SUMMARY Public - Private Dialogue on Inclusive Insurance

Transcription

1 SUMMARY Public - Private Dialogue on Inclusive Insurance Insurtech and Inclusive Insurance for Climate Risk and Agriculture: CRACKING THE CODE 19 to 22 March 2018/ Galle Face Hotel, Colombo, Sri Lanka

2 The MEFIN Public Private Dialogue (PPD5) was successfully conducted in Colombo, Sri Lanka on March 21-22, Around 80 insurance supervisors, industry leaders and insurance experts from seven MEFIN-member countries in Asia have participated in five panel sessions of the dialogue. Organized by the GIZ RFPI Asia (a German funded program through BMZ), Munich Re Foundation (MRF) and the Insurance Regulatory Commission of Sri Lanka (IRCSL), the PPD5 kicked off in March 19 with a workshop on Technical Issues of Blockchain Technology Use for Inclusive Insurance. MEFIN Network Chairman, Mr Syed Hussain Nayyar, with high level officials who graced the opening of MEFIN PPD5 High level officials grace the opening of MEFIN PPD5 Mr. Andreas Berg, Deputy German Ambassador to Sri Lanka, said Germany s focus in Sri Lanka includes MSME development and protection from climate risks. The global goal of German government is to reach 400 Million people with access to Climate Risk Insurance by the year He emphasized digitalization, including use of blockchain, is a cross cutting priority. IRCSL Director General, Ms. Damayanthi Shyamali Fernando, said learning with peers is a foundation principle of MEFIN, and IRCSL is grateful to be part of this Network. The conduct of PPD5 is timely because Sri Lanka has just launched the National Financial Inclusion Strategy where it aims to recognize and regulate informal insurance activities by formulating Regulatory Framework on Microinsurance. MRF Vice-Chairman, Mr. Dirk Reinhard, underlined the need to have all relevant stakeholders involved to make inclusive insurance work and this is what MEFIN is currently doing through PPD5. Insurance has to be integrated in the broad risk management strategy. Education of clients is key. Enhancing trust of the lowincome sector on technology is crucial. He emphasized follow up after this dialogue is key. Mr Andreas Berg German Embassy Mrs Damayanthi Shyamali Fernando Insurance Regulatory Commission of Sri Lanka Mr Dirk Reinhard Munich Re Foundation Ms. Hannah Grant, Head of Secretariat of Access to Insurance Initiative, a global partnership to support insurance supervisors, said A2ii plans to do more work in the region by leveraging from its expertise in innovation hub, development and publication of regulatory guidance in collaboration with the IAIS. Microinsurance Network, a global multi-stakeholder platform for professionals and organisations that are committed to making insurance inclusive, is committed to supporting Inclusive Insurance through knowledge management and providing platform for a dialogue between regulators and industry, said Ms. Katharine Pulvemacher, MiN Executive Director. Dr. Antonis Malagardis, Program Director of GIZ RFPI Asia and Chair of the MEFIN Secretariat, underlined the impact of RFPI Program and of MEFIN in the following key areas: 1) set-up of the MEFIN Network in 2016 with seven jurisdictions now as members, 2) design and implementation of supervisory instruments such as the Self-Assessment and Regulatory Impact Assessment, 3) development, documentation and dissemination of inclusive insurance business models, 4) development and implementation in the MEFIN countries of a toolkit on Disaster Risk Management and Disaster Risk Transfer for MSMEs and MFIs with an emphasis on an integrated approach and the need for a closer interagency cooperation, and 5) organization of Public and Private Dialogues (PPDs). Mr. Peter van den Broeke, Senior Policy Advisor of the International Association of Insurance Supervisors (IAIS), in his keynote presentation on Proportionality in Regulations emphasized supervisory measures should be appropriate to attain the supervisory objectives of a jurisdiction and should not go beyond what is necessary to achieve those objectives. IAIS work links with GIZ RFPI and MEFIN through the use of regulatory instruments such as the Self-Assessments and Regulatory Impact Assessments. Ms Hannah Grant Access to Insurance Initiative Ms Katharine Pulvermacher Microinsurance Network Dr Antonis Malagardis GIZ RFPI Asia Mr Peter van den Broeke International Association of Insurance Supervisors 1

