Collaboration is key to building a sustainable inclusive insurance ecosystem

Thursday, November 26, 2020

In the third of a four-part series of articles on the role of inclusive insurance in the UN Sustainable Development Goals (SDGs) and Environmental, Social and Governance (ESG) criteria, MiN Executive Director Katharine Pulvermacher argues that collaboration, not duplication, is the way forward.

If nothing else, the Covid-19 pandemic has taught us the value of collaboration. Scientists, medical experts, governments, international agencies and pharmaceutical companies are working together to develop much-needed vaccines. Insurers, reinsurers, regulators and civil society organisations are pooling resources and expertise to offer cover to the most vulnerable.

It’s by no means the first time the public and private insurance sectors have come together in pursuit of a common good. As the recent Digital Edition of the International Conference on Inclusive Insurance (ICII) heard, public-private partnerships (PPPs) are already delivering low-cost inclusive insurance to millions of people. Swiss Re alone has been involved in 600 PPPs in the last 10 years.

Established in the heady atmosphere of the Paris climate change agreement and the launch of the Sustainable Development Goals (SDGs) in 2015, over the past five years the Insurance Development Forum (IDF) has become a respected player in the inclusive insurance ecosystem. Itself a PPP between the insurance industry and international organisations including UNDP and the World Bank, the IDF aimed to build resilience to natural catastrophes through insurance protection.

Given its roots in the climate action agenda and COP21, it’s not surprising that the IDF has until now mainly focused on climate risk. Climate change threatens economic stability; according to the Economist Intelligence Unit, it could directly cost the global economy US$ 7.9 trillion by mid-century. According to the IDF, about 70 percent of NatCat losses worldwide are uninsured – rising to 90 percent in middle-to-low- income countries. 

But extreme weather events have social as well as economic and environmental impacts. Uninsured small businesses and families often fall further into debt. Food insecurity, malnutrition, physical and mental illness are exacerbated. Catastrophes cause long-term trauma which last long after the event. The MiN - which joined the IDF nearly two years ago – has worked since its inception in 2002 to ensure that the social consequences of the insurance protection gap are given equal prominence.

The Covid-19 pandemic has created a sense of urgency in the insurance sector, and the speed and innovation in bringing new products to market and adapting others this year has been impressive. The coronavirus crisis also serves to remind us that, huge though it is, climate change is not the only existential global threat facing low-income populations. It was with this in mind that the MiN initiated a campaign to put the “S” back into ESG. Insurers can and should play a pivotal role in social and economic development - for example through InsurTech and digital platforms which enable easy low-cost access. As the Harvard Law School Forum on Corporate Governance puts it, “S” factors now also incorporate the adoption of technology, and some of the Sustainability Accounting Standards Board (SASB) indices relating to customers could have been written with inclusive insurance in mind: Access & Affordability,  Product Quality & Safety and Selling Practices & Product Labelling.

Providing low-cost insurance products as part of an overall risk management and transfer approach is not simply part of being a good corporate citizen, but essential to the long-term health of the sector. Increasingly, investors want evidence of social as well as environmental sustainability. As Amy Clarke, Chief Impact Officer of Tribe, wrote recently, Covid-19 has made social impact investment - traditionally a long-term commitment - tricky at a time when the needs of society are shifting on an almost daily basis.

As the coordinator of the IDF inclusive insurance working group, in collaboration with co-chairs Garance Wattez-Richard (AXA Emerging Customers) and Astrid Zwick (InsuResilience Global Partnership) and members of the working group, over the next six months we will be working on country-specific roadmaps for inclusive insurance market development – each with well-defined targets for reaching meaningful scale over the medium and longer term. Each roadmap will be elaborated in partnership with national stakeholders but coordinated collectively – including ongoing monitoring and evaluation. Partnership is fundamental to making this approach work – and that extends to securing the financial resources that will be needed for execution.

By working together – and leveraging our overlapping memberships as well as relationships that are unique to each organisation – the MiN and the IDF can achieve far, far more than would be possible without this joining of forces. The IDF’s strength as a PPP is that it brings together major players from every part of the insurance sector in the global North, while the MiN has a significant and steadily increasing footprint in the global South. In a nutshell, working together in an alliance allows us to operate in specific countries, pool our resources and meet targets that we could not meet alone.

There are those who question the need for so many multi-stakeholder organisations in the inclusive insurance space. Besides the MiN and IDF, at a global level we can count UNDP, InsuResilience Global Partnership, a2ii, UNEP-PSI and ICMIF, not to mention numerous regional groupings and initiatives. However, this is to misunderstand the different but complementary roles played by these groups and their members. Yes, we need to avoid duplication and competition, but it is clear that building partnerships, collaborating and streamlining efforts can truly enhance the inclusive insurance ecosystem. Unless all parts of the inclusive insurance ecosystem work together, there is the potential for gaps through which the social dimension of ESG could fall. Although quite disparate, the players operating in the inclusive insurance space bring a diversity of strengths, experience, knowledge and expertise which can be pooled together for a more thoughtful and impactful whole. The MiN - with its grassroots membership and detailed local and regional networks, perfectly complements the strengths of the IDF which brings together C-suite representatives of global actors in the insurance development space. There is significant value in unpacking the skills, techniques and tools within the industry and amongst various partners to encourage and drive more proactive risk management. Such constructive and collaborative platforms will be increasingly important as the innovation and solutions that are required for now and the future will simply demand it.

The closing session of the ICII underlined the need for partnerships, collaboration and a multi-stakeholder approach to market development. Jan Kellett, Special Advisor at the UNDP’s Finance Sector Hub, co-chair of the IDF Operating Committee and a key member of the IDF Inclusive Insurance Working Group, shared details of the new Insurance and Risk Finance Facility which will support inclusive insurance product development. As Jan said, “Risk management and development need to be treated holistically, and Covid-19 has forced us to do that.” PPPs will a play a major role in this because public sector actors, including donors and multilateral development banks, are essential for kick-starting innovative insurance schemes in emerging economies. But they only work if all stakeholders are engaged.

That’s where the convening power of the MiN can make a difference. “Complex partnerships benefit from external brokering,” writes Geraldine O’Keeffe. The scale and complexity of global crises such as Covid-19 and climate change require responses well beyond the capacity of any one sector of the inclusive insurance ecosystem. With careful collaboration, pooling resources and avoiding unnecessary duplication and competition, we can unlock the donor funding necessary for implementing inclusive insurance at scale.