Key statistics:
While insurance penetration in Colombia remains low, the microinsurance market has significant upside potential given the country’s track record of prudent macroeconomic and fiscal management, a progressive regulatory environment, favourable demographics and a strong commitment from the public and private sectors to create a more dynamic market for inclusive insurance.
With a population of just over 50 million, Colombia has the fourth largest per capita GDP economy among Latin American and Caribbean nations. Although the COVID-19 pandemic hit Colombia hard, the prompt and decisive actions the government took to protect lives, livelihood, jobs and businesses has allowed economic activity to recover relatively quickly and the long-term growth prospects are encouraging.
As one of the world's 17 mega-diverse countries, its territory encompasses Amazon rainforest, highlands, grasslands and deserts. Part of the Ring of Fire, a region of the world susceptible to natural hazards including earthquakes, landslides, volcanic eruptions and flood risks, the World Bank approved a USD 300 million loan for Colombia in December 2021 to strengthen its resilience to natural catastrophes, climate change and health emergencies.
Socio-economic challenges
With a median age of 31.3, Colombia is considered a young country. However, young people and those over 40 face the highest unemployment rates – meaning that many Colombians do not have the ability to accumulate wealth or access insurance. Following the outbreak of the pandemic, approximately three-quarters of Colombians are now in the low- to middle-income brackets and the job and income losses suffered by households wiped away a decade of progress in reducing poverty.
In addition, the country has the highest income inequality and labour market informality in Latin America and, as is the case in many developing countries, informal work is one of the biggest challenges in the labour market with just under half of Colombians employed in the informal economy. The sectors with the highest employment rates are agriculture, trade and vehicle repair, livestock, hunting, forestry and fishing – with the coffee industry representing about one-fifth of economic activity and employing 730,000 people in the agricultural sector.
Access to healthcare in Colombia is almost universal, with over 90% of the population covered by the public health system which is financed by the Security and Guarantee Fund – part of the Social Protection System that was established in 1993. Despite the vast majority of workers contributing to the health system, only half of them contribute to the pension system – highlighting the potential of inclusive insurance for a population that will not have sufficient income to cover their staple needs in old age.
Inclusive insurance opportunities
The microinsurance market in Colombia, while still evolving, has ample potential for development to help make insurance more inclusive and overcome barriers to entry for the population. However, the market is still concentrated, with the top three insurers accounting for almost two-thirds of microinsurance premiums. The introduction of inclusive insurance began in 2014 when the first study on the inclusive insurance market was developed and this served as the basis for the “More Insurance, More Future” programme in 2016 which is supported financially by the government and implemented in collaboration with the financial regulator.
The five-year project is targeted at developing the inclusive insurance market in Colombia by stimulating supply and demand for inclusive and innovative products. The programme is aligned to Colombia’s National Financial Education Strategy that has a personal finance component which seeks to promote an insurance culture to increase consumers’ trust in the industry and its products.
Our 2021 Landscape Study reported for the first time initiatives being undertaken by private sector organisations – including, for example, our members, Blue Marble which is bringing parametric insurance to coffee growers in Colombia who suffer disproportionately from the impacts of climate change and Seguros Mundial has developed the first modular insurance for rural populations.
As our country report shows, while Colombia has a number of socio-economic challenges to address, the global pandemic has shone a spotlight on the urgent need for affordable and accessible insurance solutions for its diverse population. Although some index-based insurance products have been developed in the country, insurance penetration remains very low - particularly in rural areas of the country - and it is incumbent on public-private partnerships and development partners to work in tandem to drive forward meaningful change.
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Our country reports provide a detailed overview of specific target countries and their inclusive insurance markets as highlighted in our annual Landscape of Microinsurance Study.
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