MODEL AND MECHANISM OF REGULATION: PARTICIPANTS, OBJECTIVES, TOOLS AND STRUCTURE OF THE MARKET
The Logic of State Insurance Regulation
The logic of the process and the control mechanism is reflected in Fig. 3.1.
Fig. 3.1. The mechanism for regulating insurance operations
The logic of the process and mechanism for regulating insurance activities involves consideration of four stages.
1. Identification of the main participants in the regulatory process: the regulated insurance industry - insurance organizations, consumer groups - insurers, representatives of the bureaucracy - supervisors, political elites - representatives of the legislature. The role of each group of participants is determined by two factors: the severity and complexity of regulatory issues.
2. Determination of the objectives of regulation of insurance activities. The objectives of regulation of insurance activities include: control of solvency, ensuring equity and accessibility of the product, ensuring market stability, supporting national insurance companies, promoting economic development.
3. The choice of regulatory instruments, which is predetermined by the objectives of regulation of insurance activities.
4. Formation of the structure of the insurance market, adequate to the adopted model and the regulatory mechanism.
Participants in the process of regulating insurance activities
From the political point of view, the regulation of insurance activities is analogous to other forms of regulation, which is a process in which participants in their own interests seek to use the power of the state. The political aspect of regulation of insurance activities, and primarily the role played by individual participants in it, is determined by the characteristics of the regulatory object.
There are two key factors that determine participants in the regulatory process: the degree of severity and complexity of the issues being addressed.
Acute issues are characterized by a large-scale tense conflict (for example, regulation of hazardous emissions, pornography, ecology or carrying weapons). Regulation of complex issues requires special knowledge and skills (for example, regulation of insurance, banking, licensing of medicines).
The severity and complexity of the regulated issue determine the participants who will have the greatest impact on the regulatory process.The political elite will play a leading role in resolving critical issues. The severity of the conflict raises the reward for actions, providing political support from the masses, and the lack of complexity does not preclude the possibility of making a competent decision. >
Consumer groups also tend to show increased activity in regulating issues with high severity and low complexity. Acuity is a prerequisite for mobilizing organizational efforts, and complexity, like in the case of elites, does not prevent the general understanding of the problem and the desire to participate in the political process.
Representatives of the bureaucracy are the main acting and most influential persons in solving complex issues, the effective regulation of which requires specialized knowledge of qualified professionals. If the complex question is also acute, then its decision falls into the hands of the bureaucratic top. In the absence of sharpness, significant power passes to the lower levels of the bureaucracy.
Regulated industry will inevitably participate in the regulatory process, regardless of the degree of its severity and complexity. Since the interests of industry tend to conflict with the interests of consumer groups, bureaucrats and political elites, the regulated industry is usually not in a position to control the political process in resolving sensitive issues to which representatives of all other groups will show increased interest and desire to influence decisions . Groups of manufacturers have advantages in the case of regulation of issues with low acuity and high complexity. It is in such circumstances that the regulated industry and bureaucracy are the only ones able to participate effectively in the political process. Political elites, consumer groups, representatives of bureaucracy, regulated industry are participants in the process of regulation.
Within the framework of this concept, the regulation of insurance activity as a whole can be characterized as a complex, not an acute process.
The complexity of insurance regulation is primarily related to its specificity, which involves the use of a number of disciplines: management, jurisprudence, mathematics and statistics. Decision-making in the field of regulation of insurance activities without the availability of training in most cases is almost impossible.
Regulation of insurance activities usually does not concern acute issues, although insurance directly affects a significant part of the population, being a significant item of its expenditure. Political decisions in the field of insurance (mainly for compulsory types of insurance) sometimes attract attention, but only for a short time. Few consumers and representatives of political elites are interested in establishing minimum or maximum tariffs or the size of insurers' solvency margin. With this episodic public attention, the regulatory system usually avoids serious pressure and a large-scale conflict, which reduces the severity of the state's intervention in the insurance industry.
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