“People around the world are growing not just poorer but also less secure,” writes Rajiv J Shah, President of the Rockefeller Foundation. “One statistic is particularly harrowing: more than 500 million additional people are projected to have fallen below the expanded poverty line since 2020…Without significant development interventions, increased poverty and suffering will be a decades-long problem.”
You don’t have to be an economist to understand that much of that additional poverty has been driven by the COVID-19 pandemic and the resulting global financial downturn – and that’s on top of the impacts of climate change, which disproportionately impact the world’s poorest and most vulnerable. Despite a downward revision of its initial forecasts, the World Bank warns we are seeing “a historically unprecedented increase in global poverty.”
Even within the ranks of the world’s poor, there are degrees of inequality, with women generally harder hit than men. Oxfam estimates that the pandemic cost women around the world at least USD 800 billion in lost income in 2020, and that women lost more than 64 million jobs last year – down 5%, compared to 3.9% for men.
Meanwhile the global middle class – which had been growing steadily in recent decades – shrank by 54 million people in 2020, according to Pew Research. The drop-off was most noticeable in South Asia and Asia-Pacific – a concerning trend since these markets were previously seen as being ripe for insurance scale-up among emerging consumers. The Asian Development Bank has highlighted Asia’s worrying exposure to risk: even before the pandemic, Asia's life protection gap was USD 83 trillion, with three in four households in financial danger if a breadwinner died. The health protection gap was USD 1.8 trillion in 2019 – representing just 10% of the average annual household income.
Now comes the post-pandemic reckoning. Changes to global income distribution, and the risk of what Shah calls “the great divergence”, pose significant challenges for the inclusive insurance industry.
Further to this, research by the Grameen Crédit Agricole Foundation, ADA and Inpulse points to the financial hit suffered by microfinance institutions (MFIs) during the pandemic. Since microinsurance is often bundled with microfinance products with MFIs acting as the distribution channel, and traditionally MFIs have focused on women’s empowerment through financial inclusion, any downturn in MFI activity has a disproportionate impact on the ability of their women clients to manage risk. Half of MFIs surveyed for the Grameen/ADA/Inpulse study reported that the crisis “has had a heavy impact on certain client groups: urban areas have been more affected than rural areas, and women more than men. Logically, these same two client groups (urban population and women) have more difficulties in repaying their loans.” Almost a third of MFIs reported that their female clients struggled with restarting economic activities and struggled to repay loans as a result. This is noteworthy given that 35% of MFIs reported they had made a priority of targeting women during 2020.
It’s clear that designing and delivering insurance products which meet the needs of women is key in a post-pandemic world. The joint Women’s Insurance Community of Practice, launched earlier this year by the ILO’s Impact Insurance Facility and IFC Women’s Insurance Program, is just one of the initiatives aiming to reduce the protection gap for women, noting that while “women around the globe have rising incomes and increased buying power, they remain an underserved community across financial services.” As we reported in last month’s Network Exchange, COVID-19 has highlighted that gender-sensitive approaches to insurance are even more important than before and are also pertinent for the social taxonomy currently being prepared by the European Commission’s Platform for Sustainable Finance.
According to the ILO's Impact Insurance Facility, “The COVID-19 pandemic has exacerbated the challenges women and women-owned SMEs face in managing risk and building financial security. A range of solutions on both the supply and demand side are needed so that women can take better advantage of risk management solutions, including business insurance for women-led enterprises.” Insurers need to step up with new products specifically designed to meet the needs of women as they try to recover from the COVID-19 crisis – as the IFC’s guidance note to insurers puts it, “It has also become increasingly clear that insurers need to tailor their products and processes to the differing risks and needs of men and women and commit to mitigating the extent to which this pandemic widens the gender gap.”
In Mexico, insurers have responded to this challenge by setting up Project Minerva, an online training platform where women can improve their financial literacy and learn how to make independent, informed decisions about choosing the right financial products, including insurance. The public-private partnership (PPP) includes modules on budget, savings, credit and insurance, and is delivered via a mobile phone app. “When you talk to women in the informal sector about financial matters they are usually scared of the term. They say ‘No, I don’t know about that.’ That’s their first response,” Norma Rosas, Director of Asociación Mexicana de Instituciones de Seguros (AMIS - Mexican Association of Insurers) told a recent MiN Expert Forum on Supporting Women’s Economic Empowerment in Insurance. “We want women to be able to make informed financial decisions, plan for the future and stop living day-to-day so they can start planning and managing their budgets.”
However, initiatives such as Project Minerva remain the exception. At next week’s International Conference on Inclusive Insurance (ICII), a session dedicated to Making Insurance Work for Women will examine why products tailored to meet women’s specific needs are so scarce, and why insurers appear so reluctant to get involved in what is, according to the IFC, a market which will be worth USD 1.7 trillion by 2030. Participants will discuss this global women’s insurance market opportunity and the roles insurers have in mitigating the negative impacts of COVID-19 on women as customers and employees.
There is evidence of an increasing interest among policymakers and donors to reach women and build their resilience through inclusive insurance, although most commercial insurers do not actively track how many women they are reaching – and that lack of data is in itself, a barrier to scaling up gender-sensitive products. Women also face significant social, cultural and technological barriers in some emerging economies, which prevent them from accessing not only insurance but wider financial services.
In a post-pandemic world, it is essential that insurers learn from the past and do not revert to models which failed to address gender and other inequalities. The IFC is clear that, “as insurers adopt relief, recovery, and resilience measures, they should consider applying a gender lens to their operational processes, including how they manage, market, communicate, sell, and use information technology, and how they support their women employees, agents, and customers. This means implementing solutions in a way that does not perpetuate the gender gap.”
Although the economist Angus Deaton published a controversial analysis which claims to show that global inequality actually declined in 2020 (because GDP of high-income countries declined relatively more than that of poorer countries), most data suggests that COVID-19 has widened the global wealth gap. The Economist, for example, notes that “Amid all the misery and mortality, the number of millionaires rose last year [2020] by 5.2 million to over 56 million, according to the Global Wealth Report published by Credit Suisse, a bank. The one percent increased their share of wealth to 45%, a percentage point higher than in 2019.”
Insurance alone will not reduce wealth, health or gender inequality, but as part of a suite of risk management measures, inclusive insurance can at least mitigate against low- and middle- income individuals, families and businesses falling back into poverty when crisis strikes.