After Haiyan: Can Microinsurance help?
The recent typhoon disaster in the Philippines has left millions of people without access to basic food and shelter. In such situations, microinsurance can play a significant role in providing people with means to rebuild their lives.
Microinsurance has boomed in the Philippines over the last decade. With a population of 98 million,1 it has the highest insurance penetration rate in all of Asia and Oceania, with an estimated 19.9 million individuals and properties covered.2 “This success can be attributed both to the Philippines’ adoption of conducive legislation regulating their insurance market, as well as the establishment of a network of effective distribution channels that can be easily accessed by low income people” says Dr. Antonis Malagardis, Programme Director of the GIZ Programme 'Regulatory Framework Promotion of Pro-poor Insurance Markets in Asia' (RFPI Asia).
Yet the challenges faced by clients and insurers in claims repayment, following a catastrophic event, are not to be underestimated. One can imagine the difficulty that clients have to even provide the most basic documentation to insurers whilst they are left without a home, water, food and electricity. Further, damage to infrastructure and communication channels often mean that it is difficult for clients to get information to the insurers, and for insurers to reach their clients. Richard Leftley, CEO at MicroEnsure, a company that has 1.3m clients in the Philippines alone, reports: “We are aware of over 50,000 claims for calamity related damage to property in the Philippines. However, we have no data on lost lives yet, due to poor communications with affected areas.”
At Ahon Sa Hirap (ASHI), a Filipino NGO and Microfinance Institution (MFI), which offers a wide range of financial services to clients, the organisation has taken a proactive approach to supporting their clients with claims submissions. The MFI, which counts 9 branches in the disaster struck Panay area, has sent out their agents, equipped with cameras, to help clients document claim and take picture of their houses. Laarnie A. Aquino, one of the agents, reports that “the wide road is blocked due to the falling trees destroyed by the typhoon, and there are no electricity and telecommunication services in the area until now.” The ASHI team was able to take pictures of a number of their clients’ damaged properties (see photo above) but eventually their camera ran out of battery, and, with no electricity in the area, they continued their documentation work with pen and paper alone. In total they were able to document damage to over 2,700 of their clients’ properties, with 700 properties completely destroyed.
Other insurers, based abroad, are taking a different approach by providing monetary grants to clients affected by the typhoon through local partners on the ground. For example, the Grameen Crédit Agricole Microfinance Foundation has announced that the Group Crédit Agricole SA will dedicate €1m to support rehabilitation work through one of its associations, providing rehabilitation on site.
When it comes down to catastrophic risk, the sector is still at an early stage of development. “The business case for catastrophic risk still has to be proven; current experiences have not demonstrated the existence of a business case for the private risk carriers unless the public sector is involved to support the initiatives” says Clémence Tatin-Jaleran of the MicroInsurance Centre. Beyond the business case, it is clear that for catastrophic risk products to be of true value to clients, the sector need to come up with innovative ways to ensure clients are able to submit and receive their claims swiftly after such an event.
According to the 2012 World Disaster Report, the Philippines ranks as the third most disaster-prone country in the world, with an average of 20 typhoons per year. Since 2009 typhoon-related damages have totalled USD 2.5 billion: the poverty levels among farmers and fishermen remain three times higher compared to the rest of the population. An example of a recently established partnership that aims to offer microinsurance tailored to farmers in the Philippines is that of the International Finance Corporation (IFC), CARD MRI, and the Pioneer Insurance and Surety Corporation. The new partners will work together to design affordable insurance products for farmers against typhoon-related losses in the Philippines, allowing for risk mitigation for farmer clients of CARD, the largest MFI in the country.
The Microinsurance Network and its members believe that microinsurance is an essential component of sustainable development. “The importance of insurance is clearly evident by the typhoon that ravaged the Philippines “ stated Craig Churchill, Chairman of the Microinsurance Network and Head of the ILO’s Microinsurance Innovation Facility, during this year’s 9th International Microinsurance Conference. “While you might argue that for catastrophes such as these, one needs macro insurance, not micro; I contend that they are in fact intimately related” he continued. “We need to dramatically expand access to better insurance services to build safety nets and enhance the resilience of low-income communities. And the development impact of insurance isn’t just seen at the household level, but also within the economy as a whole. By managing and diversifying risks, insurance supports entrepreneurs to make higher risk, and higher return investments, thus stimulating growth and bolstering economic development.”
