New micro-insurance policy: Code of consumer protection applies to all insurers: SECP

The Securities and Exchange Commission of Pakistan (SECP) while disclosing key features of the new micro-insurance policy specified that the code of consumer protection shall directly be applicable to all insurers doing business of micro-insurance and insurers shall ensure that micro-insurance agents must fully understand and comply with the code.
According to the Securities and Exchange Commission (Micro-insurance Rules 2014) recently issued by the SECP, the features of the new micro-insurance policy shall be applicable to life and non-life micro-insurance policies. A micro-insurance policy shall cover the insured severally or jointly with the insured's family and/or the insured's assets. The term of the micro-insurance policy shall state the period of cover, to be determined by the insurer depending on the type of coverage.
A micro-insurance policy shall dearly state the sum insured, benefits and terms of insurance coverage The manner and frequency of premium collections shall, if possible, coincide with the cash flow of the insured and may be collected daily, weekly, monthly, quarterly, semi-annually, and annually whichever is applicable. Except in case where a micro-insurance policy is issued to a group, a micro-insurance policy shall become effective immediately if either the micro-insurance policy has been issued by the insurer or seven working days have passed from the date when the first premium has been paid in full by the micro-insurance policyholder, whichever is the earliest.
The rules said that a micro-insurance policy shall clearly state when, where and how can a micro-insurance policyholder make a claim, the documents required to make such claim, the claims process and expected turnaround time for settlement of the claim.
About the dispute resolution, the rules said that a micro-insurance policy shall clearly state when, where and how can a micro-insurance policyholder make complaint. This should state the contact details of both insurer as well as the alternative dispute resolution mechanism along with the insurance ombudsman. The waiting period would be maximum 6 months for death or disability due to natural causes for policyholders not exceeding the age of 65 years. No waiting period shall be allowed for accidental death or accidental disability.
Except health micro-insurance and policies where premium is paid on a frequency other than annual basis, a 30 days grace period is allowed for such micro-insurance policies. If a claim is made during such grace period, the outstanding premium shall be deducted from such claim amount. No deductibles shall be allowed in micro-insurance policies unless insurer can clearly justify otherwise to the Commission, the rules said.
For micro-insurance policies where premium is paid on a frequency of annual basis, the insurer shall send notices to the micro-insurance policyholder at least 45 calendar days prior to expiration of the contract Such notice shall include in clear terms whether the contract may or may not be renewed and any changes to be made thereon if renewed.
The rules said that the micro-insurance policy shall clearly state the amount of premiums to be paid with respect to the policy, where and how to pay such premium and the consequences if premiums are not paid. Under the Code of Consumer Protection, the rules said that the code of consumer protection shall be directly applicable to all insurers transacting the business of micro-insurance. However, the insurers shall also ensure that their micro-insurance agents and their specified persons fully understand and comply with this code.
The insurer shall provide to micro-insurance policyholders with complete, accurate and understandable information regarding the micro-insurance products offered to such policyholders. The wording, language and format of disclosures should be in a form that micro-insurance policyholders with limited financial experience or literacy can comprehend. To adhere to this core value, the insurer shall ensure that any disclosure made to the micro-insurance policyholder is written at least in Urdu language, avoiding any technical and legal terminology, to the maximum extent possible and key facts about the micro-insurance policy are disclosed to the micro-insurance policyholders before or at the time of inception of the micro-insurance policy contract.
The rules further said that the micro-insurance shall be completely devoid of unethical, illegal and unfair practices. The micro-insurance services shall be provided to micro-insurance policyholders in a manner that is legal, ethical, non-discriminatory and free of deception. To adhere to this core value insurers shall agree to incorporate ethical and non-discriminatory values into their operations and act fairly, responsibly and reasonably while conducting micro-insurance business; provide micro-insurance services to policyholders regardless of gender, religion race, sect or language and act as competent and responsible micro-insurance providers and make sure that the micro-insurance is cold based on a sound and thorough assessment of the needs of micro-insurance policyholders, including ability to pay the premium.
The insurer shall ensure that micro-insurance services are provided using the most efficient methods possible to enable access to financial services by low income households at a reasonable cost. The insurer shall also ensure that the claim settlement process shall be simple, efficient and friendly to clients. The insurer shall ensure to keep the personal information of micro-insurance policyholder strictly confidential, implement privacy measures with respect to such information disclosure and not pass it on to external users for any unauthorised purpose, except where required under the applicable laws.
The insurer shall ensure that micro-insurance policyholders have a recourse avenue that is effective and straightforward. To adhere to this core value the insurer shall agree to make itself easily accessible to the micro-insurance policyholder, through telephone in case they have complaints or suggestions; set up internal complaint handling systems which shall take steps to correct any omissions and handle complaints effectively; provide, at the time of the micro-insurance policy inception, the contact details of the insurer and the insurance ombudsman to the micro-insurance policyholder, for the resolution of any potential complaints; inform the micro-insurance policyholder about the free look period, as required in para 2(1)(d), at the time of the micro-insurance policy inception and conduct a biennial client survey in order to gauge the effectiveness of the micro-insurance products and client satisfaction levels, the rules added.