The International Association of Insurance Supervisors (IAIS) has issued an application paper on the regulation and supervision of mutuals, cooperatives and community-based organisations (MCCOs) in increasing access to insurance markets.
The paper represents an important step forward in recognising that different types of insurers need to be regulated in a way which is appropriate to their structure and their relationship with their policyholders.
In the paper, the IAIS said that insurance supervisors are increasingly looking for an appropriate balance between regulation, enhancing access to insurance services and protecting policyholders. The MCCO is one avenue which can potentially enhance access to insurance for un(der)served households and firms, thereby enhancing access to insurance more generally.
The paper does not suggest that supervisors should give preferential treatment to MCCOs. It in fact suggests that when seeking to enhance access to insurance, all avenues should be explored, including using MCCOs.
The purpose of the paper is to provide application guidance on the way the Insurance Core Principles (ICPs) could be applied in a proportionate manner which should contribute to removing unnecessary barriers by disproportionate regulation and supervision, while at the same time ensuring appropriate policyholder protection.
MCCOs’ member-based nature raises a number of issues that may require a dedicated regulatory and supervisory response, says the paper.
Many MCCOs operate as insurers; however, some also provide administrative, educational and distribution services.
Not all MCCOs need to function as underwriters (in a formal or informal way). Some MCCOs can be considered “aggregators”, ie, entities that bring together people for non-insurance purposes (for example retailers, service providers, utility companies, membership based organisations or civil society organisations). These “aggregators” are then utilised by insurers, with or without the intervention of agents or brokers, to distribute insurance and – depending on the model – fulfil additional functions such as administration and/or claims pay-outs.
Remote areas
The IAIS paper also noted that MCCOs’ ability to operate independently as stand-alone entities in remote and rural areas without long distribution lines makes them a potentially important business model for improving access to insurance. MCCOs can also develop beyond rural areas to become mainstream insurers serving all the population, filling a gap for those who are un(der)served both in rural and suburban areas.
MCCOs can overcome geographic, cultural, service and product design challenges which other insurers might not be able or willing to address in order to provide insurance to low income populations.
The paper does not address the special case of insurers formed to provide takaful. The IAIS and the Islamic Financial Services Board (IFSB) collaborate with each other in standards development.
Mr Shaun Tarbuck, Chief Executive of the International Cooperative and Mutual Insurance Federation (ICMIF), commenting on the IAIS paper, said: “This issues paper is a strong recognition that MCCOs are an important business model for improving access to insurance. We support the paper’s discussion on relevant proportionality in all national jurisdictions, and we will be supporting ICMIF members in all countries to ensure this is upheld.”
Ms Sarah Goddard, Secretary General of the Association of Mutual Insurers and Insurance Cooperatives in Europe (AMICE), said: “In this paper, the IAIS recognises that mutual and cooperative insurers are a fundamental element of all insurance markets, irrespective of their size. We particularly welcome that the global supervisory community identifies that proportionality is the key for proper insurance supervision and regulation in all countries.” M