1 - Projected Population as of May 6, 2013, PH: Commission on Population, May 6, 2013
2 - The Landscape of Microinsurance in Asia and Oceania, Briefing Note 2013, MRF/GIZ.
New Network publication on agriculture microinsurance
The Microinsurance Network has launched a new paper titled "The Emergence and Development of Agriculture Microinsurance".
The discussion paper, published by the Network Agriculture Insurance Working Group, reviews the current state of agricultural insurance markets in the world, and the recent developments which have seen the increase of index-based insurance schemes. A discussion about the actors involved in the provision of these insurance contracts, integrating recent literature covering this topic, underlines what can be learned about the value of these products.
Four case studies - in Brazil, Morocco, Senegal, and China - describe different country examples and compare their approaches to developing agriculture insurance, focusing on the value proposition of each system.
The conclusion highlights the main lessons that can be drawn from the implementation of agricultural insurance in the world, in view of promoting its expansion in less-developed countries.
The paper, published by the Microinsurance Network, was funded by the BMZ in collaboration with GIZ with support from Grameen Crédit Agricole Microfinance Foundation, the Foundation for World Agriculture and Rurality (FARM), and ADA.
Read the paper here (Pdf)
Reflections on the 9th International Microinsurance Conference
The 9th International Microinsurance Conference, took place in Jakarta, Indonesia 12-14 of November 2013 and brought together some 400 participants from nearly 60 countries. As the Conference came to a close we would like to take a moment to assimilate the new insights and lessons that emerged.
“The conference was particularly timely given the joint effort of OJK and the insurance industry to develop microinsurance in Indonesia, as part of our financial inclusion programme” commented Firdaus Djaelani, CEO of Non-Bank Financial institutions (NBFI) Supervision and Member of the Board of Commissioners of OJK.
Latest development in the microinsurance sector in Asia
The preliminary results of the new study “The Landscape of Microinsurance in Asia and Oceania”, commissioned by Munich Re Foundation (MRF) and GIZ with support of the Microinsurance Network, were presented at the Conference. Arman Oza, one of the authors, revealed that the number of insured low-income people in the region has increased by over 30% from 2010 to 2012, with the sector growing by over 40% (factoring in premiums). Today more than 170 million people benefit from microinsurance. In geographical terms, India is leading the market with over 100 million lives and properties covered, whilst Malaysia and Indonesia emerge as having the most vibrant microinsurance markets with a growth rate of 185% and over 100% respectively. On the other hand, the Philippines has the highest insurance penetration followed by Thailand, a country that is starting to acquire more visibility in the microinsurance sector. Click here to view the presentation by Arman Oza on “The Landscape of Microinsurance in Asia and Oceania”, and click here to listen an interview we carried out with the author.
The role of governments in supporting microinsurance
A joint presentation on trends in microinsurance combining findings from studies by the MicroInsurance Centre (MILK studies) and ILO’s Microinsurance Innovation Facility on client value and the business case confirms one of the trends discussed at this conference: Whilst life microinsurance tends to be profitable, the business case for health and agriculture microinsurance is more difficult, and needs the involvement of national or local governments with smart subsidies for scaling up and being able to prove valuable services to those who need them most. Click here to view the full presentation by Craig Churchil and Michael McCord.
Looking at the landscape study results, coverage for the low income markets in Asia and Oceania is dominated by government schemes, covering over 1.6 billion people. Tran Dooc, Insurance Commissioner in the Philippines, stated that “in addition to products like life or health insurance, disaster-related insurance especially needs more support”. He concluded that “there is a great need for government intervention.”
Regulation is key for sustainable sector development
The “1st Consultative Forum on business models, distribution and their regulatory implications” was held on the first day of the Conference and hosted by the Microinsurance Network and the International Association of Insurance Supervisors (IAIS), in collaboration with the a2ii, GIZ and MRF. The aim of the Forum was to facilitate the exchange of experiences between regulators and microinsurance practitioners. In her closing remarks Véronique Faber from the Microinsurance Network emphasised that trust and transparency are crucial if we want to serve millions of low-income people currently without safety nets. "In times of aggravating risk situations around the globe these are more needed than ever."
The next International Microinsurance Conference
With the 10th International Microinsurance Conference to take place in Mexico in 2014, the Munich Re Foundation and the Microinsurance Network will further support the improvement and development of insurance knowledge.
