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    QUESTIONNAIRE ON FINANCIAL EDUCATION AND INSURANCE

    PART I:

    1) Some countries faced recently events which demonstrated the need for improving financial education.

    These events included financial scandals that affected pension beneficiaries, insurance policyholders or

    other individual investors/savers who invested in financial instruments definitely more risky than they had

    thought, raising both a problem of financial education and financial information.

    Did investors recently suffer from insufficient financial education or information when investing in specific

    pension or insurance products?

    1. A distinction must be made between the information available and financial education. In the

    past few years, there has been a vast increase in the amount of information available to the

    public from insurance and pension companies and from the Ministry of Finance, Capital

    Markets, Insurance and Savings (in the rest of the questionnaire Commissioner) department.

    This has been accomplished primarily with the increased importance and penetration of the

    internet into the marketplace and periodic bullitens which are sent to the media (mainly

    newspapers) which will be further explained below. With respect to raising the level of

    awareness and the interest of the public a number of actions have been taken by the government

    or event have transpired which have brought to the attention of the public the importance of

    financial planning.

    2. In the past 3 years there have been 2 major developments in the insurance/pension market

    which have gotten extensive media coverage:

    a. The reform of the new pension funds (2003) and life insurance market(2004) -more

    transparency of the insurance components .

    b. Change in the capital market in the main:

    i. The separation of the provident funds and mutual funds from the major banks

    (2005) which controlled the vast majority of these funds. The banking

    industry in Israel is dominated by 2 large banks. The banks were also forced to

    sell their holding of insurance companies to less than 10%.ii. A special government commission which enacted laws increases the

    responsibility of insurance agents and pension/insurance advisors. The

    required the advisors to present the proposed insured the "best" insurance

    coverage.

    3. Problematic question inspite of what is written above, without increase awareness of the

    public such that the public will demand the best insurance/pension coverage for there needs

    and review what they have acquired regulation alone will not help.

    Could the delegates elaborate on these or any other events that raised the issue of financial education?

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    2) The insurance sector has always been characterized by an asymmetry of information between insurers

    and policyholders. Recently, deregulation and increased competition in the sector have resulted in both a

    greater number of and increasingly complex insurance products.

    What is being done in your country to help consumers understand insurance policies (terminology,

    contract provisions, etc.) and the functioning of insurance markets? How easy is it for consumers

    to be able to compare different insurance policies?

    Internet Site of the Commissioner has Buyers Guide for Life insurance and Long Term Care, and there is a

    proposed Buyer Guide for Pension Savings. Each of the guides have explanations of the need for the

    insurance coverages, what types of insurance coverage ia available, the rights of the insured (i.e. ability to

    cancel the policy within 30 days and only having to pay the risk premium, to expect to get a detailed

    explanation of what the policy covers, expected cash values policy cost illustrations, what the exclusion

    are in the policy) and questions that the proposed insured should ask the insurance agent/company .

    By regulation, with the insurance proposal the insured is given a detailed explanation in writing of the

    policy benefits and provisions. (Policy cost illustrations). This would enable a comparison of insurance

    policies.

    The Commissioner enacted regulations which deal with the required disclosure to the proposed insured as

    well as the prior insurance company in the event of the replacement of insurance policies. In this case the

    insured is presented with details of what he has in the old policy and what he will have in the new policy to

    afford some basis of comparison.

    There are monthly reports to the media of the yields of Participating policies, Provident funds and pension

    funds. These reports are also maintained on the commissioner's internet site.

    A list of authorized insurance agents appears in the Insurance departments internet site so that the

    prospective insured can verify the sales person is an authorized insurance agent.

    Bachar - Clear definitions of the responsibilities of insurance agents, broker and investment advisors

    For Motor Bodily Injury coverage (No-fault) there Commissioner's internet site allows the insured to

    compare the rates for the coverage for all the companies in Israel.

    The Commissioner's internet site has an interactive application which allows comparison of the yield

    obtained by provident funds on a monthly or cumulative basis for the last 7 year period. This allows the

    prospective insurer/saver to better manage his savings and if he desires transfer between provident funds.

    Are there financial education programmes targeted to specific types of individual policyholders,

    such as car/home owners, owners of a small business, etc. or to particular types of insurance such

    as life insurance, health insurance, liability, annuities, etc.?

