By invitation: Carlos Boelsterli looks at how microinsurance has evolved in Latin America

Ten years ago, Carlos Boelsterli was working in wholesale reinsurance. His move to microinsurance was driven by a desire to improve access to risk management tools for underserved populations. As part of our series of hearing directly from microinsurance industry pioneers and leaders, we asked Carlos – CEO at MiCRO and a Board member for the Microinsurance Network – about the growth of an inclusive insurance market in Latin America.

How has the world of microinsurance changed – particularly in Latin America?

When joining the world of microinsurance, I knew it would not be easy to innovate in an industry that is over 300 years old and accustomed to protecting the status quo. Admittedly, the hill has turned out to be much steeper than I initially assumed and remains an uphill battle in many ways. Nevertheless, increased general awareness about the importance of insurance in dealing with the consequences of climate change and the positive experiences we are making in Latin America are helping to flatten the slope to a significant extent. 

An improved regulatory environment and growing collaboration between the public and private sectors have helped create this new market, while technology has been key in transcending traditional insurance boundaries to reach new customers. 

Inclusive insurance has seen much innovation over the last 10-15 years, much of which you may have witnessed. How has the innovation evolved?

Progress in inclusive insurance is the result of several factors, most of them happening in parallel. For instance, simple life and health products are being complemented by more sophisticated products that are supported by technology as a means of protecting against more complex vulnerabilities, such as the impact of climate risks. 

Furthermore, much effort has been made and will continue to be made on identifying adequately aligned distribution channels, as access to target populations and properly managing their expectations is as important as designing the right products. To ease affordability issues, it is also essential to recognise that the benefits of inclusive insurance products go beyond just protecting their end users. As such, it may only be fair to share the cost of insurance among as many (direct and indirect) beneficiaries as possible.

Getting distribution right is still a major challenge. What are some of the best examples of distribution that you have seen?

This is true: distribution has been and continues to represent a major challenge. Reaching individuals in remote and difficult-to-access areas for a modest premium is not financially viable. Distribution is made harder knowing that insurance does not have the irresistible attraction of other products on which to spend your scarce money – it needs to be sold in a patient and convincing manner, and provide relevance and value to the buyers.

There is probably no magic solution to distribution. Rather, an awareness of distribution challenges can become a powerful ingredient in developing an appealing value proposition for distribution channels with access to the target population. Naturally, this is in addition to the high-quality product the channel is expected to distribute. There is a contradiction to this discussion: talking about distribution can sometimes move the focus to commissions, where one person winning would seemingly mean another losing out. However, one way around this is to identify and raise the other benefits of a resilient or protected client to distribution channel providers aligned with your mission. 

Given your experience in the industry, what are the main challenges that we have yet to overcome and what needs to be done for this to happen?

An ever-growing recognition of the importance of inclusive insurance is improving the access to insurance for the underserved. Nevertheless, we need to further accelerate this process to strengthen the resilience of the most vulnerable at a much faster pace.

Besides managing and driving such change, given insurance’s lack of natural appeal and the financial means of target populations, affordability remains a major challenge – irrespective of how appropriate and accessible products are. As a result, activating “indirect beneficiaries” to contribute to the cost of risk management tools is necessary.

Innovation is often confused with digitalisation or technology, but there is more to it than that. Where do you see new types of innovation emerging from?

In my mind, three things can support innovation in the inclusive insurance space:

1. Designing financial education materials that can help insured customers easily understand the product, even if they can’t read,
2. Identifying and activating private and public indirect beneficiaries, promoting the benefits of empowering individuals, and sharing the cost of insurance (through North-South dialogues, carbon markets to promote environmental best practices, government-led initiatives, etc.), and 
3. Superior products supported by improved data sources, field data quality and quantity, modelling methodologies, and the like.

How has the regulatory environment changed in Latin America? What more needs to be done for inclusive insurance services to grow further in the region?

We have come a long way since we started talking to regulators in Central America in the early 2010s. Through patient and constructive dialogue, the Superintendencia de Bancos de Guatemala (SIB) transitioned from initially sceptical to a promoter of index-based solutions. This has been helped by the results and the regulator developing a sound understanding of the requirements needed to allow these kinds of products to reach underserved populations.