Unable to meet face to face, the Digital Edition of the International Conference on Inclusive Insurance (ICII) went ahead with a record 2056 registrations from 127 countries. The focus was on risk management to help vulnerable populations through the pandemic - but as Munich Re Foundation Vice Chairman Dirk Reinhard reminded participants, even once the Covid crisis is over, climate change will remain a major risk.
Covid has created a sense of urgency. People need insurance but can’t afford it because income has declined sharply, especially for the most vulnerable. Digital and mobile are replacing personal contact and shaping new distribution channels which will likely last well into the post-Covid era. Covid will also impact pricing and value-added services.
Innovation and InsurTech
The pandemic has driven a leap in digitalisation, although most innovation isn’t coming from insurers but from tech companies,” said outgoing MiN Chair Doubell Chamberlain. Health products, for example, are moving to online and mobile, using digital wallets and integrating with other digital financial services to reduce barriers and speed up claim turnaround times. However Katharine Pulvermacher, Executive Director of conference co-organisers the MiN, warned we need to better understand the digital divide if no one is to be left behind in the rush for technology.
Pranav Prashad, Senior Technical Officer at the ILO said Covid has proven the case for technology. Crop yield data gathered via smartphones, coupled with mobile payments, has been a game changer for index insurance. WhatsApp, chatbots and AI are increasingly driving the consumer journey. Digitalisation has brought new players to the market, and has helped to improve awareness and knowledge about insurance.
On the downside, regulation around consumer protection, recurring payments and digital signatures sometimes holds up digital innovation, with long approval times for some digital products. Digitalisation can spur market growth, but it’s important to involve regulators to eliminate restrictions while ensuring consumer protection. Supervisors face a raft of challenges including assessing the value of mobile insurance products, consumer protection and partnerships, while industry players need quick decisions to facilitate investment and innovation. Hui Lin Chiew, an advisor at a2ii, noted that “the pandemic has made us ask whether digital works for everyone and has made digitalisation urgent.”
BIMA Deputy CEO Mathilda Ström identified four pandemic-driven trends: digital subscription channels such as ride-hailing apps; digital media channels including WhatsApp and Facebook to engage with customers; digital influencers and marketing instead of face-to-face sales agents; and platforms such as Grab selling insurance.
Digital is driving the budding of remittance-linked insurance products, with tech companies getting involved to roll out products such as HelloProtect. In 2018, around 200 million migrants sent remittances worth US$ 530 million but very few were covered. Research from the UAE and Spain showed migrant workers share the same worries - accident, life and health risks - but rank them very differently. Low-cost inclusive insurance can help them if they have an accident or a family member back home gets sick.
Putting customers at the centre
Katharine Pulvermacher said insurance companies could learn from the FMCG (fast-moving consumer goods) sector which understands its customers and caters to their needs. In Mexico, for example, Mango Life uses less jargon and a more conversational approach based on neuromarketing insights to understand client needs.
The latest Landscape of Microinsurance 2020 study, launched during the ICII’s opening session, confirmed that face-to-face contact remains crucial for understanding customers’ needs and wants. Report author Alice Merry said concerns around customer value, highlighted by alarmingly low claims ratios for low-cost personal insurance products, undermine trust and hinder uptake. Insurers and distributors must place greater emphasis on customer-centricity to achieve both value and scale.
But does the pandemic spell the end of high-touch, person-to-person distribution models? Not so, said Ashok Shah, Group CEO of APA Insurance in Kenya, which uses ‘feet on the street’ and community meetings to maintain contact with clients. High touch also remains important in other markets - Crezcamos in Colombia has introduced some non-physical channels whilst maintaining face-to-face contact. “We’re a bit old-fashioned,” said President Mauricio Osorio Sanchez. “We pay claims through our offices, in person - that way, clients see for themselves how the process works, insurance becomes more tangible and we develop trust.”
Participants, however, were less convinced: 45 percent thought that building a sustainable inclusive insurance business without any face-to-face client contact is possible, while 54 percent thought the high touch approach is essential for building client awareness. Katharine Pulvermacher noted that “one of the barriers in inclusive insurance is acknowledging that half your customers are women. If you don’t include them, you won’t understand your own customers.”
Effective public-private partnerships (PPPs) think big, start small and scale fast - ideal for tackling climate change. Wolfgang Buecker, Head of Financial Sector Development at GIZ, said PPPs are key to drive digital insurance solutions, with so many innovative private sector players bringing new products and technologies to market. He pointed to a GIZ/Allianz PPP in Morocco and Ghana which implements integrated climate risk management for small and medium enterprises (SMEs).
However, challenges remain around long-term efficiency and sustainability. “We have to look much further than five years,” said Jan Kellett, Special Advisor at the UNDP’s Finance Sector Hub. “Governments and regulators need to work with the private sector and mutuals for the long haul.” Successful PPPs rely on each partner knowing exactly what it is responsible for; engaging a wide range of stakeholders including end-users; and using public money to kick-start a project. Other key ingredients include credibility, education, simplification and innovation.
With experience of more than 600 PPPs worldwide in the past 10 years, Mario Wilhelm, Head of Middle East and Africa at Swiss Re, took a global view of climate risk. NatCat loses were US$ 350 billion in 2018 - only US$ 60 billion of which was insured - making PPPs essential, otherwise climate risks could become uninsurable. He singled out the Kenya Livestock Insurance Programme (KLIP) as a success story - though with 20,000 households and 100,000 animals covered, there is still plenty of room to scale up. Other successful PPPs showcased during one of the sessions included Pradhan Mantri Fasal Bima Yojana (PMFBY), a PPP between the Indian government, the Ford Foundation and insurance companies which offers index-linked insurance to small farmers; and the Uganda Agriculture Insurance Scheme (UAIS), a PPP involving the government, the Agro Consortium of 11 insurers and NGOs.
Wrapping up, Dirk Reinhard highlighted the urgent need to close the insurance gap in emerging economies. Insurance is about protecting people, but when a catastrophe hits a poor country only a tiny minority of people are covered. As climate change impacts increase, the insurance industry must aim for better coverage of insured losses. They should learn the lessons of the Covid crisis and apply them to tackling climate change. The pandemic has elevated the importance of risk but, as Doubell Chamberlain noted, “Covid-19 doesn't present new problems for the insurance industry. It exposes those that were there before.”