African countries’ experiences and perspectives from the 6th Consultative Forum

The second day of the 6th Consultative Forum on “Innovative products for the emerging consumer”, in Marrakesh, was organised into two breakout sessions, for regulators and industry participants to present insights and propose recommendations for microinsurance innovative product development.
Product design
Microinsurance products need to be designed in a way that is socially responsible and adds value to the end consumer. According to Stephen Cartwright, Finance Director at MicroEnsure, “It is important to be more flexible and to adapt products to the local environment such as developing products with monthly payments and an easy enrolment process.”
Lydia Bawa, Ghana’s Commissioner of Insurance, outlined an innovative life insurance scheme offered in Ghana. The scheme allows reimbursement of premiums paid each 5 years with the whole reimbursement done after a total of 15 years.  If the client is in good health and has not had claims in the first 5 years, he/she is reimbursed 15% of the total premiums paid in 5 years. This type of product, launched in 2010, includes hospital cash. The client has an incentive of continuing to pay his premiums in order to get total reimbursement 15 years later. This insurance cover is offered by Enterprise Life, one of the biggest insurers in Ghana. One setback was that the type of product was not easy to price by actuaries, because of the complexity of the actuarial model.
In Togo, the Head of State launched the National Fund for Inclusive Finance in January 2014, making financial services accessible to the poor through banks and Microfinance Institutions (MFIs). The Fund has the objective of reaching 2 million beneficiaries in 5 years in terms of job creation, income-generating activities and support to micro, small and medium enterprises. Bundled with the credit product offered, are microinsurance products such as funeral, personal accident, fire and health. Since the Fund does not have data of its own regarding its members, it collects regular data from MFIs each three months in order to study the evolution of the product. If the claims frequency is high and results are not profitable, the government has committed to act as a reinsurer and reimburse the insurance company providing the microinsurance products.

In Guinea, the National Agency for Microfinances (ANAMIF) provides funds for a training centre for young people and women and several MFIs. This agency was put in place following the establishment of the Microcredit Fund by the President of the Republic, Alpha Condé, two years ago. Today, the regulators aim to support the introduction of microinsurance products via these MFIs.

