Now that microinsurance is becoming a more accepted form of insurance in developing nations around the world it’s good to see people acknowledging that it requires a different set of regulation to normal insurance products. By its very nature microinsurance is aimed at poorer residents of developing nations and as such regulation needs to be in place to protect them from miss-selling, misleading policies and fraud.
One of the biggest risks to the policyholder with microinsurance is the possibility that they did not understand what they were buying. To protect policyholders, the government of the Philippines are trying to put regulation in place that hopes to make it less likely that a policy purchaser can put themselves in financial difficulty just by buying a microinsurance policy.
To achieve this they want to put a law in place which would restrict all microinsurance providers to only sell policies for which the premiums cost less than 5% of the daily minimum wage. This is a sensible move which will bring all microinsurance schemes into line and means they cannot sell a policy at a price which could financially harm local people. The other rule they are seeking to enforce is that the maximum coverage level should be no more than 500 times the premium.
The Philippines are hoping to have all microinsurance providers registered with their insurance commission by next year. This will mean all microinsurers are bound by the same legislation, at the moment many are not and concerns exist as to whether policyholders are really getting value and affordable policies (something microinsurance has to strive to achieve).
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