    1. There are not general educational programs. However the commissioner is attempting to

    increase the consumer awareness of the need for "shopping" for the best coverage by periodic

    advertisement of the need to use the comparative data available on Commissioner's internet

    site. The commissioner tracks the amount of usage of the site in an attempt to study its

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    effectiveness. We are witness to an increased in the use of the site especially when combined

    with advertising the site on the media (mainly radio).

    2. In the near future, the Commissioner internet site will include a calculator which will comparethe prices for risk insurance for all the companies.

    Has the government in your country undertaken programmes to address these issues or is this the

    concern of the private sector? If the private sector is involved, what are the extent and respective

    roles of insurance companies, mutual funds, brokers, or other insurance intermediaries, as well as

    corporations in the case of group contracts? How involved are other private sector groups such as

    community organizations and industry associations?

    1. Most of the programmes to increase awareness, have been initiated by the government

    however the private sector has placed extensive information on its internet sites. In the

    past the data was not uniform in its level of detail and not all of the regulated bodies hadan internet site. . To increase the level of information and transparency the Commissioner

    has required the companies to place extensive amount of information on their internet

    sites for example:

    a. Policies which are being used for individual and group insurance

    b. Annual statement for a 5 year period

    c. Dislcosure of rates of return for participating policies

    2. The consumer organization and the industry associations have no programmes.

    3. Question for Yadin and Sharon Health Funds

    Could you give examples of public and/or private financial education programmes? Please give as

    much detail as possible.

    1. The Commissioner of Banks, by regulation limited the amount of credit afforded to the

    public to the authorized credit limit for each individual. As a result of this regulation, some

    of the banks opened up courses in budgeting in order educate the public on how to stay

    with in a credit limit.

    3) New opportunities are opening to insurance providers as governments begin to scale back the state-

    provided benefits and as new insurable risks (asbestos, mold, terrorism, natural catastrophes) are

    developed. In your country, what are the main challenges for financial education in the insurance sector

    with respect to these new insurable risks?

    What is being done in your country to help consumers to understand and identify risk? What

    actions have been undertaken to assist policyholders in their appraisal of their needs for insurance

    and in their choice of a contract and of an insurance provider?

    What is being done to increase awareness of the need for insurance in specific areas such as

    terrorism, catastrophic risk, and other risks where insurance demand may not be sufficient?

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    1. The Cat risk in Israel is for a earthquake exposure.

    a) The coverage is readily available from insurance companies. The coverage is required by

    creditors in the event of mortgages. Therefore vast majority of the homes which havemortgages have earthquake coverage.

    b) Periodically minor earthquakes occur in the country and major earthquakes periodically

    occur in countries in the immediate region (Greece, Turkey, ....) . In both cases

    extensive coverage is given to the events and the need for better regulation including

    insurance coverage

    c) The government appointed a committee to advise/plan the government & the public how

    to better cope with natural disasters. Among the other issues discussed was the importance

    of appropriate insurance. The committee is scheduled to submit its recommendations to

    the government.

    2. Terrorism and the damage it may cause occur on a weekly basis and are covered in Israel on

    an almost daily basis in the media. The government covers individuals and business to certain

    limits. Coverage beyond these limits is available from insurance companies. Insurance

    companies were actively involved in promoting the coverage to individuals during the Gulf

    War in the 90's.

    Could you give examples of public and/or private financial education programmes? Please give as

    much detail as possible.

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    4) Along with financial education, there must also be an increase in financial information available to

    policyholders. Several countries have noted that an important aspect of financial education is the

    availability of accurate and complete information on financial products. What are the main issues related

    to insurance information and the role of insurance companies and other financial institutions.

    What is your country doing to increase the insurance information available to consumers? What are

    the roles of the government and of the private sector in providing information about insurance

    products? Information on the internet, Buyers guides, Investment results of the companies for

    1. See the answers for 1 and 2

    2. Information required to be presented by the insurance company on their internet site including

    Periodic financial statement, examples of the various policy forms being used by the company

    3. Monthly informational bulletins are prepared for insurance, pension and provident funds. Thebulletins detail the investments, yields, the risk, funds transferred between the institutions. The

    purpose of these bulletins it to increase the public's ability to choose the investment body

    which suit the investor with respect to yield and risk and increase the investor's awareness of

    the ability to transfer funds between these investment bodies

    Are there requirements for increased reporting by insurance companies, pension funds, banks, etc?

