1 THE COMPLEXITY OF INSURANCE PRODUCTS AND THE DEVELOPEMENT OF FINANCIAL EDUCATION BY THE INSURANCE REGULATOR FINANCIAL EDUCATION BY THE INSURANCE REGULATOR Sofia, 29 June 2010

2  International references: ‘OECD Recommendation on Good Practices Enhanced Risk Awareness and for Education on Insurance issues’  ISVAP relevant past experience: the ‘Practical Guide to Insurance’  ISVAP upcoming initiatives: - dedicated website project - cooperation with other Italian Public Authorities  Further steps ahead INDEX

3 OECD Recommendation on Good Practices for Enhanced Risk Awareness and Education on Insurance Issues  Subjects involved: Governments and private and public institutions  Education process: - as part of a wider effort - through distinct programmes

4 Government action:  should include promoting a ‘culture’ of responsibility of personal protection at all levels of education  could involve the development of specific websites or a sub-site of the supervisory authority dedicated to consumer information OECD suggestions on Governments action

5 Government action:  Should also consider the development, at national level, of appropriate specialized structures - possibly within the framework of existing authorities – which would be in charge of promoting and coordinating risk awareness and education on insurance issues OECD suggestions on Government action

6 EDUCATION ON INSURANCE ISSUES CORE OBJECTIVES  Heighten awareness and responsibility vis-à-vis potential risks to which individuals are exposed and the means by which insurance can best cover those risks  Enable citizens: - to develop the knowledge, understanding and confidence needed to adequately appraise and understand the policies they require - to know where to look for additional information, objective advice and help - to take informed decisions

7 EDUCATION ON INSURANCE WITHIN THE INSURANCE REGULATORY AND SUPERVISORY FRAMEWORK EDUCATION ON INSURANCE ISSUES:  Does not substitute prudential regulation and policyholder protection  Helps prudential supervision as it is more difficult to mislead citizens educated on this matter

8 INSURANCE PRODUCTS COMPLEXITY Insurance business is characterized by:  Policy complexity and heterogeneity often referred to as ‘information asymmetry’ between non-expert customers and insurers  Increasing diversity of insurance products and types of policies and the variety of insurance providers  Emergence of insurance products which involve a greater risk transfer to the insured  Need for systematic financial education in conjunction with an appropriate consumer protection framework

9  ISVAP first major consumer information programme  First published in 2004 and afterwards regularly updated  Still available on line on the institutional website  Conceived as a support tool for policyholders  Depicts guarantees and rules of the most common Insurance policies ISVAP PRACTICAL GUIDE TO INSURANCE

10  Deals particularly with: - ISVAP’s role and activity - Compulsory Motor Insurance - Life Assurance - Health Insurance - Complaints handling ISVAP PRACTICAL GUIDE TO INSURANCE

11  Available both in a printable format and in an interactive format  ‘Interactive format’ includes an organized set of questions, answers and suggestions on how to behave in some of the most common situations consumers may face  Uses clear and plain language  Contains useful Glossary ISVAP PRACTICAL GUIDE TO INSURANCE

12  Isvap ‘dedicated website’ project on Insurance education  Future commitment to cooperation development among public national authorities ISVAP UPCOMING INITIATIVES

13  Project main characteristics  Website contents  User- friendly facilities  Further project development  Future efforts ISVAP PROJECT ON INSURANCE EDUCATION

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15  Financial education addressed and treated above all as a ‘communication’ matter  Appropriate communication tools needed to: I.Gain individuals attention II.Make individuals imagine themselves in real-life situations, using a practical approach, giving real-life situations as examples  Use of innovative e-learning methods PROJECT MAIN CHARACTERISTIC

16  Interactive Guides available, dealing with : I.Insurance basic concepts II.Non-life and life policies III.‘What to do’ in case of claims IV.Complaints handling V.ISVAP’s role and activity WEBSITE CONTENTS

17  Insurance guides presented not only with a ‘traditional’ layout  Educational ‘pills’ available to allow for interactive use ( by clicking on an image, an interactive sequence of information and images is activated. These images are accompanied by narration. It is possible to go both forwards and backwards )  Real life situations depicted USER - FRIENDLY FACILITIES

18  To date, ISVAP’s major concern has been financial education effectiveness  Future efforts needed for financial education effectiveness evaluation in order to ‘fine-tune’ initiatives already underway and/or suggest new ones and set realistic expectation for the possible impact of new programmes  Importance of ‘experience sharing’ underlined by Rome ‘OECD – Bank of Italy’ Conference FUTURE EFFORTS NEEDED

19  On the occasion of the Rome ‘OECD – Bank of Italy’ Conference Italian financial regulators announced they had just signed an agreement on financial education issues  The first Italian regulators initiative in line with the agreement on financial education issues will be represented by future implementation of a common website INSURANCE REGULATOR COMMITMENT TOWARDS COOPERATION DEVELOPMENT AMONG PUBLIC AUTHORITIES

20  Parliamentary Bill on financial education  Need for coherent and coordinated national initiatives and strategies  Need for ensuring financial education development in a sustainable, consistent and efficient way FURTHER STEPS AHEAD