The role of insurance associations in supporting market development. 10th Annual Microinsurance Conference November 2014

Transcription

1 The role of insurance associations in supporting market development 10th Annual Microinsurance Conference November 2014

2 What do we mean by market development? 2

3 Ideal State of an Inclusive Insurance Market Demand Public is well informed about Public has trust in insurance and insurance companies A culture of insurance exists among the population Supply An industry that believes the low-income market is viable Available products are relevant to the low-income market Distribution and payments Environment systems are effective Microinsurance friendly regulation Consumer protection Public-private partnerships to extend social protection 3

4 Stages of market development Products: multiple risks, voluntary, agriculture, property, bundled with other services, aligned with social protection Distribution: Great diversity of channels Clients: All, including the poorest COMPETITIVE Quality DIVERSIFYING Products: funeral, hospital cash, PA, simple savings, some voluntary Distribution: MFIs and banks, associations, some retailers, perhaps MNOs Clients: non-financial groups (coops, MNOs); savers EMERGING Products: credit life Distribution: MFIs Clients: Borrowers, mostly upper-poor Scale 4

5 Introducing the insurance associations 5

6 Asociación Mexicana de Instituciones de Seguros Of the 104 Mexican insurance companies, 82 of them are AMIS members, representing 98% of total premium. At the end of 2013 total premiums reached US$ 25 billion. The main objectives of AMIS are: 1. Promote the development of the insurance industry, creating publicprivate partnerships to promote the use of insurance as a reliable means to deal with risks 2. Represent the sector s interests before the public sector authorities to generate an appropriate regulation according to the socio-economic environment prevailing in the country 3. Provide technical support to Associates, contributing to their development and to boost the growth of the industry 4. Promote a risk prevention culture and the use of insurance as a protection mechanism through its various financial education programs, as part of their social responsibility

7 Life Microinsurance in Mexico Microinsurance certificates 10 69% Millions ,4 5,5 8,8 9,8 10,0 9,9 59% 49% 39% 29% 19% 9% * * Figure estimated as of Dec % Life microinsurance premiums USD millions 50% 40% % 20% 10% * * Figure estimated as of Dec %

8 SOUTH AFRICAN INSURANCE ASSOCIATION - Non-life market = US$9.6 billion GWP - SAIA Members 93% - Biggest lines = Motor and property - Board 16 - Staff 40 - Founded in members - Non-life Insurers - Re-insurers - State owned Insurers SAIA - No separate legislation for MI - SA Insurance undergoing massive change and MI will be incorporated into changes - Financial Inclusion identified as a top government priority - Industry has made voluntary commitments to increase financial inclusion, but to date has not been successful due to various factors

9 Fasecolda and The Microinsurance Market Gathers and represents all the insurance companies located in Colombia (34) 9,4 billions USD in premiums. Life, workers compensation and car insurance, the biggest lines of business. No special regulation for MI. Insurance industry define it as a product developed to serve lowincome people MI total written premiums (without credit life) $115 millions of US dollars

10 Microinsurance Numbers 2013 Premiums: 56% life insurance, 16% personal accident and 15% funeral insurance 5,0 millions of insured risks Channels: Utility companies 50%, banks 20%, cooperatives 14% and MFI 8% Average premium $2 USD per month. Average insured value $6.000 USD Paid claims $25 million USD to clients

11 APESEG S ROLE IN MICROINSURANCE Insurance companies have a common strategy for developing microinsurance under the umbrella of APESEG. The development of self-regulation by APESEG has advanced the agenda on microinsurance and public-private dialogue. APESEG created the Microinsurance Committee in 2008, just after the SBS issued the first Microinsurance Resolution in The Microinsurance Committee has proved to be an appropriate forum for insurers to discuss ways to develop the Peruvian microinsurance market and a good tool for enhancing the dialogue between the industry and the SBS. APESEG s microinsurance committee has discussed with the SBS ways to develop the microinsurance market and has provided a draft of standardized clauses for life insurance. ASOCIACION PERUANA DE EMPRESAS DE SEGUROS Mexico D.F., November 11, 2014

12 Products offered as microinsurance without being registered with the supervisors Small percentage of low-income population is covered. Market growth and product diversification. Microinsurance is offered mostly by private insurers. Most insurers offer some form of microinsurance product. The market is not concentrated in a few companies. Microfinance used as the main distribution channel. Little innovation in distribution channels. Products do not generally meet the real needs of consumers. Regulatory barriers. ASOCIACION PERUANA DE EMPRESAS DE SEGUROS Mexico D.F., November 11, 2014

