Policy and regulatory challenges of microinsurance market development in Africa

Transcription

1 Ad-Hoc Expert Meeting on CAPACITY-BUILDING FOR THE INSURANCE SECTOR IN AFRCA 23 February 2009 Policy and regulatory challenges of microinsurance market development in Africa by Ms. Martina WIEDMAIER-PFISTER Consultant, Gesellschaft für Technische Zusammenarbeit (GTZ) The views expressed are those of the author and do not necessarily reflect the views of UNCTAD

2 Policy and regulatory challenges of microinsurance market development in Africa UNCTAD Ad-hoc Expert Meeting on Capacity Building for the Insurance Sector in Africa 23 February Geneva, Switzerland Martina Wiedmaier-Pfister: Financial Systems Development for German Development Cooperation (GTZ) and Federal Ministry for Economic Cooperation and Development (BMZ)

3 1. Content Joint Working Group (Microinsurance Network and IAIS) Market and policy challenges Existing regulation-supervision-policy (RSP) approaches Emerging Guidelines for the regulation and supervision of microinsurance What can authorities do? Policy, regulation and supervision matter for microinsurance market development! 24. Februar

4 2. Microinsurance Network-IAIS Joint Working Group Since 2006 Joint Working Group meets several times per year JWG members: insurance supervisors of many jurisdictions, sector experts, industry, international development agencies (World Bank, ILO, ICMIF) German Technical Cooperation/BMZ heads RSP Subgroup of Microinsurance Network Continuous contact with members of JWG and IAIS committees and identification of new developments 24. Februar

5 3. MIN-IAIS Joint Working Group: Work Plan Completed: Issues Paper on Regulation, Supervision and Policy Issues (completed 2007) RSP Country Studies in 5 countries (completed 2008) FSI- IAIS Basel Policy Conference (Sept 2008) On-going/planned: IAIS Guidelines for the Regulation and Supervision of Microinsurance Issues Paper on Mutuals and Cooperatives (Drafting Group) A2II to expand and fund more activities 24. Februar

6 4. Major Challenges: Coverage Coverage of the low-income segment is still low despite encouraging trends in the environment. Access remains a huge challenge (premiums/gdp) Africa: total insurance penetration low (4.35 %) Latin American and Caribbean: 2.61 % Compared to 15 EU countries with 8.34% South Africa: 15.3 % (12.31 % in life) Kenya: 2.53 % In many African countries (Egypt, Nigeria, Ethiopia, Algeria) insurance coverage is less than 1 % Source: Swiss Re SIGMA 3/ Februar

7 5. Major Challenges: Demand Policyholders demand is weak as they - do not understand the insurance concept - are often ill-informed - do not trust insurers. Uganda: Focus groups discussions revealed that individuals struggled to understand the insurance concept Country Study, CENFRI 2007 Ghana: Microinsurance policyholders expect to get a loan, or their savings back from their microinsurance policy NIC-GTZ Feasibility Study 2008 South Africa: Retail shops sell life insurance. Very low claims ratios show that policyholders are not aware that they are paying for insurance together with their monthly purchase bill. Landscaping Study, Microinsurance Centre Februar

8 Covered lives: Life insurance by type 6. Major Challenges: Products and Delivery The range of products is too narrow and delivery channels are not adequate. Millions of covered lives Credit Life Long-term Funeral Term (short) Source: Microinsurance Centre (2008) Nigeria: Compulsory insurance is dominating, there is almost no voluntary insurance (insurance penetration 0.64 % of GDP) West-Africa has a wide network of mutual health insurers, which are often small and weak. Other products and commercial insurances are very scarce. In general, credit life insurance and community-based health insurance are dominating but more and more product innovations emerge. Delivery channels are often informal. Use of non-traditional channels is often not allowed. 24. Februar

