Strategies to Expand and Deepen the Insurance Market in Africa

Transcription

1 Ad-Hoc Expert Meeting on CAPACITY-BUILDING FOR THE INSURANCE SECTOR IN AFRCA 23 February 2009 Strategies to Expand and Deepen the Insurance Market in Africa by Mr. Craig CHURCHILL Social Finance Program, International Labour Organization (ILO) The views expressed are those of the author and do not necessarily reflect the views of UNCTAD

2 Strategies to Expand and Deepen the Insurance Market in Africa Craig Churchill International Labour Organization

3 Overview of Presentation 1. Introduction to inclusive insurance 2. African microinsurance examples 3. Strategies for creating inclusive insurance Policymakers Insurers Delivery channels 4. Microinsurance resources 5. Conclusions

4 1) Introduction to Inclusive Insurance: Microinsurance

5 ILO s interest in microinsurance The ILO is concerned about the promotion of decent work: more and better jobs The availability of social protection for workers and their families The impact of financial polices on social justice, i.e. toward more inclusive financial markets This reflects the two most common perspectives on microinsurance

6 The microinsurance continuum Social Protection Benefits are a human right (e.g. health, pension) Contains a redistributive element New Market 4 billion persons living on less than $2/day Product and distribution innovations can make the poor a viable market for insurers

7 Microinsurance is a mechanism to protect low-income people against specific perils in exchange for regular premium payments proportionate to the likelihood and cost of the risk involved Microinsurance is not Small insurance companies Just another product offered by MFIs Regular insurance products with smaller sums insured and premiums Savings, credit, risk prevention

8 Country Uganda Malawi Philippines Viet Nam Indonesia Lao P.D.R. Georgia Ukraine Bolivia What risks are the poor Priority concerned risk about? Illness, death, disability, property loss, risk of loan Death, food insecurity, illness, education Death, old age, illness Illness, natural disaster, accidents, livestock disease Illness, children s education, poor harvest Illness, livestock disease, death Illness, business losses, theft, death, retirement income Illness, disability, theft Illness, death, property loss (including crop loss in rural areas) Adapted from Cohen and Sebstad (2006)

9 Most common types of microinsurance products Degree of Difficulty Credit life Term life/personal accident Savings life Property insurance Endowment life Health insurance Agriculture Degree of Success

10 Challenges for microinsurance Developing sustainable products that meet the needs of the market Reducing transactions costs (enhancing affordability) Creating an enabling regulatory environment Overcoming the market s natural resistance and educational barriers Building microinsurance infrastructure (e.g. actuaries, TA providers, data management systems) Distribution: getting products to the market Developing a microinsurance approach to claims

11 2) African Microinsurance Examples

12 Cooperative Insurance Company, Kenya Developing Bima ya Jamii: Basket product covering life, disability and the National Health Insurance Fund (NHIF) coverage Selling through MFIs, SACCOs and other cooperatives Emphasizing training and consumer education for distribution channels and their members Collaborating with Swedish Cooperative Centre, NHIF, and Folksam Insurance (Sweden)

13 Hollard, South Africa Providing homeowners and content coverage for lowincome households Selling through non-traditional distributors: retail shops, mobile phone air time vendors Testing inexpensive claims assessment strategies Providing replacement materials instead of cash payouts Learning about the demand for voluntary asset cover (most microinsurance is mandatory)

14 Union des Assurances du Burkina Vie (UAB) Targeting informal sector entrepreneurs (e.g. market vendors) Distributing Cauri d or, based on a contractual savings scheme that includes life and disability coverage Collecting clients contributions daily (as low as 150 francs CFA or 0.35 USD per day) Testing smart cards and collectors with hand-held terminals to improve efficiency and reduce fraud

15 3) Strategies for Creating Inclusive Insurance Policymakers Insurers Delivery channels

16 Policymakers Financial inclusion policy Promotion: Raise awareness, educate insurers National strategy approach Data collection Infrastructure Adjustments to the insurance regulations?

17 Insurers BOP strategy is not just corporate social responsibility Requires commitment from top, independent space and culture Not just standard products with small premiums and sums insured Need to understand the market s needs, preferences Dedication to educating the market and building trust

18 Credit unions Delivery Channels Banks Insurance companies Retailers Labour unions On-line & ATM Self-help groups MFIs NGOs Cooperatives Utility companies Smart cards Cell phones Low- Income People Computer kiosks Service providers Employers Link to existing transactions for efficiency

19 4) Microinsurance resources Microinsurance Network (formerly CGAP Working Group on Microinsurance): and newsletter ILO s Microinsurance Innovation Facility Publications

20 Four Pillars of Activities Microinsurance Innovation Facility Innovation Grants Technical assistance Research Dissemination

21 Innovation Grants Grants: $20,000 to $600,000 for 2-3 years Frequency: 5-10 issued every 6 months for first three years Purpose: To test new products, models or approaches to consumer education Organizations eligible include insurance companies, semi-formal microinsurers, employers associations, labour unions, cooperatives and other people s organizations, and other distribution channels

22 Africa Latin America/ Caribbean Asia Institutional models SCC/CIC/NHIF (Kenya) La Positiva (Peru) AMUCCS (Mexico) Seguros Argos (Mexico) Health FINCA/Microcare (Uganda) UMSGF (Guinea) Calcutta Kids (India) VimoSEWA (India) Property / Agriculture Hollard (South Africa) Planet Guarantee (Mali) People Mutuals (India) DID/SICL (Sri Lanka) Life /Accident UAB (Burkina Faso) AIC (Haiti) PICC (China) ICICI Prudential (India) Max New York Life (India) Other Guy Carpenter (Latin America) CIRM (India)

23 Learning about microinsurance Conducted 24 case studies, which draw lessons from 40 microinsurance providers, including risk carriers and delivery channels, primarily in Africa, Asia and Latin America Case studies are available on Published Protecting the poor: A microinsurance compendium with Munich Re Foundation

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25 5) Closing Thoughts Microinsurance is not just regular insurance with smaller premiums and sums insured Successful products: Overcome the wariness of customers Adapt to the socio-economic situation of the poor Strive to create an insurance culture Pivotal time for sector development Must scale up, by: Leverage existing distribution channels Start small: Ensure product viability first Build on lessons learned Innovate to add more value to products

26 THANK YOU! For more information: or or call Craig Churchill