    With respect to the insurance contract, what are the disclosure requirements for insurers and

    intermediaries during the duration of an insurance contract? With respect to information about

    insurance companies, do policyholders have access to information concerning the financial

    situation of insurers? What actions should be developed in this respect?

    1. Life insurance, Pension Funds and Provident funds - by regulation the companies are

    required to report to the insured a detailed report of the policies and coverage the insured has

    cash values, contributions made during the report period, yield and management fee

    information during the reporting period, a breakdown of the investments by investment type

    (bonds, stock, loans, deposits etc) There is currently a proposed Commissioners bulletin

    which will require the companies to report in detail the investments for each of the

    investment tracks.

    2. Financial information on the insurer companies are required to maintain their financial

    statements on their internet site for a period of 5 years. In addition the Commissioner has

    comparative financial data on a quarterly basis for the companies on the Commissioner's

    internet site. There is also comparative data whichis presented as part of the Commissioner's

    Annual report (also available on the internet)

    What is being done to ensure that consumers understand the information providied to them about

    their insurance policy? Are there programmes aimed at improving the ability of policyholders to

    understand the financial information available on insurance companies?

    1. The Commissioner's internet site has buyers guide and explanatory information

    (frequently asked question and glossaries ) on the different insurance products. Also the

    insurance companies have information on insurance products.

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    2. Periodically the information and the format provided the insureds in the annual reports

    is updated so that the insured can better understand the information provided.

    Please give us some examples of these programmes that provide consumers with information onfinancial products, providing as much detail as possible.

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    5) A number of countries have indicated that they conduct periodic surveys of the financial literacy of

    their consumers. We are interested in learning more about these surveys and their relationship with

    financial education programmes. What are the main criteria used in your country to assess financial

    insurance literacy? What have been the major results of such assessment?

    There have been no periodic surveys of financial literacy

    Muhammad verified this with the Bank of Israel and does not know of any survey conducted by

    the Ministry of Finance

    Are there any surveys of the financial insurance literacy of consumers in your country? How

    often are they conducted?

    How do the results of these surveys affect government and private programs with respect to

    financial education with respect to insurance? For example, was a survey of financial literacy

    conducted to determine which insurance issues were most important to or needed by

    consumers? What do such surveys indicate about the awareness of consumers with respect to

    insurance issues?

    Could you describe the characteristics of these surveys (how and when conducted, number of

    individuals surveyed, questions asked, etc.) and provide us with copies of the results?

    If surveys on financial insurance literacy are not available, are the decisions about which

    types of financial education programmes to offer based on studies or reports on financial

    issues, advice of experts, policymakers observations, or other means?

    6) Evaluations of financial education programmes are important in order to determine whether

    programme objectives have been achieved. What actions have been undertaken in this field? What are

    the main criteria to assess financial education programmes with respect to insurance issues?

    Have there been any attempts to measure the implementation and effectiveness of the

    insurance-related financial education programmes referred to above or to identify best practices

    in the provision of financial education?

    1. With respect to the Commissioner's MBI comparative price calculator and Yields for

    Provident funds, the number of times the site was viewed has been tracked for several years. We are

    witness to increased usage of the site by the public. This is especially evident after the "site" has been

    advertised on the radio.

    Are there any criteria or standards that have been developed to evaluate financial education

    programmes related to insurance issues? Have there been attempts to define and measure the

    outcomes of these financial education programs?

    1. We are witness to a large transfer of funds from provident funds maintained by the banks

    to Private provident funds, we attribute this to 2 reasons - bulletins to the public in which gave

    expression to the higher yield generated by the private provident funds and the vast increase in the

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    amount of funds transferred to the private provident funds so the investor will understand that there is

    no problem in leaving the provident funds managed by the banks. The second reason is the marketing

    by carried on by the private provident funds

    Could you provide us with copies of these studies, criteria or outcomes?

    o Data for the increase in the private provident funds, transfers between funds

    o Data on hits on the site

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    7) Finally, we would like to ask you for your thoughts about the future direction of financial education and

    any suggestions you have for other policymakers wanting to implement financial education programmes.

    What recommendations do you have for future projects in the area of financial education? For

    example, what additional functions can financial education programmes play in helping consumers

    understand and deal with changes in private pension arrangements, the increased competition and

    the increased number and complexity of products in the insurance market, and the increased

    volatility in financial markets?

    To advance the level of awareness

    )1 financial education programs should be started on an elementary school level.

