FSC pushes insurance policy for low-income earners
LOW-INCOME earners are set to be major beneficiaries of legislation proposed by the Financial Services Commission (FSC) for a micro insurance policy by 2015.
The policy is aimed at providing coverage for people like housekeepers and small farmers at a rate lower than what the market currently offers.
Under the framework, insurance companies will also be able to provide parametric insurance — the coverage of agricultural crops upon the occurrence of a hurricane or other natural disasters.
"We have been looking at the framework for micro insurance because our current legislation does not allow for micro insurance to be sold in Jamaica," senior director of insurance at FSC Rosemarie Henry told the Jamaica Observer. "We are expecting farmers to benefit from this initiative because agriculture is an area that badly needs insurance coverage."
Micro insurance, which forms part of a National Inclusion Financial Strategy, is geared towards getting low-income earners into the formal financial sector.
"These persons are usually not included as part of the formal financial sector and do not get access to loans, insurance and other risk coverage," Henry explained. "So when you're able to access insurance, it takes you into the formal financial sector."
Under the policy, the FSC also seeks to get banks and other financial institutions to provide products and services for low-income earners.
"There are costs attached to opening a savings account and accessing loans," Henry told Sunday Finance. "Some of these rates are above what low-income earners can afford as well as the requirements do not allow them to access the loans either."
The FSC is now in the process of amending the Insurance Act to include micro insurance as well as consulting with partners in the industry and the public about the initiative.
"We are implementing a financial literacy programme which will educate the public on what financial risks are and what insurance can do for them," she said.
According to Henry, the main difference between the traditional insurance market and the micro insurance market lies in the distribution channels.
Currently, insurance is only distributed through registered brokers and sales agents. However, with the inclusion of the micro insurance legislation, people will be able to access insurance through credit unions, post offices, micro-financing companies, among others.
"Persons will be able to sign up at any of the listed institutions and pay their premium right there," Henry said.
The commission also is expecting insurance companies to design policies that are simple enough for policyholders to immediately understand what is being presented to them as insurance coverage.
She added that if an accident should happen, policyholders should be able to make a claim at any of the institutions, depending on the arrangements with insurance companies.
"We are anticipating that process for the claim and the requirements for the policyholder to access the claim to be simple and paid out within a short period of time," Henry said.