13 Outline 1) Policy and regulations Insurance regulations Promoting public-private partnerships 2) Generating and maintaining demand Consumer education Resolving grievances 3) Expanding and improving the supply of (micro)insurance Monitoring performance Improving performance, improving client value 13

14 1a) Influencing regulations to promote the development of inclusive insurance markets 14

15 DEALING WITH REGULATORS AND SUPERVISORS Encourage selected mandatory insurance products Simplify product registration Removal of barriers on alternate marketing channels ASOCIACION PERUANA DE EMPRESAS DE SEGUROS Mexico D.F., November 11, 2014

16 Enabling microinsurance regulation To ensure proper distribution of microinsurance that allows sustainability, necessary changes to allow their massive promotion should be made, requiring the following: Public-private partnerships through assistance programs that contribute to spread the benefits microinsurance provide, for added confidence. Microinsurance agents, do not have to be certified to sell this policies, and they can be distributed throughout massive channels. Leverage technology: Promote mobile devices transactions, digital signature recognition and that mandatory clauses doesn t have to be included in the policy.

17 Regulation Experiences and Main Achievements Earthquake Reserves: Proportional information Non-Banking Correspondent: Regulation to allow companies use these new channels Money Laundering: Proportional measures Mass Market: Regulation for a wider definition

18 1b) Promoting public-private partnerships Positioning the insurance industry to be an ally to achieve public policy objectives 18

19 Promoting Public-Private Partnerships (PPP s) Partnership between insurers, Departments of Agriculture and National Treasury The project is designed to advocate and contribute to the proposal of an agricultural insurance framework for SA in which the government is able to support the struggling Multi-Peril Crop Insurance (MPCI) sector with a view to ensuring food security as well as to assist developing small holder farmers. The PPP will involve state subsidised agricultural insurance premiums as well as the state acting as the re-insurer of last resort Product design and rate setting would occur centrally, but products would be distributed through existing private sector channels and participating insurers will be responsible for the assessment of losses and processing of claims for the policies on their books Current Status debate to decide on the appropriate structure and flexibility of the PPP and which products will be supported (e.g. will hail insurance be included / excluded from the PPP)duct design and rate setting would occur centrally, but products would be distributed through existing private sector channels and participating insurers will be responsible for the assessment of losses and processing of claims for the policies on their books

20 PUBLIC-PRIVATE PARTNERSHIPS Public-private partnerships have proven to be effective in the design and encouragement of microinsurance in various cases: The government has teamed up with the private sector in order to provide catastrophic agricultural insurance, covering hundreds of thousands of small-scale farmers in Peru. The government subsidizes the product, and insurance companies act as the risk carrier. Credit life, life, accident, health, funeral and general insurance products, such as multirisk insurance, are distributed by state-owned entities such as Banco de la Nación, EsSalud (Public Health), ONP (Public Pensions) and Public Utility Companies. ASOCIACION PERUANA DE EMPRESAS DE SEGUROS Mexico D.F., November 11, 2014

21 Public-private partnership programs To boost microinsurance Institute of Mexicans Abroad (IME) AMIS in collaboration with the IME and the Ministry of Finance (SHCP) worked on designing social protection schemes for immigrants residing in the United States and Canada. PRONAFIM The Ministries of Economy and Finance worked on the granting of a life microinsurance to cover outstanding balances and give an extra amount to beneficiaries. Heads of household AMIS, SEDESOL and SHCP designed a life insurance with the aim of providing a pension to their children that allows them to complete their professional studies.

22 Public-private partnership programs To boost microinsurance PROSPERA (OPORTUNIDADES) Together AMIS, SEDESOL / PROSPERA and SHCP worked on the design of a life insurance for PROSPERA title holders. In case of death, their beneficiaries receive financial assistance to cover funeral expenses. TELECOM AMIS in collaboration with TELECOM and SHCP designed social protection schemes for the most vulnerable sectors of the population, as well as immigrants residing in the United States. BANSEFI A life microinsurance was developed to provide financial protection to beneficiaries of the insured in case of death, and / or an insurance related to the microcredit due balance.