“The extension of insurance to new markets represents a tremendous opportunity and a tremendous responsibility”, stated Craig Churchill, Chairman of the Microinsurance Network, during this year’s conference. “Formal insurance does not come naturally to persons who have never had it before. Consequently, it is absolutely critical that, when getting insurance for the first time, they have a positive experience with the product and its benefits. Needing insurance is like needing a parachute. If it isn´t there the first time, chances are you won´t be needing it again” Churchill added.
At the next year's 10th anniversary of the International Microinsurance Conference more examples and insights of what makes Microinsurance work will testify of the progress and innovation made in the sector. The event will address specific issues in the Latin American region as well as globally.
About the 9th International Microinsurance Conference
The 9th International Microinsurance Conference was hosted by the Munich Re Foundation and the Microinsurance Network, with the support of the Indonesian Financial Services Authority (OJK), the Indonesian Insurance Council (DAI), Deutsche Gesellschaft für International Zusammenarbeit (GIZ) on behalf of the German Federal Ministry for Economic Development and Cooperation (BMZ), the Georgia State University’s Center for the Economic Analysis of Risk (CEAR), the World Bank/IFC and the PharmAccess Foundation.
Insurers and regulators join hands for better microinsurance
In the wake of the recent weather disasters in East Asia experts from 40 countries discussed how to improve regulation for better microinsurance. Besides scale, value-for-money products and services are key.
The 1st “Consultative Forum on Business Models, Distribution and their Regulatory Implications” was held in Jakarta back to back to the 9th International Microinsurance Conference. The forum was hosted by the International Association of Insurance Supervisors (IAIS) and the Microinsurance Network, bringing together representatives of the insurance industry and supervisors.
Commissioner Firdaus Djaelani from the Indonesian supervisory authority OJK, welcomed more than 100 participants from 40 countries for this public-private dialogue. He emphasized the priority the government has been giving to achieving broad-based access to insurance. Peter van den Broeke, representing the Secretariat of the IAIS and the Governing Council of the Access to Insurance Initiative, reiterated the strong focus of IAIS to instilling regulatory practices. He underlined the importance of proportionate approaches best serving the low-income segment. He sees the Consultative Forum as an important platform for the exchange of information between the IAIS and the Microinsurance Network.
Setting a frame for the discussions, Stefanie Zinsmeyer from the Access to Insurance Initiative presented emerging microinsurance business models from 25 jurisdictions around the globe, focusing on related risks and regulatory implications for supervisors.
Insurance supervisors from Tanzania, the Interafrican Conference on Insurance Markets, and the Philippines, as well as representatives from global and national players of the insurance industry, multilateral development banks and development experts deliberated on business models that work for low-income populations. Panel facilitator Arup Chatterjee from the Asian Development Bank underlined that “efficient distribution alone cannot sustain a market. Effective post sales services need to be in place”. The recent extreme weather events in the Philippines support this statement, with thousands of clients expecting rapid and unburocratic pay-outs.
Insurers and regulators agreed to join hands not only to achieve more scale but also to push value-for-money products and services.
In her closing remarks Véronique Faber from the Microinsurance Network emphasised that trust and transparency are crucial if we want to serve millions of low-income people currently without safety nets. In times of aggravating risk situations around the globe these are more needed than ever.
View press release here (Pdf)
The 9th International Microinsurance Conference opens in Jakarta
It is with great excitement that the 9th International Microinsurance Conference was inaugurated today in Jakarta. The Microinsurance Network and the Munich Re Foundation were especially inspired by the introductory talks of Firdaus Djaelani, CEO of Non-Bank Financial Institutions supervision and Member of the Board of Commissioner of the Indonesian Financial services Authority (OJK) as well as Kornelius Simanjuntak, Chairman of the Insurance Council of Indonesia (DAI) and Chairman of the General Insurance Association of Indonesia (AAUI) for inaugurating and welcoming the participants to the conference.
This year the 9th edition of the International Microinsurance Conference brings together some 400 participants coming from over 60 different countries, sharing knowledge, networking and working on the future of microinsurance. We are glad to see a 45% participantion from Asia and 30% from the insurance industry. We will keep you updated on the evolution of the event on Facebook. For live feeds please subscribe to our Twitter account at MicroinsuranceNetwk@networkFlash #9IMC.
Meet us at the 9th International Microinsurance Conference!
Once again, the Microinsurance Network will be present at the International Microinsurance Conference, this year in its 9th edition, in Jakarta November 12-14. Those attending will be able to meet the Secretariat team at our exhibition stand during lunch and coffee breaks. We will be giving away a number of publications from the Working Groups, some fresh off the press.
