One of the highlights of this year’s International Conference on Inclusive Insurance was undoubtedly the launch of the Landscape of Microinsurance in Africa: focus on selected countries - a study commissioned by the MiN and supported by the Government of Luxembourg, Luxembourg Aid & Development, Munich Re Foundation, the Center for the Economic Analysis of Risk (CEAR) at Georgia State University and AXA.
Launched during a conference session on Challenges in data collection, the Landscape Study serves as an example of the difficulties including data infrastructure, lack of regular reporting, varying definitions of microinsurance, unwillingness to share data and inconsistencies. These challenges were outlined by Queenie Chow of MicroInsurance Centre at Milliman who pointed out that concerns about market competition could be getting in the way of development, and her colleague Mariah Mateo Sarpong who thought there was a need to better incentivise insurers and regulators to participate in studies and share data.
During the launch event, MiN ED Katharine Pulvermacher outlined the benefits of better market data collection such as: market development, tracking trends over time, enabling regulators to craft better policies, and comparisons between neighbouring countries. Insurers can use the data when designing and distributing products, pricing premiums and improving operations and claims metrics. The advantages of better data are reinforced in a short animated video shown during the launch.
Turning to the study itself, Katharine said it shows that millions of low-income households and small businesses across Africa still have no insurance, leaving them vulnerable to climate change, natural catastrophes, food insecurity, accidents, illness and untimely death. “Our study shows that only a tiny percentage of insurance business in Africa caters for low-income people and the emerging middle class,” she added. On the other hand, she explained, one positive trend is in inclusive health insurance products, which are experiencing something of a boom. Insurers are supporting comprehensive public schemes, while simple, complementary health products such as hospital cash and health value-added services are also increasingly popular.
A week after the launch of the Landscape Study, the latest MiN Expert Forum gave a chance for a deeper dive into the findings with Financial Inclusion Consultant and report author Alice Merry and Elias Omondi, an Actuarial Associate, with the Insurance Regulatory Authority (IRA) of Kenya.
Alice began by outlining the purpose of the study, which is to track the evolution of microinsurance, to drive market development and to encourage the routine collection of data - data which is not just about premiums but about people; data which is disaggregated by business line and segmented by income group.
The study is based on data collected from 100 insurers and regulators across Africa, covering a total of 15 million lives and US$420 million - that represents less than two percent of the estimated 700 million people in the low-income bracket on the continent and less than one percent of overall insurance premiums. This, she said, contrasts starkly with the previous study in 2015 covered 61.2 million lives and US$756 million worth of premiums. In addition, more than 200 questionnaires were completed in 2015, more than double the number in 2018.
However, these aggregated figures mask significant differences between country trajectories - for example, in the six countries which yielded the best data, some countries such as Uganda and Zambia experienced a decrease in microinsurance, whilst others including Senegal and Togo saw growth.
Alice identified three main trends which emerge from the study: the growing importance of health insurance (28 percent of lives covered compared to 14 percent in 2015); the collapse of the Mobile Network Operator (MNO)-linked ‘freemium’ model (which reached its peak in 2015, but proved unsustainable in many countries, with the subsequent closure of many schemes); and the emergence of digital platforms offering insurance products, such as online shopping and ride-hailing apps. Once recent study from Cenfri, for example, found 277 unique digital platforms in 7 countries, with 4.8 million people earning income from these digital platforms.
From a regulator’s perspective, Elias identified a number of ways to relate to the data presented in the study, including realities and opportunities; the pace of microinsurance progress; the main fallouts (both real and expected); the rebalancing of responsibility; current, possible and aspirational data; and how to address the challenges.
The opportunities of the African microinsurance market includes a demographic ‘youth bulge’, a US$1 trillion agricultural sector by 2030, manufacturing, digital and FinTech growth. However these have to be weighed against realities such as climate change, poor financial access and extremely fragmented African markets.
Microinsurance data is important for a number of reasons, said Elias, including evaluating performance indicators for effective management; financial management and accounting; calculating reserves and pricing products; meeting regulatory requirements; and managing distribution channels. However, there has to be a rebalancing of responsibility between consumers and firms, between innovation and protection - but there’s a big struggle between customer value and business value.
When it comes to the future, he said, we need a big shift both in the data that will be collected and how we systematically analyse current data. That means better ‘SupTech’ (supervisory technology) along with improved digital gathering and analytics; open insurance and data sharing (but should that be mandatory or voluntary, public or private sector led, and what control will consumers have over their data?). “We need to have data which will foster the provision of effective insurance - that means putting the customer at the centre, a data framework which can be applied by insurers and regulators to achieve better outcomes for low income customers,” said Elias.
Discussion turned to the question of scaling up crop and livestock insurance - only three percent of small holder farmers in Africa - most of the women - are insured. Elias believed insurers need to adopt a de-risking approach - for example, agricultural insurance could be provided as a rider to other products. However, agricultural products are still costly, and loss ratios make them unattractive to insurers - that’s where regulators can help. One of the findings from the interviews with experts, said Alice, was that there have been a lot of advances in tech and innovation, but there are fundamental problems to scaling such as poor reputation, price undercutting, efficiency, unsustainable business models and lack of capacity and expertise. There has been some success - in Zambia, for example - with government supported crop and livestock schemes but when those products are purely private, there are questions over their sustainability.
Summing up, moderator Katharine Pulvermacher identified the clear need for data in order to move the market forward. “Collaboration between the public and private sectors is crucial,” she said. “It’s all about customer focus, customer focus, customer focus.”