Consumer protection in the IAIS Framework for Insurance Supervision

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Consumer protection in the IAIS Framework for
Insurance Supervision

• Catherine Lezon
• 19th Pan European Conference
• Sofia, Bulgaria
• 8 June 2007

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Consumer protection in IAIS work

• Agenda
• Introduction
• IAIS Framework for Insurance Supervision
• The Insurance Core Principles
• Other IAIS Work on Market Conduct
• Potential Future Work on Consumer Protection

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1. Introduction

• IAIS
• Founded in 1994
• Represents insurance regulators and supervisors
• Worldwide membership - 180 members from more than
  130 countries
• Observers participate actively - more than 120
  observers

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1. Introduction

• IAIS Objectives
• To contribute to improved supervision to maintain
  efficient, fair, safe and stable insurance
  markets for the benefit and protection of
  policyholders
• To promote development of well-regulated and
  supervised insurance markets
• To contribute to global financial stability

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1. Introduction

• Importance of IAIS work in the area of consumer
  protection from supervisory perspective
• protecting individual policyholders rights
• link with prudential supervision as market
  conduct of an insurer may affect its reputation
  thus indirectly its risk profile and capital
  strength

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1.Introduction

• No generally accepted definition
• Often discussed as part of market conduct
  (information to the market and to other
  stakeholders)
• Relevant aspects of consumer protection include
• Information and advice to customers
• Claims handling
• Complaints handling

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Consumer protection in IAIS work

• Agenda
• Introduction
• IAIS Framework for Insurance Supervision
• The Insurance Core Principles
• Other IAIS Work on Market Conduct
• Potential Focus on Consumer Protection

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2. IAIS Framework for Insurance Supervision

• provides a structure
• underpinning the IAISs past and future
  standard-setting activities on insurance
  supervision
• communicating the over-arching interrelationships
  between IAIS principles and standards being
  adopted
• for identifying key areas for future work.

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2. IAIS Framework for Insurance Supervision
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2. IAIS Framework for Insurance Supervision

• Market conduct block of regulatory requirements
  includes
• dealing with customers in the selling and
  handling of insurance policies
• integrity of conduct by an insurer as an
  institutional investor
• disclosure of relevant information both to the
  market and to policyholders

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2. IAIS Framework for Insurance Supervision

• Market conduct block interrelated to Financial
  and Governance blocks
• bad governance may lead to poor market conduct
• both may affect the risk profile and indirectly
  the capital strength.

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Consumer protection in IAIS work

• Agenda
• Introduction
• IAIS Framework for Insurance Supervision
• The Insurance Core Principles
• Other IAIS Work on Market Conduct
• Potential Focus on Consumer Protection

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3. The Insurance Core Principles

• What are ICPs?
• The Insurance Core Principles provide a
  globally-accepted essential benchmark for the
  regulation and supervision of the insurance
  sector.
• IAIS other principles, standards and guidance
  papers expand on various aspects.
• They provide the basis for evaluating insurance
  legislation, and supervisory systems and
  procedures.

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3. The Insurance Core Principles related to
Markets and Consumers
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3. The Insurance Core Principles

• ICP 25 Consumer Protection
• The supervisory authority sets minimum
  requirements for insurers and intermediaries in
• dealing with consumers in its jurisdiction
• Including foreign insurers selling products on a
• cross-border basis
• The requirements include provision of timely,
  complete and relevant information to consumers
  both before a contract is entered into through to
  the point at which all obligations under a
  contract have been satisfied

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3. The Insurance Core Principles

• Essential criteria for ICP 25
• a. The supervisory authority requires insurers
  and intermediaries to act with due skill, care
  and diligence in their dealing with consumers.
• b. The supervisory authority requires insurers
  and intermediaries to have policies on how to
  treat consumers fairly and to have systems and
  provide training to ensure compliance with those
  policies by their employees and other sales
  collaborators.
• c. The supervisory authority requires insurers
  and intermediaries to seek the information from
  their consumers that is appropriate in order to
  assess their insurance needs, before giving
  advice or concluding a contract.

