent model also provide TA and product devlpt.
TA for MCCO’s: APEX Institution (RIMANSI) • Independently owned (non-stock, non-profit) • Member-governed but with full-time professional staff • Services • Licensing assistance for MCCO’s wishing to establish MBA’s • Extensive market surveys to identify risk protection needs of clients • Governance structure of MCCO’s behind MBA’s that has built-in attention to satisfaction and needs of client members • Professional product development, pricing, reserving, investment services • MIS installation and training • Prudential and performance monitoring of client MI operations (self-regulatory function recognized by Insurance Commissioner) • Corporate governance training
TA for MCCO’s: Cooperative Insurers • Serve the interests of their cooperative members • Member-owned and governed, but with full-time professional staff • Profit not retained by individual members; shared and administrated by collective • Services • Extensive market surveys to identify risk protection needs of members • Governance structure has built-in attention to satisfaction and needs of members • Provide professional product development, pricing, reserving, investment services • Financial literacy and other social services (i.e. health education)
V. Where Do We Go From Here? • Understanding MCCO’s • Don’t know the scope/size of number of MCCO’s size of their activities – DATA! • Don’t know their interests and strengths, and contributions adequately yet • Many questions still be to answered – How are MCCO’s fundamentally different? • Do MCCO’s want to be regulated? • How do MCCO’s contribute to the insurance market (what are their special roles, in terms of social capital, financial literacy, trust-building?) • Are they addressing a market failure, and consequently, require a organizational profile different than a professional insurer? • Risk- transfer Vs. Risk-pooling • How to balance technical assistance with regulation/supervision? • Do different stages of MCCO development that require different types of regulatory/supervisory intervention?
Where Do We Go From Here? • Exploring viable paths to development and regulation • Establishing dialog between key stakeholders (MCCO’s, insurance regulators, other regulatory agencies with jurisdiction, donor agencies) to explore best approach to • Regulation and supervision • Development of MCCO capacity, performance and integrity • Develop adequate and appropriate regulatory/supervisory framework • Developing TA and regulatory models with various key stakeholders • Learning from practices and experience around the world