Which financial activities are supervised? European experience

1. Which financial activities are supervised?European experience • Banking • Insurance • Asset management

2. Why supervision of financial activities? • The reliability and functioning of the financial industry is of national interest. • Solvency supervision. Ensure that the company can meet the (future) liabilities. The accounting rules differ per country and activity • Consumer (supplier and investor) protection. A combination of maximum safety and profit

3. Organisation of the supervision • A trend to integrate the separated supervision activities in one national body • Grouping of bank-, insurance- and asset-management companies. New integrated cross-sectoral products. • More efficiency and less co-ordination costs with a comprehensive full-scale overview of the market • The national voice has more impact in Europe

4. Supervision of Health insurance • The differences in supervision of public and commercial insurance are evident • Public healthcare insurance by a legal entity under the the Ministry of Health • Package and regulations by Ministry of Health • In close co-operation with the health providers • Social business • Commercial healthcare (incl. supplementary) insurance by a legal entity under the Ministry of Finance • Close connected to other financial industries • Commercial business

5. Supervision of public and commercial health insurance undertakings • A tendency from detailed daily process-control to financial end-control, but: • Public funds are most intensively (day by day) controlled (incl.quality) • Public funded enterprises. Non-profit enterprises • Subscribers’ power to influence quality is very weak • Mostly compulsory. No freedom of choice • Commercial funds are less intensively controlled • Private premium collection. Full profit enterprises • More clients’ influence. When dissatisfied, they can resign. • The market will regulate more (but safety for all!)

6. Licensing • Before granting authorisation the supervision body conducts a comprehensive legal/financial study: • Met the legal conditions • Evidence of own funds • Operation Plan • Management of good education and reputation • In case of mismanagement: • Advises or directives to improve • Dismissal of management • Stop the license • Stop the business

7. On-going supervision • On-going monitoring: • Still sufficient provisions and uncommitted funds in balance with the risk taken • Reinsurance to a appropriate degree • Changes in the business strategy and the environment • Changes in the operation • Information by: • All types of notifications • Audit reports • Management Information System • Free access to the Board and all operations

8. Countries differ • Prior approval of General Conditions, tariffs and (changes in) premiums • Actuarial directives • When to involve a trustee actuary • Reserves for the old age and chronic diseases • Complaints handling • Responsible for training programs • In public healthcare insurance: • Advise in new building/supply of care institutes • Risk equalisation between funds • Settlement of claims/payments abroad

9. Solvency requirements • Dependent on risk • Differ for public and commercial funds. A public fund has more risk sharing and so lower requirements • Calculated as a percentages of the premium and the experienced claims. For public funds are minimum and maximum requirements. An example: • A public fund: minimum is 8% of the risk (future years) and the maximum is 2,5 times that amount • A commercial fund: 16% of the premium or 23% of the average 3 years claims. The highest outcome is the requirement (mostly the 23%)

10. Quality control of public funds is essential • Supervisory bodies are focused on financial aspects • Clients of the public system complain about quality of service but have not enough power. Statutory quality control (Quality Law) works as consumer protection • Quality control by the fund itself is not sufficient • Usually the supervisory body is responsible, but there is a tendency to use specialised quality institute • Quality control of the public healthcare providers is a must too. This is done by public health fund but preferable by specialised institute

11. Commercial insurers are under the rules of the free market. Quality is a matter of survival • Clients of a commercial institute are far more powerful. They can resign! • Market requires quality of the insurer (and health provider) • Commercial insurers have Quality Management Systems and Complaints Programs in place • There is a tendency to use specialised quality institutes • Commercial insurers control the provider very intensive

12. Summary and advises • Supervision is essential. Public healthcare insurers are supervised more intensive then commercials • The healthcare needs are evident • Equal access for all in full solidarity and high quality • But: the Slovakian healthcare debts are enormous • So: • Supervise the funds to support the management • Limit the public benefits to the essentials • Introduce voluntary healthcare insurance to generate extra money flow