Seeking to regulate the growing microinsurance markets is a growing trend in the developing world. After the initial pilot schemes, run by NGO’s and governmental organisations have ended countries are finding they are often left with a system which has not got proper regulation in place.
Without regulation microinsurance could become hard to police and ensure that the policyholders are actually benefiting from the schemes. Normally regulation would be in place before any new financial market is launched, but in the case of microinsurance it seems to have been forgotten in some areas. Microinsurance is an example of a market which has grown too quickly in some cases and in the, sometimes difficult to access, north of Pakistan that has proved costly to implement and keep running.
Pakistan are the latest to seek to add a layer of regulatory safety to microinsurance. There are around 4 million microinsurance policyholders in the north of Pakistan. The schemes are experiencing high incidences of claims against policies and coupled with high administrative costs of selling policies they now seek to regulate the market to lay down some ground rules which should help it flourish.
Making microinsurance viable in the long term is the aim of this regulation, as well as ensuring the products are actually helping the people they are designed to. The key to this is community involvement and Pakistan should look to India where local people are set up to sell policies in their community which reduces costs.
The regulatory push will result in more pilot projects as new methods are tested. More details in the Tribune here.