3 Technology is a solution, but not a panacea The Workshop on Technical Issues of Blockchain (BC) Technology Use for Inclusive Insurance concluded that BC enables the valuation and transfer of assets from Person to Person (P2P), automate payments based on agreed parameters using if, then rule, without an intermediary (e.g. Banks), which reduces costs. It is suited to organize in a shared ledger insurance contracts that are easy to underwrite (e.g. index-based insurance), with small premiums, transparent claims and high-volume transactions (e.g. Microinsurance). It could facilitate the following: 1. Ease in distribution, enhanced interaction. 2. Easier enrolment or selling of insurance policy (e-policy). 3. Bring down cost and improve profitability to insurance companies. 4. Improve insurance processes. 5. Quick claims settlement. 6. Share claims experiences --- speedy business decisions. 7. Better data analytics. Ms Sabahat Ul Ain Presenting Group Outputs Blockchain Workshop Participants Group Discussion Before jumping into too much excitement, Mr. Muhammed Ali Ahmed, Chief Strategy Officer and Executive Director EFU Life Assurance Ltd, Pakistan and a member of MEFIN Network, offered an advice to only use BC in insurance if you can tick all the points below: Are multiple parties (not 3 or 5) sharing data? Will multiple parties be updating data simultaneously, or in a sequence? Is there a requirement for verification from these multiple parties? Are intermediaries adding cost and complexity, which needs to be reduced/ removed/rationalized? Are interactions time sensitive and payouts dependent on chronology? Are transactions by different participants of the chain significantly dependent on each other? Three pillars of smart contracts IoT, AI and BC technology PPD5 session1 Insurtech platforms underlines that Blockchain (BC) enables the movement and programming of money through smart contracts. Information from Internet of Things (IoT) and Artificial Intelligence (AI) triggers smart contracts to move money and assets, completing the three pillars of automation. BC adds value to a product that spreads out in large volumes and requires real time data to inform claims. The presence of index-based insurance, small scale farmers and large number of expected contracts is a fitting environment for BC technology. Consumer protection, prudential regulation and market conduct are the three aspects that will influence the adoption of BC. Customer acceptance of BC technology requires an understanding of its implications. Financial literacy and trust are main issues affecting acceptance of customers. Regulators should decide the level of knowledge consumers need to have on BC and its operational details. One of the suggestions is to focus discussions on the capabilities of BC, and not on its mechanisms. End customers do not need to know the technical details of BC but only see its benefits. The Regulator may facilitate in BC, Alternative Dispute Resolutions. Mr Berende Giving Keynote Presentation Participant Asking Panelists a Question Session 1 Panelists Session 1 Menti Questions 2

4 Proportionality is important in Sandbox regulation. Inter-agency cooperation is equally important PPD5 session2 Proportionality in times of disruption emphasized that Sandbox approach in regulation is appropriate in dealing with Insurtech which allows live experimentation of innovations in a controlled environment but it must balance with consumer protection. Clearly defined roles of agents, distributors and insurers will assist in regulation. Access to insurance and providing explanation on utility of insurance is key. Blockchain and smart contracts are very helpful to reinforce trust on insurance. Session 2 Panelists Insurers, agents and brokers are traditional players in the insurance value chain. Today, the ecosystem of insurance is getting broader. We see non-financial stakeholders playing in the insurance space, for example, in the value chain of agriculture insurance, we see traders, processors and its affinity groups are becoming more relevant in making insurance inclusive. Technology providers that offer efficient platforms for enrolment, e-payment and customer interaction are also now playing in the insurance value chain. From the government side, traditionally only insurance supervisor, Ministry of Finance and Central Bank are the stakeholders in insurance. Today we see other government Ministries increasing interests in making insurance inclusive to their constituents such as the MSMEs, coops, MFIs and low-income communities. Financial regulators and government entities need to closely coordinate and cooperate to avoid regulatory arbitrage and to improve effectiveness and efficiency in provision of government services. The session concluded that there is no onesize-fits all solution to the issue of inter-agency cooperation. Coordination can be driven from financial stability point of view and/or from financial inclusion national agenda. Insurance authority can play a leading role in inter-agency coordination if the policy framework on inclusive insurance is not clear or non-existent. Low outreach and lack of trust persist in Sri Lanka insurance market PPD5 session3 Insurtech cases: Sri Lanka spotlight The insurance industry has experienced 3-15% of growth yearon-year. The industry is consolidating through mergers and acquisitions and segregation of composite insurers. However, insurance penetration is still low at 1.21% of GDP. There are gaps that need to be addressed in inclusive insurance such as low outreach and lack of trust. IRCSL will commence developing this year a Regulatory Framework on Microinsurance. The panel discussion concluded that government has to play leading and enabling role in encouraging the industry and other stakeholders to participate in market development. Industry has to do more to increase trust in insurance. The regulator, on the other hand, should showcase to the clients the value of insurance. Government has to take responsibility in providing reliable weather data to support the industry in upscaling weather index insurance. Overall, appropriate technologies that suit to the segment of the value chain have to be identified. Sri Lanka Spotlight Panelists Participant Asking the Panelists Participant Sharing Inputs 3