9 7. Major Challenges: Customer Protection Customer protection for low-income households requires a different policy and regulatory approach. Traditional products, information and recourse mechanism are not suitable. Consumer protection is a policy task. It takes place at all levels of the financial system. Various sector authorities are involved. Consumer information is an integral part of it but also weak. Customer protection is crucial for market development. 24. Februar

10 8. The Challenge of an Enabling Policy, Regulatory and Supervisory Environment A conducive policy, regulatory and supervisory environment can facilitate microinsurance provision and up-take. Expansion to low-income market segment Formalization and sound growth of providers Integration of non-traditional or informal delivery channels Understanding of insurance Fostering quality of services Reduction of transaction costs Growth of trust 24. Februar

11 9. Policy Barriers FINANCIAL SECTOR POLICIES and OTHER POLICIES are often not conducive to insurance market development for the low-income segment. 1) Government policies rarely consider microinsurance. 2) Policymakers awareness and know-how on microinsurance is low. 3) Weak institutional capacity impedes supervisors from being proactive. 4) Coherence among different policy areas is weak. 5) There are mandate crossings between various government agencies. 6) High fiscal burden on premiums and intermediation is a limiting element. 7) Subsidies can impede market based solutions. 24. Februar

12 10. Regulatory Barriers Insurance Sector INSURANCE REGULATIONS are not adapted to the specific features of microinsurance. 1)Entry requirements 2)Delivery channel rules 3)Demarcation between life and non-life lines 4)Product regulation 5)Capping of commissions 6)Definition of insurance 7)Customer protection 24. Februar

13 11. Regulatory Barriers Other Sectors OTHER REGULATIONS can hinder microinsurance expansion. 1)Cooperative laws 2)Payment systems rules 3)Foreign investment rules 4)Anti-money laundering rules 5)Health regulations 6)Banking or microfinance rules 24. Februar

14 12. Policy approaches to consumer protection and market development MEXICO: Intermediary and product regulation COLOMBIA: National Microfinance Policy PERU: Intermediary and product regulation * West Africa: Microinsurance regulation in 8 countries for mutual social health organizations BRAZIL: Microinsurance as a national policy priority, product rules * * * SA: Financial Access Charter; Intermediary Act; new tier for MI providers envisaged ETHIOPIA: Access to Finance Strategy includes microinsurance * INDIA: MI agent and product regulation ** PHILIPPINES: New tier of MI providers * RSP intervention under consideration identification of other African RSP interventions required 24. Februar

15 13. Emerging Guidelines for Microinsurance Regulation and Supervision 1. Take active steps to develop a microinsurance market 2. Adopt a policy on microinsurance as part of the broader goal of financial inclusion 3. Define a microinsurance product category 4. Tailor regulation to the risk character of microinsurance 5. Allow microinsurance underwriting by multiple entities 6. Provide a path for formalization 7. Create a flexible regime for the distribution of microinsurance 8. Facilitate the active selling of microinsurance 9. Monitor market developments and respond 10.Utilize market capacity to support supervision in low-risk areas Source: Making insurance markets work for the poor: Microinsurance policy, regulation and supervision, Synthesis Paper (2008) IAIS-Microinsurance Network-Joint Working Group 24. Februar

16 14. What can policymakers, regulators and supervisors do? Guideline 1 - Active Steps Capacity building of authorities National dialogue Policy dialogue at regional and global level (IAIS, MFW4A). Country diagnostic Mix of policy and regulatory instruments 24. Februar

17 15. What can policymakers, regulators and supervisors do? Guideline 2 - Inclusion Policy Integration of microinsurance into financial sector framework Promotion of consumer protection as a cross-cutting task Giving the insurance supervisor a market development role and adequate resources Streamline mandates for insurance supervision in case they are disperse 24. Februar

18 16. What can policymakers, regulators and supervisors do? Guideline 3 Define a Product Category E.g. Simple product No screening requirements Lower amount Rapid claims settlement Simple administration 24. Februar

19 The impact of good policies has to be felt in African markets! Thank you very much for your attention! 24. Februar