23 2a) Consumer education, financial literacy Breaking the ICE* 23

24 The term "risk" is inadequate. Unexpected events" is preferred. Low insurance culture Distrust in the insurance sector Insurance is not the preferred protection mechanism. There is no difference between products offered by the insurance industry vs. those offered by the government. Contracts unclear. Inaccessible rural areas. Reduced capacities. Diversity of languages and dialects. Complexity in the acquisition Preference of present over future rewards Low value assigned to tangible benefits of insurance products. Contributions of friends and relatives are preferred. ASOCIACION PERUANA DE EMPRESAS DE SEGUROS Mexico D.F., November 11, 2014

25 FINANCIAL EDUCATION CAMPAIGNS Awareness of risk management. Dissemination of competitive advantages of microinsurance products. Distinction between private insurance and government welfare schemes. Training for alternate distribution channels. Training on claims management and conflict resolution. Measuring and monitoring the impact of these campaigns. ASOCIACION PERUANA DE EMPRESAS DE SEGUROS Mexico D.F., November 11, 2014

26 Das Bild kann nicht angezeigt werden. Dieser Computer verfügt möglicherweise über zu wenig Arbeitsspeicher, um das Bild zu öffnen, oder das Bild ist beschädigt. Starten Sie den Computer neu, und öffnen Sie dann erneut die Datei. Wenn weiterhin das rote x angezeigt wird, müssen Sie das Bild möglicherweise löschen und dann erneut einfügen. AMIS Financial Education Program (As part of its social responsibility) Crece Seguro Contest Insurance financial education among elementary school students since 2010, so children learn to identify and prevent risks, as well as the importance of being insured. Insurance Financial Education AMIS aims to disseminate and promote within Mexican society, the culture of risk prevention and insurance as a protection mechanism against them. Nada es seguro, Tu Seguro Sí Promote prevention, savings and insurance education, in conjunction with the Oportunidades (Prospera) program in which 83 workshops were held in the states of Hidalgo, Mexico, Morelos, Tlaxcala and Puebla.

27 AMIS Financial Education Program (As part of its social responsibility) Insurance Financial Education AMIS has worked for several years in the dissemination of a prevention culture through WORKSHOPS in public-private partnership with various institutions like: - BANSEFI - OPORTUNIDADES - TELECOM - PREPASÍ, ETC. In which they evaluate the acquired knowledge and reward the outstanding participants. AMIS promotes public-private partnerships and consider they need to evolve and promote access to microinsurance to welfare programs beneficiaries.

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29 Consumer Education Project was initiated and driven by the association in relation to an industry commitment Central project funded by member contributions 0.4% of profits To date US$9 million have been spent Most projects run in conjunction with the Regulator Teacher projects run with the Department of Education

30 Consumer Education Community Workshops 49,047 people trained Training in both rural and urban areas Accredited training material 66% of learners were female 92% in LSM 1-3 Commuter Awareness - Commuters on taxis, trains and buses mill people reached Television Programmes 1.5 million viewers through 1 programme 5.2 million through another Programme followed by Twitter and Facebook discussions Teacher Training - 3,645 teachers trained in 9 provinces - Increase in attitudes towards savings and budgeting Community Radio Financial Literacy 11 radio stations 11 languages Inserts followed by discussions with experts Greater impact in rural areas Audience of +/- 11million

31 Consumer Education Lessons Learnt Face-to face workshops are effective but is the most costly form of education, thereby limiting the impact and reach Better retention is achieved when the audience engages and relates the material Initiatives must be across media platforms to ensure retention through repetition Messaging must be easy to understand and in the audiences home language, they felt it easier to listen, interact and ask questions Consumers require basic financial literacy prior to engaging with insurance products

32 Consumer Education Experience and Main Achievements OBJECTIVE CHANNELS Developing consumer skills allowing them to make informed decisions on risk management and insurance Radio, workshops, booklets, videos, webpage and social networks, among others. More than 4 million people covered IMPACT EVALUATION People who listened the radio programs and attended the workshops changed their knowledge. There were no evidence of changes on their perceptions and behaviors THE FUTURE Fasecolda is working with some experts to rebuild the program to reduce the gap between knowledge and behavior thanks to a strategy of cultural changing

33 2b) Resolving customer grievances 33

34 Resolving Grievances Experience and Main Achievements Same treatment to complaints submitted by MI consumers and other insurance consumers Where? Supervisor, insurance company or the ombudsman that every insurance company must have 90% are presented and solved at the insurance companies. 38% of the complains are by lack of information and 38% by poor consumer attention Consumer Protection Code: Selfregulation code that includes practices for companies to make the grievance process easier and faster for our consumers

35 Consumer protection Decentralized public agency created more than 15 years ago (April 1999) Promote and disseminate education and financial transparency among users nationwide, to give them trust in financial products and services. Receives complaints or inquiries by telephone, or in its 36 offices across the country. Protect the interests of users, provides free legal advice and analyzes and verifies that the marketing information is accurate and effective, in order to enhance transparency, fight corruption and build the enabling conditions for the political, economic, social and culture equality.