5 MEFIN can play a role in capacity building and setting up of risk pool PPD5 session4 Insurtech in Climate Risk Insurance (CRI) the panelists shared there are laws in its respective countries where climate risks can be referred to. However, there are no regulations yet on CRI. The insurance industry is relatively new to this insurance space. In the Philippines, the five insurance entities that composed the MEFIN, Inc. (a private sector counterpart in the Philippines of the MEFIN Network) believes that a national pool is needed to promote CRI. The regulator should take the lead in a discussion about establishing such a pool. Session 4 Parallel Session InsurTech in Climate Risk Insurance Creating awareness is important in climate risk insurance and it is a joint effort of government and industry. Inter-agency cooperation is needed to set up database, support the design of simple products in particular by determining price and implement climate risk insurance. There is need to ensure that premium of CRI is affordable by making research. Insurers can cooperate with MNOs in awareness raising and selling climate risk insurance. The panelists agreed that MEFIN Network could play a role in building capacity of regulators, facilitating inter-agency cooperation and in setting up of a CRI risk pool. Dr Malagardis Moderating Session 4 Open Forum Provision and sharing of reliable data are joint task of Government and private sector PPD5 session5 Insurtech in Agriculture The panel discussion agreed that lack of reliable data is the main challenge in agriculture insurance. Data should be a joint responsibility of public and private sectors. A neutral third party that will manage data could be a solution to avoid conflict of interest. Session 5 Parallel Session Insurtech in Agriculture Technology is part of the solution in promoting agriculture insurance but there are fundamental issues that need to be addressed such as lack of data, product design, education, reach, and measures to mitigate risks. There is a need to continue working on increasing awareness of farmers not only on value of agriculture risk protection and to explore how technology could help in the awareness raising in particular along the agriculture value chain. Powerful and inspiring closing messages Mr. Peter van den Broeke, Senior Policy Advisor of the IAIS, has appreciated the open discussion and exchange in the PPD5. He is more in favour of a regional approach (rather than a global approach like IAIS) because it increases participation of stakeholders and allows focus on relevant topics. He said, he will bring new insights from PPD5, i.e. the importance of inter-agency cooperation, the possibility of innovations in inclusive insurance and that other jurisdictions are still dealing with basic issues like regulatory framework. I am impressed, inspired and is open to attend future PPDs; RFPI did a great work. Peter said. Peer-to-peer learning is good, especially if done regional; we learn from other regulators, said Atty. Ranil Angunawela, Director Legal and Enforcement, Insurance Regulatory Commission of Sri Lanka (IRCSL). He reiterated the message we (IRCSL) need to bring the informal sector to benefit from financial services. There is growing demand from regulators and industry even beyond Asia to interact in MEFIN, Dr. Antonis Malagardis, Program Director of GIZ RFPI Asia, mentioned in his closing remarks. His insights from PPD5, are the need to address the basics and be cautious in advancing to new solutions. He is looking forward to do more joint work with Munich Re Foundation, Microinsurance Network, International Association of Insurance Supervisors and Access to Insurance Initiative. We shall all strive together to make MEFIN network financially sustainable over the years to come. Participant Asking Panelists during Session 5 Open Forum Participants Pose After Checking Out Info Market Place Atty Ranil Angunawela Giving Closing Message 4

6 MEFIN Organizational Meeting, 22 March Colombo, Sri Lanka Dr. Davaasuren Sodnomdarjaa, Chairperson of Financial Regulatory Commission Mongolia, has been elected as Chairperson of the MEFIN Network for Dr. Davaasuren Sodnomdarjaa said I am very pleased to address my greetings to you as the new Chair of MEFIN and wish to thank the member countries for their support and trust. I trust that with the support from GIZ RFPI programme the 7-member countries of the MEFIN Network, including Mongolia, have accomplished great successes in their home countries with considerable progresses in the development of inclusive insurances since Access to insurance and insurance coverage of the low-income population and the ensuing opportunities remain limited in developing nations, and therefore urges us, as regulators, for further developing the inclusive insurance market and extending its scope in target countries, including Mongolia. Dr. Davaasuren further said I look forward to working with you to resolve the priorities in insurance industry and discuss solutions for tackling industry challenges and progressing towards a more inclusive financial system, and in this respect, the International Public and Private Dialogue on Inclusive Insurance is a unique opportunity for such mutual consultation and discussion on key industry topics. Mr. Zaidi Syed Nayyar Hussain, Director Securities and Exchange Commission of Pakistan (SECP) was elected as Vice Chairman. The MEFIN Regional Steering Committee (RSC), composed of insurance supervisors from seven countries in Asia (Indonesia, Nepal, Mongolia, Pakistan, Philippines, Sri Lanka and Vietnam) welcomes the 2018 Chair and Vice-chair of MEFIN Network. EFU Life Assurance Ltd Pakistan is also a member of MEFIN Network. Among the decisions taken by the RSC in the Colombo meeting includes The minutes of RSC meeting in September 2017, Ulaanbaatar, Mongolia 2017 Accomplishments of Technical Working Groups (TWGs) Revised 2018 TWG work plans MEFIN Network Financial Literacy Campaign Kit In the same RSC meeting, the MEFIN, Inc. (Philippines) led by its Chair, Cebuana Lhuillier Insurance Solutions (CLIS), presented its proposed MEFIN, Inc. sustainability plan. Among its strategies to sustain its operations financially independent from GIZ RFPI Asia are: 1) expand its membership, 2) organize fee-based training and conferences, and 3) offer consultancy services on inclusive insurance. Prior to the RSC meeting, the five MEFIN TWGs have met which discussed details of 2018 work plans. MEFIN TWGs members discussing what they can still do in their respective countries in 2018 to ensure that knowledge shared in the MEFIN Network is translated into inclusive insurance solutions especially targeted for the low-income sector. 5