The consumer protection agenda is becoming increasingly important across the global financial services sector. But how will this influence insurers' strategic and operational models – including the products they offer and the way they distribute them?
In February 2011, the G20 asked the OECD to develop guidelines for advancing financial consumer protection through informed choices that include:
- transparency and education
- protection from fraud, abuse and errors
- opportunities for recourse and advocacy.
In response, the OECD – working closely with the Financial Stability Board and other international bodies and standard setters – developed a set of 10 key guiding and consumer protection principles for incorporation into supervisors' broader regulatory framework.
These principles are voluntary and are designed to complement, not substitute for, existing international financial principles or guidelines already in force within member countries.
The G20 endorsed the principles in November 2011 (PDF 130 KB)
The principles: a summary
The principles can broadly be classified into the three pillars of: protection, access and education.
Set on a global level, they don't aim to address sector-specific issues dealt with by the relevant international organizations and the financial standard setters such as the International Association of Insurance Supervisors. The principles may need to be adapted to specific national and sectorial contexts.
Respectively, the principles focus on:
- Legal and regulatory framework.
- Role of oversight bodies.
- Equitable and fair treatment of consumers.
- Disclosure and transparency.
- Financial education and awareness.
- Responsible business conduct of financial services providers and their authorized agents.
- Protection of consumer rights.
- Protection of consumer data and privacy.
- Complaints handling.
Download the report, available to the right, to find our more on each principle’s scope, objective and likely impact on insurers.
Implications for insurers
Supervisors' adoption of these principles can expect to have an important impact on all aspects of insurers operations. With business and operating models likely to be significantly affected, insurers will have to pay close attention to the requirements – not only to ensure compliance but also to spot opportunities to pursue competitive advantage.
Download the report, available to the right, for a detailed analysis of how the requirements are expected to affect insurers and the wider market.
What can insurers do?
Insurers need to make fundamental decisions now about which lines of business and products they want to continue with and how they'll distribute them.
Meanwhile, they should also take the following steps to position themselves as well as possible:
- Know your business
How the requirements affect your business depends on the products you sell, how you distribute them, who your customers are and how your business operates. Understanding these factors and how they interact will allow you to plan and react quickly to the requirements and to the opportunities that flow from them.
- Prioritize change
Identify processes and systems most likely to be impacted – then prioritize related change.
- Market positioning
Consider your role. In the future, will it make more sense to distribute more of your products yourself? What additional services will clients require? And how will this affect your pricing?
- Join up the dots
Plan ahead across the regulatory spectrum. Take an all-encompassing strategic approach to applying regulation. Avoid overlapping efforts and wasted resources by responding to the requirements with a one-off change project.