2018 - an exciting year of challenges and microinsurance opportunities

2018 was a significant year for the development of the microinsurance market, with the MiN playing a leading role in shaping the debate, driving innovation and delivering a series of unmissable publications and events. Highlights included three Consultative Forums (Sri Lanka, Ghana and Argentina - co-hosted with the International Association of Insurance Supervisors (IAIS) and the Access to Insurance Initiative (A2ii)); three regional workshops (Pakistan, Senegal and Burkina Faso); the 2018 State of Microinsurance report; the Latin America and Caribbean landscape study and the 14th International Microinsurance Conference in Lusaka, Zambia. Together, they created a powerful case for inclusive insurance as a tool to increase resilience, manage risk, promote growth and help achieve the UN Sustainable Development Goals (SDGs).

Participants at the 12th Consultative Forum in March in Colombo got stuck into another recurring theme of 2018 - the rise of InsurTech and its challenge to regulation. Digital technologies have experienced rapid growth and are changing the insurance landscape by paving the way for new companies and business models with the potential to enhance financial inclusion. In many parts of the world, and especially in Sub-Saharan Africa, mobile insurance has already provided access to insurance for a large part of the previously uncovered population. Mobile and other digital technologies are now introducing new business models, but regulators sometimes struggle to reconcile customer protection with innovation. “New technologies might be a tool, but are certainly not a panacea”, said Arup Chatterjee of the Asian Development Bank, prefiguring much of the debate for 2018.

The subsequent 13th and 14th Consultative Forums moved the debate forward. In May, participants in Accra took a deep dive into some of the big challenges, including how new technologies and players are changing the insurance landscape; how supervisors can stimulate innovation to encourage market development and enhance customer value; the pros and cons of technology for consumers; and how new players and business models should be supervised. Moving forward to Buenos Aires in October, the third Consultative Forum of 2018 heard how new digital technologies have the potential to enhance financial inclusion, but that innovation comes with uncertainties. As CNseg’s Alex Korner said, “If in the next 10 years we have not succeeded in translating insurance into the plain language used by ordinary people, we have not done our jobs. Technology provides us with the tools for achieving this.”

The role of microinsurance as a means to help the most vulnerable adapt and manage risk in a rapidly changing world was explored through a series of regional workshops, starting in Lahore. Nadeem Hussain of the Pakistan Microfinance Network (PMN) underlined the importance of innovation given the overall low penetration of life and health insurance in Pakistan, and the importance of creating independent products that go beyond life and health. The MiN’s Executive Director Katharine Pulvermacher emphasised how inclusive insurance underpins sustainable development because it meets the needs of emerging consumers and plays a critical role in preventing households from falling back into poverty after a financial shock. As a risk mitigation strategy, microinsurance can considerably reduce losses for low-income individuals and families. The convening power of the MiN was once again in evidence with panel discussions featuring representatives of the State Bank of Pakistan (SBP), the Securities and Exchange Commission of Pakistan (SECP), Pakistan Microfinance Investment Company (PMIC) and leading names of the microfinance and insurance industries.

The next regional workshops for microinsurance professionals moved to West Africa, with two one-day sessions in Dakar, Senegal and Ouagadougou, Burkina Faso, building on the success of a pilot event in Ethiopia in 2017. The two West African countries were chosen partly because of the urgent need to develop the market for microinsurance products, especially in Burkina Faso where drought has hit small-scale farmers in recent years. The aim was to expand awareness and understanding of microinsurance among microfinance insitutions (MFIs) in order to drive consumer uptake, and to gauge the appetite for a potential two-year professional certification programme. There were sessions on synergies between microfinance and microinsurance, and creating trust-based relationships with low-income communities, using examples of MFIs in different parts of the world who have improved their microinsurance offer. Nearly four out of five participants said they found the content relevant to their needs, and 95% said they would like to participate in similar events in the future. Importantly, nearly all said they had learned something concrete which they could put into practice in their work to enhance their microinsurance offer. 

2018 also saw the launch of two landmark MiN publications - the Latin America and Caribbean landscape study and the State of Microinsurance report. Launched at an international seminar marking 10 Years of Evolution in Inclusive Insurance in Latin America in Bogotá, Colombia, the Landscape of Microinsurance in Latin America and the Caribbean 2017 revealed that 8.1% of the Latin American population were covered by at least one microinsurance policy as of 2016, with an estimated total of 52 million people now insured. Based on data from regulators, reporting companies and other secondary sources, the total value of gross written premiums (GWPs) was USD 480 million. Microinsurance service providers reported that microinsurance GWPs account for an average of 2.45% of their total written premiums, and there was an actual increase of 19% in terms of the number of lives covered. This year, the Landscape study – focusing on Africa - is trialling a new methodology, which, if successful, will see the study shift to an annual global report in order to avoid larger gaps in data and provide a more comprehensive overview of microinsurance uptake across the world every year.

The 2018 State of Microinsurance (SoM) report was launched at the 14th IMC in Lusaka. It showcases ten ground-breaking initiatives from around the world which are already helping to eliminate poverty and hunger, achieve good health and well-being, promote gender equality, provide decent work and economic growth, and take action on climate change. The SoM suggests inclusive insurance is playing a significant part in achieving the SDGs, and that millions of consumers in emerging markets are already benefitting from insurance products and services which build resilience and help manage risk. As Katharine Pulvermacher wrote in an article for In Depth News, “Insurance reduces uncertainty and encourages farmers to plant more fields, or buy fertilisers, seeds or new agricultural technologies to increase productivity. For micro, small and medium-sized businesses, insurance helps with access to financial services such as loans, which in turn encourages investment to create employment opportunities.”

And so to the 14th IMC itself. Around 400 inclusive insurance experts from over 50 countries came together to discuss how best to increase insurance penetration and uptake in emerging markets and how inclusive agriculture, health, life and accident insurance can help deliver sustainable development. The tone was set by Shipango Muteto of conference co-hosts the Microinsurance Technical Advisory Group (TAG) of Zambia who said “Insurance alone will not help the world’s poor to achieve lasting prosperity, but it is a critical factor for success.” Following the opening press conference, the MiN hosted the opening plenary session, asking Why does insurance matter for development? Panellists pointed out that insurance is not just an industry, it’s an essential institution for society to function well. The insurance sector has a key role in promoting and helping with the achievement of the SDGs, and insurance companies should not see it as simply a matter of CSR, but rather of delivering responsible, effective and inclusive insurance.

Common themes to emerge from the panel discussion included the necessity of cooperation and partnerships among all stakeholders, especially by governments which can ensure real transformation at scale. Speakers agreed that insurance as a stand-alone product cannot make a significant impact - it has to be implemented as part of a holistic approach including other financial products, capacity building and financial education. Inclusive insurance is not CSR -  it is and should be a scalable, sustainable and effective insurance in which all the partners win. As the IDF’s Rowan Douglas said, insurance is about freedom - freedom to live with security.

The good news is that there’s been a significant increase in the last decade in the number of low-income people with insurance cover of some kind. But for the market to develop, insurers need a better understanding of the emerging consumer segment, so that they can design products and services that correspond more closely to customer needs, and that are priced to reflect risk more accurately while remaining affordable and sustainable from a business perspective. Throughout 2018, the MiN continued to bring insurance companies, digital providers, regulators and policymakers face-to-face in different parts of the world to find solutions to boost resilience and reduce disaster risk. That role is vital to enable the inclusive insurance market to grow quickly and significantly.