36 Insurance Sector Claim Index For every 1,000 claims incurred For every 1,000 policies Source: CONDUSEF and AMIS

37 3a) Monitoring the performance of our members 37

38 Financial Reform Approved in 2013 and became effective in It was directed primarily to the banking sector in order to expand credit. It also included other financial sectors, including insurance. Some of the reforms include: Major faculties granted to the National Commission for the Protection and Defense of Financial Services Users (CONDUSEF) regarding adhesion contracts, "abusive" clauses, sound practices, sales of credit related insurance and corporate information. Consider CONDUSEF executive enforcements in some cases. The creation of the Arbitration System in Financial Matters. The creation of a Financial Institutions Bureau.

39 Financial Institutions Bureau It aims to be a query and dissemination tool to promote the products offered by financial institutions, their commissions and fees, claims, non-sound practices, administrative sanctions and any other information that is relevant about their performance.

40 Monitoring Supply Experience and Main Achievements Since 2007 Fasecolda has an information system. A monthly survey provided voluntarily by the insurance companies. Information is collected by type of insurance and distribution channel written and earn premiums, paid and incurred claims, number of insured risks, number of paid claims, insured value, commissions and administration cost Information allows the industry understand the market behaviour from the supply side, analyse trends and do some predictions Financial Inclusion Report, lead by the Superintendence and supported by Fasecolda. Includes information about MI, Mass Market and other kind of insurance, and some social performance indicators The non-renewal ratio grew 6,3% in 2013 (life 2,4% and non life 30,5%) Rejection rate was 5,3% in 2013 (4,6% fore life insurance and 6,6% for nonlife insurance) funeral insurance has the lowest rate with 0,3% followed by fire and earthquake with 1,4%.

41 INFORMATION SYSTEM FOR MICROINSURANCE Financed by the Multilateral Investment Fund (FOMIN) and FIDES under the Microinsurance Program for Latin America and the Caribbean, APESEG developed an information system for microinsurance to support the monitoring and evaluation of the microinsurance market in Peru. The system is intended to offer precise and reliable data regarding microinsurance products. It can generate and compile information by policies, insured lives, claims ratios, and distribution channels at the national or regional level, so insurance penetration can be measured by regions. It will support FIDES in compiling information on the development of microinsurance in the region and will be available for all of its associates. The purpose is to replicate the system among other insurance associations in Latin America. ASOCIACION PERUANA DE EMPRESAS DE SEGUROS Mexico D.F., November 11, 2014

42 Monitoring Financial Sector Charter The Financial Sector acknowledges that access to firstorder retail financial services is fundamental to transformation and to the development of the economy as a whole. The Short Term Insurance industry undertakes to make available appropriate firstorder retail financial services, affordably priced and through appropriate and accessible physical and electronic infrastructure to the Financial Sector Code target market. Reporting Annual Reporting to Council Reporting covers adherence of products to standards set and targets met for number of active policies in place within the target market Performance Performance has historically been poor, initially only targeted consumers earning less than US$300 p.m. In 2013 increased the income threshold to US$500 p.m. The top three reasons for not having short-term insurance were: Don t have a job Don t need it (even though the greatest perceived risk is the theft, fire or damage to property) No assets to insure Short-term insurance is known as a grudge purchase even for normal consumers. For people in the lower income groups, purchasing short-term insurance is not a priority.

43 3b) Improving the performance of our members 43

44 Improving Performance, Improving Client Value Increased the income threshold of the target market to $500 p.m. Expanded the types of insurance products to also include: Motor, Small Business, Agriculture, Livestock Consumer Education Devised new products standards

45 Product Standards Accessibility of Insurers to the target market Appropriateness of products Affordability Non-discrimination of products Flexibility of premium collection Minimum cover offered Alternative Distribution channels Simplicity and understandabilityof products Claims processes

46 Product Standards Pros Cons Ensures product are appropriate for the market Products are fairly standardised, making comparison easier and products easier to understand Builds Consumer Trust Could Stifle Innovation Anti-competitive Drives a compliance mentality

47 RESEARCH AND DEVELOPMENT Market Determining the market. Determining the needs. Products Standardization of products and processes. Simple and innovative products that meet the needs. Contracts easy to understand. Simple and transparent process claims. Distribution channels Leveraging partnerships with microfinance in rural areas. Linking commission rates with customer relationship, claims rates and customer satisfaction. ASOCIACION PERUANA DE EMPRESAS DE SEGUROS Mexico D.F., November 11, 2014

48 Improving Insurers Performance Additional Experiences and Main Achievements Short training course in our insurance training institution (National Insurance Institute), to share good practices and learn lessons from other leading countries in microinsurance. MI Committee, an scenario for the association to share international experiences and where companies share them good practices and define the main topics the association have to work on. Conferences where international experts and important stakeholders for the MI chain could interact with the insurance companies. Hire demand surveys, do research and support researchers.

49 Gracias! Questions? 49