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3. The Insurance Core Principles

• Essential criteria for ICP 25
• d. The supervisory authority sets requirements
  for insurers and intermediaries with regard to
  the content and timing of provision of
  information
• - on the product, including the associated
  risks, benefits, obligations, and charges
• - on other matters related to the sale,
  including possible conflict of interest to
  existing or potential policyholders.
• e. The supervisory authority requires insurers
  and intermediaries to deal with claims and
  complaints effectively and fairly through a
  simple, easily accessible and equitable process.

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3. The Insurance Core Principles

• Advanced criteria for ICP 25
• f. The supervisory authority requires insurers
  and intermediaries to set rules on the handling
  of customer information paying due regard to the
  protection of private information of customers.
• g. The supervisory authority gives information to
  the public about whether and how local
  legislation applies to the cross-border offering
  of insurance, such as e-commerce. The supervisor
  issues warning notices to consumers when
  necessary in order to avoid transactions with
  unsupervised entities.
• h. The supervisory authority promotes the
  consumers understanding of the insurance
  contracts.

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3. The Insurance Core Principles

• Other related ICPs
• ICP 24 on Intermediaries
• ICP 26 on Information, disclosure
  transparency towards the market
• ICP 27 on Fraud

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Consumer protection in IAIS work

• Agenda
• Introduction
• IAIS Framework for Insurance Supervision
• The Insurance Core Principles
• Other IAIS Work on Market Conduct
• Potential Focus on Consumer Protection

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4.Other IAIS Work on Market Conduct

• IAIS Principles 3 Principles for the conduct of
  insurance business (December 1999)
• Apply to insurers and intermediaries in the
  retail market
• Principles covering
• Integrity
• Skill, care and diligence
• Disclosure of information to customers
• Information about customers
• Conflicts of interest
• Complaints

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4.Other IAIS Work on Market Conduct

• Standard on Disclosures concerning technical
  performance and risks for non-life insurers and
  reinsurers (October 2004)
• Standard on Disclosures concerning investment
  risks and performance for insurers and reinsurers
  (October 2005)
• Standard on Disclosures concerning technical
  risks and performance for life insurers (October
  2006)
• Guidance Paper on public disclosure by insurers
  (January 2002)
• Guidance Paper on preventing, detecting and
  remedying fraud in insurance (October 2006)
• Guidance Paper on combating the misuse of
  insurers for illicit purposes (October 2005)
• Guidance Paper on anti-money laundering and
  combating the financing of terrorism (October
  2004)

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Consumer protection in IAIS work

• Agenda
• Introduction
• IAIS Framework for Insurance Supervision
• The Insurance Core Principles
• Other IAIS Work on Market Conduct
• Potential Future Work on Consumer Protection

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5. Potential Future Work on Consumer Protection

• Potential future IAIS work on consumer protection
• market discipline (i.e. transparency and
  disclosure) already covered in existing standards
• Identify the main elements of consumer
  protection, especially those relevant to the
  supervision of the insurance market such as
• Information and advice to customers
• Claims handling
• Complaints handling

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5. Potential Future Work on Consumer Protection

• Survey different supervisory and industry
  practices in jurisdictions
• Analyse specific issues relevant to developing
  and developed markets
• Focus on cross-border aspects
• Taking into account work done by other
  international bodies such as the Joint Forum,
  IOSCO, BCBS, OECD, EU
• Bearing in mind that not all supervisors cover
  consumer protection
• Given other work priorities, work is likely to
  commence in 2008

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International Association of Insurance
Supervisors (IAIS)

• All the papers mentioned in this presentation are
  available in the Principles, Standards
  Guidance section of our website

Catherine.lezon_at_bis.org
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14th IAIS Annual Conference

• 16 19 October 2007
• Ft. Lauderdale, Florida USA
• Harbor Beach Marriott Hotel
• A Global Climate for Change
• The Future of Insurance Regulation

• Global Regulatory Convergence
• Cross-Sectoral Risk Transfer
• Securitisation
• Emerging Economies
• Reinsurance

• Promoting Sound Insurance Markets
• Principles-Based Supervision
• International Accounting Standards
• Ageing Society /Microinsurance

Hosted by NAICNational Association of
Insurance CommissionersTo register or for more
information www.iais2007.org
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