    )2 Period education seminars in community centers

    )3 Increased advertising in the media- newspapers, radio and television- of the importance of

    long term saving/insurance

    )4 Making data available in plain language to the public for example buyers guide, periodic

    bulletins to the media

    )5 Internet interactive applications which allow comparison of data for various financial entities

    or products

    .2 The above should be supported by surveys to understand where there are deficiencies in the level

    of awareness and surveys which will measure the effectiveness of the previously suggested

    processes

    For other countries wanting to implement financial education programmes similar to yours, do you

    have suggestions as to approaches they should take or pitfalls they should avoid? What things

    would you do differently if you could do them over? What things worked well that you would do

    again?

    In spite of the fact we have not carried out any surveys, with a doubt the use of the internet for the

    dissemination of information and applications which allow for comparison between different products

    or companies, which are further supported by periodic bulletins to the media are effective for raising

    public awareness. It is difficult to measure the level of effectiveness without surveys/

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    PART II:

    Additional policy issues

    What type of financial education is most needed by consumers with respect to insurance

    increasing awareness of insurance needs, providing basic understanding of insurance principles,

    or providing information on specific types of insurance?

    Increasing awareness of insurance needs of the public is two areas (1) long term saving in life

    insurance and pension and (2) Long Term Care

    What are the specific obstacles to the provision of financial education in the insurance industry?

    The product is complicated and abstract so that the public can not easily understand it.

    What are the most effective ways of making consumers aware of insurance issues and informing

    them about specific types of insurance? Typically, are consumers provided with ex-ante

    simulations or projections of coverage and cost where appropriate? Is this compulsory in certain

    lines of business?

    Buyers guides which describe the various insurance options.

    This is appropriate by those lines of insurance which are long term and more abstract such as life

    insurance, long term care and disability insurance.

    As mentioned above with the issuance of policies, policy cost illustrations are given to the insureds

    Can compulsory insurance be considered an efficient alternative to increase awareness of

    insurance needs? If compulsory insurance is introduced, is an increased role for government in

    informing consumers about these particular policies still needed?

    Even with effective awareness there will always be parts of the population which will not be

    covered due to financial considerations. . In Israel MBI and Health insurance are compulsory,

    currently there are discussions of have compulsory pensions.

    If compulsory insurance is introduced the government will have an increased role in informing the

    consumer as well as following up the compliance with the compulsory requirements.

    The insurance sector has always been characterized by an asymmetry of information between

    insurers and policyholders. What is being done to help consumers understand insurance policies

    (terminology, contract provisions, exclusion etc.) and the functioning of insurance markets? How

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    easy is it for consumers to be able to compare different insurance policies? What are the legal or

    regulatory protections for insurance policyholders, for instance, in the case of mis-selling?

    The first 2 questions were answered above.

    With respect to mis-selling if found that the company/broker mislead the insured then the company

    can be fined in extreme situations there can be criminal prosecution of the perpetrators of the mis-

    selling

    What should be the relative roles of financial education and regulation in protecting the insurance

    consumer? Should financial education and regulation be viewed as complements or substitutes?

    Is it the case that a more financially literate population would reduce the need for and reliance on

    regulation?

    Financial education and regulation are complementary. In most cases increased "regulation" requires

    the companies to provide the insured with additional information if it is the information that is

    supplied with the initial application, the annual report to the insured or financial data on the internet

    such as the yield, investments policy and detailed listing of investments Information which would

    not have been readily available to the insured without regulation.

    What distinguishes financial information from financial advice on particular products? What is

    the best way for financial institutions to provide financial information on insurance without

    providing financial advice on particular products? Or should financial information best be left to

    the government or independent bodies to provide?

    Comparative financial data for an industry can only be accumulated in an effective manner if there is

    a regulatory requirement for that data. In theory the regulator can require and insure that the data is

    submitted in a uniform manner on a timely basis. The data needs to be presented in its entirety with

    possible giving the prospective insured the option of sorting or filtering the data for analysis. With

    respect to advice as to which investments are preferred for the insured that would have to left to

    financial advisors which tailor the coverage/investment to the needs, abilities and desires of the

    prospective investor/insured.

    Suggestions for good practices

    In the light of presentations and discussion held at the 75th session of the IPPC, Delegates, who

    have not already done so, are particularly invited to provide guidance for the drafting of good practices

    with respect to financial education and insurance and to list the top 10 priorities that these good

    practices should cover.