The conference is an opportunity for the Network working groups to meet and refine plans for 2014. This year the Social Protection, Health, Performance and Agriculture Working Groups will be meeting on Tuesday morning, November 12. The Technology, and the Social Protection Working Groups, and the Consumer Protection Task Force are meeting on Friday afternoon. The Research Discussion Group and Impact Working Group are having a joint meeting, also on Friday afternoon.
The results of the work by the Funders Discussion’s Working Group on mapping investors will be presented on Wednesday morning. The Conference will also see the launch of the first Consultative Forum on business models, distribution and their regulatory implications, organised by the International Association of Insurance Supervisors (IAIS) and the Microinsurance Network. The session will discuss regulatory issues and challenges in the microinsurance sector and how can they be addressed.
November 15, the day after the conference, will be the General Assembly of the Network, where amongts other, the results of our recent election for four new Boar Members will be presented.
If you are not able to attend, don't miss out by getting live updates from the conference by following us on Facebook and Twitter @NetworkFlash; hashtag #9IMC!
Microinsurance in Asia and Oceania grows by 40%
Over 170 million low-income people are benefitting in the region
According to new research released by the Munich Re Foundation and GIZ, the microinsurance sector in Asia and Oceania has reached 172 million lives and properties covered, representing a 40% annual growth rate between 2010 and 2012. India is leading the market at over 100 million, whilst Malaysia and Indonesia emerge as having the most vibrant microinsurance markets with a growth rate of 185% and over 100% respectively, over the same time period.*
Despite these encouraging achievements, the microinsurance sector today covers less than 5% of the people living in Asia and Oceania.* “When low-income people are unable to manage risk, they cannot break out of the cycle of poverty” says Craig Churchill, Chair of the Microinsurance Network and Head of ILO’s Microinsurance Innovation Facility. For this reason, “access to effective insurance by low income people is essential to sustainable development.”
Currently life insurance is the main risk for which people are covered (83m), followed by accident (77m), health (27m), agriculture (26m), and property (7m) insurance.* In addition, over 1.6 billion are estimated to be covered by subsidized schemes referred to as “social microinsurance” or social protection schemes. “Market-based microinsurance needs to be complemented by schemes with governmental involvement to increase outreach, especially in the field of agriculture and health. It is important that approaches based on insurance principles are being developed jointly, involving the insurance industry, regulators and client representatives, as well as donors,” comments Dirk Reinhard, Vice Chairman of the Munich Re Foundation. Capacity development along the value chain is a key factor for the sector going forward. According to Dr. Antonis Malagardis, Programme Director of the GIZ Programme 'Regulatory Framework Promotion of Pro-poor Insurance Markets in Asia' (RFPI Asia) “The capacity development strategy of RFPI Asia prioritises the development of trainers and experts on inclusive insurance regulation, particularly in key areas such as agriculture, disaster risk management, SMEs and Islamic insurance.”
The 9th International Microinsurance Conference, taking place in Jakarta, Indonesia, November 12-14, will bring together around 400 experts on microinsurance. The conference, co-hosted by the Munich Re Foundation, the Microinsurance Network, Insurance Council of Indonesia (DAI) and the Indonesian Financial Services Authority (OJK) will focus on the status and trends of microinsurance in the region and globally, covering critical topics such as distribution, business models, and investments.
OJK, together with DAI, recently launched a blueprint to support marketing and implementation of micro-insurance products across Indonesia by 2016. “The conference is a great opportunity for Indonesia to develop our microinsurance sector and learn from the experiences of our peers across the globe” says Kornelius Simanjuntak, Chairman of DAI and Chairman of the General Insurance Association of Indonesia (AAUI). “The conference is particularly timely given the joint effort of OJK and the insurance industry to develop microinsurance in Indonesia, as part of our financial inclusion programme” comments Firdaus Djaelani, CEO of Non-Bank Financial institutions (NBFI) Supervision and Member of the Board of Commissioners of OJK. “We hope many of our insurance providers will have the opportunity to attend and learn from microinsurance experts worldwide.”
*Data from Briefing Note “The Landscape of Microinsurance in Asia and Oceania 2013”; Munich Re Foundation
To download the press release see the links below:
- Press Release - English version (pdf)
- Press Release - French version (pdf)
- Press Release - English version (pdf)
- Press Release - Bahasa Indonesian version (pdf)