Unlike Burkina Faso, where an MFI has created its own microinsurance structure and insures its members, Gabon witnesses the reluctance of insurers to offer microinsurance products. In Morocco, regulators are more supportive of microinsurance products being offered by conventional insurers, similarly to countries covered by CIMA (Conférence Interafricaine des Marchés d’Assurances)*  where conventional insurers are seen to also sell microinsurance products. 
The question then arises whether generic insurance products can meet the needs of low-income populations, as tailored microinsurance does. It has been seen in many cases, that generic insurance programmes targeted at low-income people do not effectively meet the particular needs of these populations.
“On the other hand, payments are becoming extremely easy as in Ghana, where FinTech is acting as a disruptive technology”, explained Peter Wrede, Senior Insurance Specialist at the World Bank
However, a preliminary condition for FinTech to work is that the country should be technologically advanced, which is not always the case. In Mauritania, for example, where health insurance is mandatory and covers the low income population, a system was put in place for people working in liberal professions which supports two insurance companies to provide covers for low premiums. However, due to lack of communication, and lack of cooperation between public hospitals to receive this section of the patients, the programme was not successful. 
In Gabon, only civil servants are now covered by public policies for universal health coverage. However, other sections of the population such as the poor and university students, will have to be covered with new innovative products that respond to their needs.
Lotfi Kharrat from the General Committee of Insurance in Tunisia, explained that both ENDA, a microfinance institution providing micro-credits and CNAM (Caisse Nationale d’Assurance Maladie) offer microinsurance coverage to different socioeconomic categories of the population. There is an inherent type of universal solidarity between public and private entities regarding the benefits provided to the low income population in terms of insurance coverage.
Consumer education
In relation to consumer education and public awareness, all stakeholders need to play a role. In South Africa, the insurance association organises financial education campaigns and earns a small percentage from the insurance company’s profit to perform this task. Other initiatives are driven by international development organisations as many people do not trust the insurer but refer to the intermediaries for questions and follow-up. 
In Kenya, the supervisory authority established a department to train local people to spread the message about the benefits of insurance to the population. It is important to adapt to the cultural background of the country when formulating a microinsurance product, as some populations do not want to talk about death or funeral insurance but prefer a life plan, for example. 
Another idea put forward by regulators from Senegal and Gabon is the absence of political power to drive inclusive finance and inclusive insurance. Building awareness has therefore to start in the public arena with public authorities, before reaching the consumers.  
Data collection
Discussion emerged around the type of data that should be collected by the insurer. Is data necessary only for the development of the specific product or is further information needed to help better understand the consumers’ behavior? “Data can be captured by linking to already existing data such as that from mobile accounts, making the enrolment process much easier”, added Lemmy Manje, Development Consultant from Zambia.
According to Lydia Bawa, Ghana’s Commissioner of Insurance, it is crucial to prepare surveys to monitor product development and enhance data collection both qualitatively and quantitatively. In addition, collaboration with peers and other regulators help reduce constraints and provide lessons learnt in microinsurance development.
Regulations in microinsurance
Regulating microinsurance provided by mobile network operators (MNOs) is not an easy business due to the high commission rates received by the MNOs. However, it is the only distribution channel that reaches masses of people in a small period of time and fills a gap left by insurance companies.
Some regulators stressed that mobile companies need not have a high return on investment the first year already. 
According to Renata de Leers, Executive Director at Actuaries Without Borders, when mobile insurance was launched in Ghana in 2010 and 2011, the loss ratio was very high, ranging from 75 to 80%. This loss ratio could be reduced to 50% but should still offer a real client value. In the countries covered by CIMA, several reforms were carried out in the last years, with support from A2ii, to enhance the regulatory framework for inclusive insurance. In Ghana, the National Insurance Commission worked on encouraging innovations in development and delivery of microinsurance products.
In Ethiopia, the regulators have a role in insurance stability and the healthiness of the insurance industry. However, according to Tulu Belay, from the National Bank of Ethiopia, “because the role of regulator is separated from product development, in some cases, there is confusion on which entity prices the product, who drives the process, and what the involvement is with the technological providers.” “As a regulator, we must ensure that actual microinsurance providers can provide sustainable, accessible and affordable products” he further added. 
Being an agriculture-based economy, Ethiopia focuses on the insurance needs of smallholder farmers against the perils of climate change. Since there are no companies providing microinsurance products, it would be convenient to support development of traditional life insurance policies into microinsurance products.
Stephen Cartwright, Finance Director of MicroEnsure, affirms operating with MNOs since 4 years. According to him, the reason MicroEnsure is successful in Africa is that they are filling a gap in terms of product design and technological infrastructure, citing for example their ability to process 2.5 million records in one hour. MNOs bring value to the market by introducing new products and reaching a big number of customers in a timely manner. However, this comes at a cost to be acknowledged, which is the short term nature of financial modelling with this type of distribution channel. 
According to Yvette Florence Kouma from the Directorate of National Insurance at the Ministry of Economy, Investments, Promotion and Prospective in Gabon, microinsurance is still in the pioneer stage and limited to MFIs as providers. In her opinion, this is due to the lack of political power as is the case in Senegal. There is general talk about financial inclusion, but the awareness should be implemented at the level of public authorities and not only at the level of consumers. 
According to Lemmy Manje, Rwanda, Tanzania and Zambia are increasing the number of licensed insurers to drive microinsurance today.

In Africa, it is seen that the distribution channels are driving microinsurance coverage and penetration. Insurers are solicited in their capacity as underwriters. For them to stay in the market, a long term perspective should be envisaged for product innovation, reducing costs and introducing tailored products on the market.
*Benin, Burkina Faso, Cameroon, Central African Republic, Congo, Comores, Ivory Coast, Gabon, Guinea, Equatorial Guinea, Mali, Niger, Senegal, Chad and Togo.
Written by Jenny Nasr, Development Coordinator, Microinsurance Network.