Insurance Market Conduct Guidelines Explained

Amended Cayman Islands Monetary Authority (CIMA) guidelines are now in effect, addressing how domestic insurance companies and their agents should conduct business with customers.

The Statement of Guidance (SOG) on Market Conduct – Class A Insurers and Agents, approved by the Cabinet last week, aims to enhance the conduct of insurers and their agents. It requires them to act with integrity, care, skill and diligence in their business activities; to pay due regard to the information needs of their customers, and to have a published complaints procedure.

The SOG builds on the original one issued by CIMA in 2003. That SOG was in line with global standards set out in the International Association of Insurance Supervisors (“IAIS”) Core Principles and Methodology. The amended SOG goes further, to incorporate revisions made to the IAIS Principles and some of the recommendations that came out of the Review of the Domestic Insurance Industry Post Ivan. That review was conducted by the Authority on behalf of the CI Government. The report drew attention to the need for insurers and their intermediaries to ensure clients fully understood the benefits, risks and obligations associated with the insurance products bought.

CIMA’s Managing Director, Mrs. Cindy Scotland, said the development of the SOG demonstrates the Authority’s commitment to protect the consumer as far as it is in its power to do so: “We took the post-Ivan experiences and concerns of consumers and insurers very seriously.  We were pleased to see the local insurance industry taking the initiative to begin implementing some of the post-Ivan report recommendations. However, by documenting these basic standards of business conduct we aim to make insurers’ obligations transparent, thereby strengthening consumer protection and, by extension, enhancing market confidence.”

The amended SOG, which has been in development since 2005, has been refined to better prescribe standards for insurers and agents. Standards for brokers are now prescribed in the Code of Practice for Brokers adopted by the recently formed Cayman Islands Insurance Association (CIIA). CIMA assisted the CIIA to develop the code, which, like the SOG, aims to ultimately ensure that consumers are correctly informed when making decisions about their insurance coverage. As detailed in the code, brokers are to represent the insured at all times, not the insurer.

The following is a summary of the Statement of Guidance (SOG) on Market Conduct – Class A Insurers and Agents:

Introduction

  1. The SOG applies to domestic insurance business. It does not apply to reinsurers conducting domestic reinsurance.
  2. Insurers and their agents should put in place internal policies and procedures to implement the guidelines and should ensure that everyone who deals directly with clients is trained and competent in all aspects and effects of the products sold.

Integrity

  1. Insurers and agents should always act honestly and in a straightforward manner towards their policyholders. They should avoid misleading and deceptive acts or representations and should not try to avoid any duty or liability they legally, or through accepted practice, have to a customer.

Care, Skill and Diligence

  1. Insurers and agents have a duty to act competently and diligently in all transactions with customers. They should assess each customer’s individual requirements to determine what insurance product is appropriate. They should only act within the limits of their authorisation and personal competence and should act in a timely manner and with all resources necessary to ensure proper consideration of customers’ needs.

Disclosure of Information; Information About Customers

  1. Insurers and agents should pay due regard to the information needs of their customers and treat them fairly. They should provide information about benefits, risks and obligations associated with the insurance product, as well as information about the insurer, the product itself, the claims and complaints procedures, and other contractual arrangements. Information should be comprehensive, timely, accurate, balanced, clear and understandable to reasonably enable the customer to make a balanced and informed decision.
  2. Information should be provided at the time the contract is being entered into.
  3. When creating a quotation, life insurers should state the commission payable to the agent.
  4. Customers should be informed about their duty to disclose material information. Insurers and agents should seek all material information before giving advice or bringing a contract into effect. They should obtain sufficient information about the customer to assess his insurance needs. Confidential information should be treated as such.

Conflicts of Interest

  1. Insurers and agents should seek to minimize the risk of any conflicts of interest. An agent should not act for customers if the agent already holds a position whereby (s)he is able to exert significant influence over the client. Where other conflicts arise, the service provider should ensure fair treatment of its customers

Complaints

  1. Insurers and agents should have in place a simple and equitable system of complaints handling and should deal with customer complaints quickly, efficiently and fairly.
  2. Written notification of the complaints process should be provided to the customer at the inception of the policy. Such notification should include the name and contact details of the person responsible for complaints handling.

The Monetary Authority is advising insurers, agents and members of the public to familiarise themselves with the SOG in its entirety. It is available on the Authority’s website at www.cimoney.com.ky under ‘Regulatory Framework / Rules, Statements of Guidance /Insurance,’ or under ‘Current Developments’