REGULATORY OVERLAP MAY ADD TO UNCERTAINTY
There may be specific requirements for outsourcing functions and licensing requirements for those operating in designated regulatory roles. A thorough understanding of regulatory and licensing categories and delineation of responsibilities will be all-important. Some countries will require that intermediaries who arrange insurance are licensed (so as to ensure they have the requisite knowledge and skills to advise customers), but inclusive insurance products in emerging markets are often highly simplified and distributed by partners – such as MNOs or supermarket chains – who do not usually fall within the regulatory framework of insurance supervisors. Where new technologies are involved, the value chain can be significantly shortened with a merging or blurring of lines between “traditional” roles of introducing, broking, claims administration, marketing and underwriting. Some jurisdictions may require a certain profit commission or brokerage on policies defined as microinsurance. The level of such payment percentages as well as the tax treatment and regulatory burden on participants in the value chain will need to be considered as part of any business plan.
Inclusive insurance products, particularly those with new distribution partners or offered as part of a wider mobile service, can potentially attract attention from a number of regulators: including insurance, banking and telecommunications; information commissioners and data protection officers; consumer protection bodies and ombudsmen; ministries of agriculture and health regulators. Overlapping jurisdictions of regulators and supervisors have the potential to create uncertainty and increase costs. It may not be clear which body regulates specific issues. A proliferation of regulatory bodies to oversee a relationship could lead to regulatory arbitrage and the costs of clearing a new product with several regulatory bodies may be high. It is important that inclusive insurance project partners have a good understanding of where the regulatory obligations will lie, and, if necessary, work in cooperation with various regulators to streamline approvals processes and licensing. Early coordination with regulators through pilot projects and “sandboxes” may assist in streamlining this process. In due course, regulatory architecture may itself need a refresh to take account of these new products and new distribution channels to allow innovation and new approaches to flourish in this rapidly evolving market. -William Hogarth, Partner, Clyde & Co, London
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