developing inclusive insurance markets

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Developing Inclusive Insurance Markets Craig Churchill ILO’s Microinsurance Innovation Facility

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A holistic and systematic approach to market development can overcome barriers to serving insurance to the low-income population. Collaboration between supervisors/regulators, industry players, policy makers, and donors is already showing positive results in some countries.

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Page 1: Developing inclusive insurance markets

Developing Inclusive Insurance Markets

Craig ChurchillILO’s Microinsurance Innovation Facility

Page 2: Developing inclusive insurance markets

Discussion flow

1. The ILO’s Microinsurance Innovation Facility

2. What is microinsurance?

3. The different stages of market development

4. The case of Zambia

5. The case of the Philippines

6. Concluding thoughts

2

Page 3: Developing inclusive insurance markets

1) The ILO’s Microinsurance Innovation Facility

Mission“Our mission is to increase the availability of quality insurance for the developing world’s low-income families to help them guard against risk and overcome poverty”

Beliefs“We believe in the power of insurance to change people’s lives, to protect their health and their assets, and to give them peace of mind to make investments for the future”

Launched in 2008 Housed at the International

Labour Organization based on the work of the Microinsurance Network

US$34 million grant from the Bill & Melinda Gates Foundation

Additional support provided by Zurich, AusAID and Munich Re Foundation

Supported over 60 action research partners across Asia, Africa and Latin America

Page 4: Developing inclusive insurance markets

Dissemination through

workshops, conferences, publications, website, etc.

Innovation

grants

Capacity

building

Innovation grants

Capacity

building

1) Our activities

Action Research Partners

New and improved products and models

+Better informed

consumer=

Improved risk management practices

among the working poor

Page 5: Developing inclusive insurance markets

1) Our work 2008-2013 A

bou

t u

s

Page 6: Developing inclusive insurance markets

2. What is microinsurance?

“…not a specific product or product line. It is also not limited to a specific provider type. Microinsurance is the provision of cover to a specific market segment, i.e. low-income persons.” ~ IAIS Issues Paper (2007)

A new market opportunity for the insurance industry to make itself relevant for the majority of the population who do have have insurance.

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Page 7: Developing inclusive insurance markets

2. And why do we care?

7

Outcomes & Impacts Evidence available

Financial protectionLower out-of-pocket expenses 15 5Less burdensome risk-management strategies 12 Higher investment and production 10

Better healthAccess to health services 7Utilization of health services 14 3 Improved health outcomes 10 4

Page 8: Developing inclusive insurance markets

3. Stages of market development

Nascent

Few MI products, mainly credit life

Growing

Simple products are scaled up

Diversifying

More complex products are developed

Competition

Clients have choice of products

and providers

Increase in quality products, diversity of distribution channels, and demand by consumers

88

Page 9: Developing inclusive insurance markets

3. Barriers to market development

• Awareness and interest

• Skills (basic)• Data• Understanding &

trust

• Limited distribution channels

• Viability concerns• Product value

• Skills (advanced)

• Effective public-private partnerships

• Consumer protection

9 • Supply side• Demand side

Page 10: Developing inclusive insurance markets

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3. The stakeholder approach

Many stakeholders can impact the development of inclusive insurance.

There is a need for a coordinated and systematic process for market development, where capacity building, research in the pre-competitive space and innovation would be collectively designed and shared.

Risk carriers, delivery

channels and associations

Regulators and

supervisors

Policy makers

Enablers and donors

Page 11: Developing inclusive insurance markets

3. Stages of development: Zambia and the Philippines

Nascent

Few MI products, mainly credit life

Growing

Simple products are scaled up

Diversifying

More complex products are developed

Competition

Clients have choice of products

and providers

11

ZAMBIA PHILIPPINES

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Page 12: Developing inclusive insurance markets

4. Zambia: Microinsurance before 2009

Regulation

• No specific regulations on microinsurance

• Supportive regulator

• Hesitant and risk averse providers

Product

• Product offerings narrow and limited

• Mismatch between demand and supply

• Inappropriate and unaffordable products

• Complex and complicated contracts

Consumer Awareness

• Low understanding

• Limited experience

• Misconceptions• Distrust of

insurers

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Page 13: Developing inclusive insurance markets

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4. Zambia: Accelerating microinsurance development

• Conducted a diagnostic assessment: opportunities and barriers for inclusive insurance markets

• Created a steering committee (SC) and multi-stakeholder technical advisory group (TAG) to oversee strategy development and implementation process

• Microinsurance development strategy/action plan finalised in January 2010

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Page 14: Developing inclusive insurance markets

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4. Zambia: Microinsurance development process

Regulatory review and formulation

Supplementary studies on the

supply side

Business opportunity awareness

Capacity building

interventions

Supporting product

development and marketing

Consumer education

and product awareness

• Technical assistance to regulator

• Industry consultative workshops

• Supplier assessment study

• Aggregator study• Finscope analysis

• Microinsurance Innovation Seminars

• Exposure visits

• Capacity diagnostic study• Training workshop• Technical assistance• Microinsurance Acceleration

Facility

• Microinsurance marketplace

• Media programmes• Technical assistance

to insurers and distributors

14

Page 15: Developing inclusive insurance markets

15

4. Zambia: Market developments

2012

5 active insurers (Life)and 3 in the pipeline (non-life)

CoverageLife: 220,000+

Credit life: 115,000+

Broader distribution: MFIs, banks, mobile network

operators, labour unions, post office, microenterprise

associations, community based agents

15

2009

2 active insurers among 12 insurers

Less than 1% microinsurance penetration

Mainly credit life

< 90,000 policyholders estimate

Limited distribution mainly via MFIs and banks

Page 16: Developing inclusive insurance markets

• Performance standards formulated• Alternative dispute resolution

mechanism established

16

Market Conduct Product Innovation and

Development

Financial Literacy and Advocacy

Consumer Value and Protection

POLICY AND REGULATORY

ENVIRONMENT

• Microinsurance defined• Microinsurance providers identified• Formalization process clarified• Microinsurance agents/Brokers created • Reporting standards established• MBA Chart of Accounts Revised

• Prototype product developed: composite product

• Contracts simplified

• Branding and slogan conceived• Trainings on MI advocacy and seminars

5. Philippines: Key interventions

Page 17: Developing inclusive insurance markets

17

5. Philippines: Market developments

201235 Commercial insurers

(Life – 17, Non-life 18)

19 Mutual Benefit Associations

89 Products approved

(Life – 38, Non-life – 25, MBAs – 26)

17

2008

2 Commercial insurers

6 Mutual Benefit Associations

7 Products approved

About 3 million individuals covered –50% informal

insurance, mostly credit life

About 12 million individuals covered – excluding

government sponsored schemes

Page 18: Developing inclusive insurance markets

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6. Concluding thoughts

• Market development can be accelerated

• Need for in-depth analysis of the barriers for market development

• Create buy-in through a well-structured stakeholder process

• Leadership by supervisor and key industry persons is critical

• Customize intervention to support progressive development

• Goal, action plan, strategy, market development interventions, performance indicators

• A coordinator is needed to facilitate the process of implementing the action plan

• Focus on generating scale and consumer value, and ultimately consumer protection

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Page 19: Developing inclusive insurance markets

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Discussion, Q&A

Craig Churchill

International Labour Organization

Tel +41 22 799 6242 Email [email protected]