[Microinsurancefocus] Insurance issues in the world spotlight

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From: Charles.Klingman at do.treas.gov [mailto:Charles.Klingman at do.treas.gov] 
Sent: mercredi 27 mai 2009 21:49
Subject: Unbanked News - World

 

Business Day

May 22, 2009  

Insurance issues in the world spotlight

David Jackson

Insurance issues in the world spotlight

A NUMBER of burning issues affecting intermediaries and the wider insurance
industry came under the spotlight at the recent World Federation of
International Intermediaries (WFII) congress in New York, attended by the
FIA.

These included the effects of the global financial downturn on financial
intermediation, the pros and cons of intermediary remuneration model
options, the solvency of large insurers, and concerns about multinational
placements for intermediaries who trade across the globe.

There was also a strong focus on issues such as consumer education, money
laundering processes and micro insurance.

Justus van Pletzen, Chief Operating Officer of the FIA, was the FIA's
representative at the congress.

On the impact of the global financial crisis on the industry, Van Pletzen
says: "It has had an impact on the insurance and intermediary industries
across the globe, although it certainly appears that the industry in the US
has been more affected than the rest of the world.

"The regulation of remuneration structures and systems and their disclosure
was debated at length and different models were discussed. The question of
whether the approach should be fee-based or negotiated with and paid by the
client was posed."

He says that a remuneration committee in the Netherlands consisting of key
stakeholders from the insurance industry met recently to determine the pros
and cons of various remuneration models and their relevance, given today's
insurance market and prevailing trends.

The core objective of this committee was to ascertain the underlying
principles and concepts for sustainable forms of remuneration in the
distribution channel for complex insurance products. The committee devised
three models.

He says that In SA the FIA engaged with regulators and policymakers with
regard to the Insurance Laws Amendment Act, which addresses remuneration,
the classification of intermediaries and intermediary structures.

"The outcome of these negotiations is sure to influence processes and models
abroad."

He says that with the AIG debacle in mind there was agreement that the
industry needs to revisit the methodology used to gauge the solvency of
insurers.

"The general consensus was that the rating agencies' regulations should be
reviewed so as to ensure they reflect more independence, accountability and
responsibility," Van Pletzen says.

The definition of intermediaries is high on the agenda of the International
Association of Insurance Supervisors.

"In negotiations with regulators it has become apparent that the
classification of intermediaries is a concern that affects and influences
perceptions about remuneration structures and potential conflict of
interest.

"There is confusion about the differences between outsourcing and
intermediation.

"Regulators the world over are looking to introduce structures that demand
insurers assert more control and governance over outsourced activities and
service providers."

Anti-money-laundering processes were discussed in New York and it was clear
that FICA placed a huge responsibility on intermediaries "and is most
certainly one of the reasons behind intermediaries' increase in operational
costs. The WFII has undertaken to review its global policy with regard to
FICA".

Major concerns facing the micro-insurance market include suitable products -
getting the product price and benefits right; coping with huge volumes of
small policies; collecting premiums from those without bank accounts; and
controlling fraud.

The congress also discussed the need for new models and partnerships that
capitalise on the strengths and overcome the weaknesses of current
institutional models for providing insurance.

TRENDS: Justus van Pletzen says there are moves for greater control.

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