In early May 2024, we launched our annual Landscape of Microinsurance report in partnership with the United Nations Development Programme’s Insurance and Risk Finance Facility (UNDP IRFF) in Geneva. As in previous years, researchers conducted an extensive primary study for 2022, gathering insights from 294 insurers across 36 countries in Africa, Asia, Latin America and the Caribbean. The study covers 1,040 products across the health, life, agriculture and property sectors, among others.
The report has become an essential resource for the global industry - particularly at a time of rising risks related to the climate emergency - as it tracks and provides a clearer picture of the insurance landscape. Insurers, intermediaries, and reinsurers regularly use the report for performance benchmarking, value proposition design, and product development. Insurance supervisors and associations also use it to clarify definitions, establish measurement indicators and inform regulatory design. Public and international organisations use this unique study to inform policy decision making, evaluate programme implementation and design national risk transfer plans.
The data provided by this report not only highlights innovation and current growth areas but also gaps to close which are opportunities for the insurance sector. As Nilofer Sohail, Deputy General Manager at EFU Life Pakistan, explains: “With the information provided by the Landscape study, we can assess where we stand in relation to emerging trends in our region and revise our inclusive insurance strategy, if necessary. The study also helps us identify new leads to develop inclusive insurance to build the resilience of vulnerable populations.”
Positive signs for the growth of the industry
The report reveals that in 2022, microinsurance covered 330 million people, representing 11.5% of the potential market. Insurers collected USD 5.8 billion in premiums which is only 15% of the market’s estimated value of USD 41.1 billion. Despite the seemingly low percentages, these numbers present a positive picture of the current inclusive insurance landscape. It is expanding beyond pre-COVID levels, with providers reporting growth in their microinsurance portfolios. Compared to the previous year, insurance premiums increased by 12%, and the number of people covered increased by 28%. However, it also highlighted the challenges to future growth posed by broader macroeconomic trends, such as inflation, increased food prices, and political instability.
In terms of the types of coverage, life and accident insurance covered the largest number of people at 171 million, followed by health (72 million), agriculture (33.6 million), and motor, property and income replacement (13 million). The report also revealed that customer awareness, cost, accessibility and availability are the key drivers for insurance uptake.
When it comes to distribution channels - microfinance institutions (MFIs), other financial institutions, agents and brokers dominate, with almost 90% of people covered through one of these. The 2023 report found that physical networks still dominate distribution channels despite regional variations. For example, in Africa financial institutions are by far the biggest distribution channel (54% of people insured) whereas in Asia, microfinance insurance institutions dominate (53%). In Latin America and the Caribbean however, there is a more even distribution across all channels. Although not yet the norm, emerging digital models offer innovative ways to reach more people to close the protection gap.
This year’s report also shows that direct debit and cash remain the predominant payment methods for insurance, representing 64% of products. However, premium collection remains a key barrier to insurance supply. As a result, mobile money agents and other innovative methods could provide a more convenient option and support efforts towards a cashless society.
Innovation in product development and distribution is already happening
Despite the increased uptake of inclusive insurance products in 2022, there are still plenty of opportunities for further growth. Accessing these opportunities requires innovative thinking to develop and distribute microinsurance products. This year’s study shares examples of organisations already succeeding by breaking away from typical models.
For example, to encourage greater insurance uptake among smallholder farmers affected by climate change, ACRE Africa leverages AI and blockchain technology to lower the cost of its index insurance. Farmers can upload photos of their farms throughout the season to the ACRE Africa app and AI algorithms analyse these to assess damage and share personalised advice with the farmers. It also triggers claims if a farmer suffers a loss. The company has seen success amongst smallholder farmers and, as of 2022, covers 300,000 of them.
Several companies are looking to avoid MFIs and other traditional distribution channels when distributing products. For example, Turaco – an inclusive insurance company operating in several African countries has digitalised most of the customer experience through WhatsApp, enabling it to keep costs low. The company has grown rapidly and now covers 1.5 million people, largely through life and hospital cash insurance. However, regulation will be necessary to help lower the barriers to entry for digital distribution channels to really take off.
Pragati Life Insurance in Bangladesh has also been experimenting with a new way of distributing and charging for insurance. They provide life and health coverage to mobile operator Robi Axiata subscribers, based on their talk-time usage. Once users surpass a specified minute threshold, the insurance is activated, and coverage continues if they consistently meet this criterion. Between 2020 and 2022, coverage grew from around 139,000 individuals to 582,000.
Data is the key to industry growth
The success of many of these products and initiatives is due to their ability to address customers’ needs. And to do that consistently, one needs good-quality data. Not only will this help insurance companies design better products and services for their customers, it also highlights gaps where certain groups are not being catered for. Historically though, the industry has struggled to collect data uniformly, which is where the Landscape survey comes in.
Whilst more data has been collected for 2022 than the previous year, collecting gender-disaggregated data is still a challenge. For example, half of the respondents participating in this study provided no information on the gender of policyholders. The issue is gaining more relevance, and organisations such as A2ii have launched tools, such as the FeMa-meter, to address this data gap. For now, though, the industry is still lacking crucial information about women and their use of insurance. This not only makes it harder to design products tailored to women but also for MSMEs, of which women involved make up a large percentage, particularly in the informal sector. In doing this, the insurance industry is leaving a huge market largely untapped.
However, some companies are already capitalising on this gap. For example, Río Uruguay Seguros, a cooperative insurance company in Argentina, has been implementing initiatives to address the inclusion of women and transgender individuals in insurance. They have worked with several insurance companies to develop an insurance package aimed at women entrepreneurs, called ‘superadoras,’ as well as their own tailored health insurance packages for women. They have also implemented initiatives to better understand the needs of transgender people when it comes to insurance.
Seguros Bolivar, a Colombian insurance company, has launched a multi-risk product targeted at MSMEs. The company realised that despite their importance to the Colombian economy, half of MSMEs faced bankruptcy within their second year of business, and only a fifth survived three years. The product was designed with insights from MSMEs to make it more attractive and easier for this group to access.
Protection gaps bring opportunities to innovate better
Overall, the 2023 Microinsurance Landscape report highlights that while there are many successes to celebrate, there remains plenty of work to be done by the industry to ensure the most vulnerable in society are resilient against rising risk.
As Lorenzo Chan, Chair of MiN, and President and CEO of Pioneer Inc., highlighted during the launch event for the study, “Not enough people are covered.” And the reality of this is that any unexpected setback – illness, death, or climate-driven events – often means starting anew from ground zero for the uninsured. He further added, “the purpose of microinsurance is not to address all needs and losses that are suffered but rather to enable people to rebuild and resume their lives and livelihoods after what will now be temporary setbacks. This ability to bounce back makes a world of difference.” Resilience is about ensuring access to effective risk management tools, which includes insurance; it involves knowledge sharing.
Chan also pointed out, “I do not believe there is a scarcity of insurers – there is, rather, a shortage of those who are willing to look beyond the traditional business case by learning more about the micro market.”
Insurance providers can support resilience and help close the protection gap, but to do that, they need to truly understand the needs of this market then develop new and innovative products to meet these needs. The key to this is information, and that’s why the Microinsurance Landscape report will continue to perform its vital role through clear focus on the collection of timely, relevant and high-quality data from the industry.