The Microinsurance Network (MiN) have revealed some of the findings from the 2023 Landscape of Microinsurance Study which will be released fully in the first quarter of 2024. Now in its 13th year, this flagship research continues to provide unique and invaluable insight into the global inclusive insurance industry and is consistently used as a benchmark to track products and emerging trends. This is thanks to the brokers, insurers, experts and collaborators who take part in the survey, as well as the industry and government partners who support it.
A key aim of this annual study is to help the global microinsurance industry identify ways to support the UN Sustainable Development Goals (SDGs). Specifically, those of no poverty, zero hunger, good health and wellbeing, gender equality, decent work and economic growth, and climate action. While insurance has the potential to help protect households and businesses in developing countries against risk that will impact their lives and livelihoods, there is currently an access gap between those who can afford it and those who can’t but who need it most. Today, 75% of the world’s population is left potentially unprotected against daily risk and natural disasters. The Landscape Study plays an important role in addressing these gaps and driving progress to support a healthy and innovative global insurance sector that serves the needs of the vulnerable.
The 2023 study is based on research with 294 insurance providers who reported on 1040 microinsurance products (including national and government-led schemes) across 36 countries. The number of participants has been growing steadily from 194 in 2020 and has included nine more countries over the last four surveys. The number of products covered has increased by 77% in this time. All of this highlights an increased industry participation which reflects the value the study brings to the sector.
Key findings from the 2023 Landscape Study
This year’s study, which is based on data collected from 2022, shows that more than 300m people across the 36 countries surveyed were recorded as covered by a microinsurance product. This represents around 11.5% of the microinsurance target population in the countries studied, and shows a significant increase compared with 2019 when just a third of this number (102m) were covered. These numbers not only show how global inclusive insurance has evolved in recent years, but also reflect the increased response rate and number of countries studied as part of the survey.
Of the microinsurance products reported in all four of the previous surveys, 45m people were covered in 2022 - an increase on the previous year when just 35m were covered. This has followed a general pattern of growth over the last four years, with the exception of 2020 which saw a decline of 46% compared with 2019 largely because of the COVID-19 pandemic. Premiums collected also increased from 2021 to 2022 by 12%.
Collecting data on the number of people covered by product line, as is done in the Landscape Study, is crucial to create products that are accessible and affordable. This is particularly the case for products targeting low-income individuals. Not only does it help plug the access gap, but it also supports insurers to sustainably scale their operations in the long-term and informs policymakers about financial inclusion among their populations.
When it comes to distribution channels, this year’s Landscape Study has shown that microfinance institutions were the most important globally. This was followed by financial institutions and agents and brokers. With regards to payment methods for inclusive insurance there was an increase in the use of direct debit as payment method to 35% of products, compared with 28% in 2021. The use of cash and credit or loans has also increased compared with the previous year, however “other" forms of payment have decreased. We also see a variation in preferences across the different regions covered. In Asia, cash is the primary payment method (for 45% of products), whereas in Africa and Latin America and the Caribbean, direct debits are the most common payment methods.
Challenges remain
The positive impact of the Landscape Study has been seen over the decade and more since it launched. The findings of the report have been well-received by governments, insurance companies and opinion formers globally, and are used as a valuable reference to inform strategic decision-making and support microinsurance programmes in developing countries. It has also been recognised by the UN Development Programme (UNDP), which is engaging with the MiN as a Responsible Partner over a multi-year period to complement and inform the activities of the UNDP’s Insurance and Risk Finance Facility.
Despite improvements the industry has seen in recent years, there are still challenges to overcome. While the number of people covered by a microinsurance product increased significantly in 2022, there is still work to do to close the people protection gap, as only 11.5% of microinsurance target population in countries studied are reported to be covered.
To achieve this, closing the insurance protection gap for low-income earners and workers in the informal sector should be an immediate priority for the industry. Additionally, many of these underserved people live in areas greatly impacted by climate change. Any products developed for this market in future will need to factor in this increased risk so require an innovative approach. There should also be a focus on regional markets that are currently underserved. For example, Africa is the second fastest growing region in the world and has a very young population, so accessible and affordable insurance must become a reality for those living in the region so that they can build financial resilience.
With all these challenges comes opportunity though. The insurance industry can play a significant role as investors in local infrastructure and social development by supporting businesses and families in building resilience against the various environmental risks they face and working towards sustainable financial growth for themselves and their wider communities.