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Insurance Consumer Protection| All You need to Know.

Insurance Consumer Protection| All You need to Know.

By May 10, 2022 General Insurance Business 0 Comments

       What is Insurance Consumer Protection?

Insurance consumer protection is a concept in the insurance business that states in detail, the social responsibility of producers to their prospective customers or consumers. It is an action aimed at preventing producers from destructive activities, without taking into cognizance their immediate profitability, the welfare of the customers, and wholesome contribution to human development.

However, Insurance markets are important in both the micro-and macroeconomics of

most developed nations. At the micro-economic level, insurance propels risk-taking by
both individuals and firms. Providing indemnification for losses increases the marginal
productivity of capital by removing the need for holding large contingency funds, and in

this way leads to a more efficient allocation of resources (Curak et. al, 2000).

These perves ways for risk-averse individuals in making huge purchases such as real estate and

promote innovation by firms in risk-producing activities (Ward and Zurbruegg, 2000).
At the macro-economic level, insurance premiums amount to nearly 10 percent of gross
domestic product (GDP) in the average OECD country in 2007 (OECD, 2008).
Insurance as a percentage of GDP is typically less in developing countries, but many of
these markets are growing at a rapid pace. Insurance market development has been
shown to be related to overall economic development and is a driver of economic

growth (Outreville, 1990; Ward and Zurbruegg, 2000; Curak et. al, 2009).

 

It is agreed upon that unconstrained competition is generally thought to be the best way to
facilitate market development, in insurance as in other financial services it has long
been stated that uninhibited competition may in fact hinder the market. The
The intangible nature of financial products leads to markets that rely heavily on trust and

consumer confidence.

Because of complexity and uncertainty, it is not possible to

contractually specify firm behavior in every possible state of the world. This contractual
incompleteness reduces consumer demand for services. Legal and/or regulatory

safeguards are therefore essential to promoting healthy financial markets.

Following the modern regulatory description, consumer protections in
insurance markets play the primary role in protecting consumers from unexpected misfortune,

misrepresentations, or unwarranted risk in insurance transactions or practices.

The very regulatory concerned bodies include the architectural design of insurance business, including contractual language; insurer selling procedure or methods, sales equipment, and advertisements; insurer underwriting and

insurance coverage denials; insurance pricing; and claims payments or reimbursement of premium.

However. Regulator actions may take on several dimensions, including promoting market transparency, restricting

specific behaviors, and facilitating consumer redress to ensure that the free interest and confidence of consumers are fully protected.

How Does Consumer Protection Positively or Negatively Affect my Business?

Consumer protection is a concept that gained general acceptance following industrialization and mass production. the following are the positive and Negative effects of consumer protection.

Positive Effect of consumer protection

a. Consumer protection provides speedy redress to consumers’ complaints through negotiation, mediation, and conciliations.

b. Consumer protection facilitates the adoption of appropriate measures to ensure that products are safe either intended or normally safe use.

c. Consumer protection plays the primary role in safeguarding or protecting producers or consumers’ unwarranted risk in insurance transactions.

d. Regulates and states a reliable procedure for claim settlement

e. Any act of misrepresentation in terms of premium settlement is an offense and must be properly handled by the regulating law guiding the consumers of the insurance business.

The negative effect of consumer protection

 

  • The misleading advertisement may enrapt most time misleading customers
  • Providing misleading information during a sales negotiation by some dubious producers
  • Some consumer protection agencies usually collect bribes, thereby perving way for an unlawful product to graze the market.
  • Nonchalant attitudes of some consumer regulating agencies over their work will always cause severe havoc to the consumers.

Finally

Consumer protection is about treating customers fairly and honestly. Here are the most important things you need to know about your consumer protection responsibilities. Customers are the sustaining force of any business, this is because if customers are treated well, there will be an all-around improvement in your business.

But if consumers are not well treated it will bring a controversial issue that may likely lead to the failure of the business in question.

Consumer information disadvantages in insurance transactions lead to the potential for insurers’ misrepresentation of products or manipulation of product quality. An important implication of persistent information asymmetries is that consumer confidence in the honesty of service providers and the quality of products is essential to the functioning of insurance markets.

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