Big ideas for managing risk in a post-Covid world

Thursday, December 17, 2020

The launch of the UNDP’s new Insurance and Risk Finance Facility (IRFF) - announced at last month’s International Conference on Inclusive Insurance - aims to revolutionise the role of insurance in driving sustainable development. The facility, which goes live in early 2021, is not lacking in ambition: in the words of Jan Kellett, Special Advisor at the UNDP Finance Sector Hub, insurance can help “tackle poverty and inequality, and support countries to deliver on achieving the Sustainable Development Goals (SDGs).” In this, the final article in a series focusing on putting the ’S’ back into ESG, Jan spoke exclusively to us about the role of the IRFF in a post-Covid world.

MiN: In previous articles we examined the role of the different many organisations working in the inclusive insurance space. Where does the IRFF fit in?

Jan: Essentially the idea is for the Facility to be a one-stop shop for all UNDP country offices, programmes and partners. We’ll be focusing on networks, partnerships, policy guidance and potential funding sources. For the first time, UNDP will have a team dedicated to insurance - of course we’ve been working in this field for a while, but we’ve never had a single, dedicated unit. UNDP is especially concerned with customer awareness and financial literacy - we support the development of a financially literate population by understanding their needs and learning from them. We are not afraid of the long-term work and investment required to create a sustainable market in even the most challenging of environments.

MiN: Has your inclusive insurance strategy changed in light of the Covid-19 pandemic?

Jan:  On a practical level, we had to adapt the logistical and administrative set-up of the Facility, as well as our working practices, since much of our work is on the ground through our country offices. More importantly, it forced on all of us the realisation that continuing to work in silos is obsolete. For example, does it make sense to tackle climate change on its own in the middle of a health crisis? We want insurance to be an integral part of risk management solutions, not just for climate change but for future pandemics. Covid has forced us to re-examine the inequalities we live with in all societies. It has reinforced inequality - in fact it has increased the wealth gap - and if we don’t use Covid to start talking about these things then we are doing ourselves a disservice.

Covid has influenced the scope of our work in three areas. Firstly, the role of insurance in Universal Health Coverage (UHC), especially in Africa. Secondly, it has highlighted the lack of business interruption insurance in most countries, especially for SMEs, the backbone of many economies. And finally, using insurance to protect people against the secondary impacts of Covid on jobs, food security, etc.

These are ‘moon shots’ – we are trying to push things beyond what might normally be possible in order to make a point about what is unacceptable. For example, we have drafted a concept note which articulates a vision of how insurance can provide healthcare for the 410 million people in Africa who currently don’t have UHC. We estimated that would cost around US$15 billion a year to deliver some version of UHC - which in the scale of overall African debt is actually not that much.

MiN: How will the IRFF complement existing inclusive insurance initiatives, rather than duplicating efforts?

Jan: First of all, we are not an insurer: we will not hold the risk. We want to be seen as a catalyst to advancing insurance and risk management in developing countries. We’re broadly working in two areas. There’s the whole enabling environment, working with the regulatory and institutional capacity of governments to push forward the role of insurance. Then there’s using that to distribute insurance and risk financing products in the countries where we operate, building on what’s already there. We will be doing diagnoses of the enabling environment, and supply-and-demand, to understand and inform our own work, using already-available resources such as the MiN’s Landscape Study.

The other focus is actively developing partnerships with existing players in the sector, such as the MiN and a2ii. Rather than duplicating structures and trying to have all that technical expertise in our team, we want to work with partners to develop and implement programmes. And of course we are heavily engaged both technically and at leadership levels with the Insurance Development Forum (IDF) and InsuResilience Global Partnership. This helps make sure we ‘keep ourselves honest’ and move forward in tandem with others - there’s no point in us duplicating someone else’s work.

MiN: Where are the big opportunities for inclusive insurance?

Jan: Technology is the way forward, especially in light of the Covid pandemic. Everything is moving away from face-to-face and paper-based. That wave will continue and the industry will have to adapt it if hasn’t already done so. It would be fantastic to use mobile technology to capture every aspect of the chain - from marketing and purchasing through to claims and monitoring impact. We have a couple of large initiatives already looking at that so we can check to see if products are being targeted and sold correctly and the impact they are having on families.

Tech is where the inclusive insurance industry can really deliver significant benefits. For example, insurance penetration is very poor in Africa yet by 2025 there will be 435 million people in Sub-Saharan Africa accessing the internet through their mobile phone. We don’t need physical banks or insurance branches with people in them - mobile will do a lot of that, and the growth paradigm will be different from developed countries. That’s not to say there isn’t a balance to be struck with tech vs. human touch. Face-to-face transactions are still important in some countries.

MiN: How do you see the IRFF and MiN working together?

Jan: Collaboration with the MiN has already started, but we still need to have detailed conversations. We have made a commitment to work with the MiN and others to build a regulatory, legislative and institutional enabling environment, but we need to be clear on how we can maximise resources.

When it comes to insurance and risk finance, I see an upwards trajectory towards 2030 but I don’t think it will be all smooth sailing - there are still some trust barriers which we need to break down. You don’t create a market for sustainable insurance overnight - some of this work takes a long time, meaning donors’ expectations need to be managed. We see our role as working on both the supply and demand side, and that requires patience. We aim to have rolled out in a minimum of 20 countries by 2025, delivering inclusive insurance in around 35 countries by 2030. We’re here for the duration.