Download Microinsurance und FSE

Managing Risk in Financing Agriculture
1-3 April 2009, Johannesburg, South Africa
Working Group A: Microinsurance
as a Risk Management tool in Rural Areas
Dr. Brigitte Klein, Financial Systems Development, German Development Cooperation (GTZ) and Federal
Ministry for Economic Cooperation and Development (BMZ)
What is Microinsurance?
Microinsurance is
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insurance accessed by low-income people
provided by a variety of institutions
run in accordance with generally accepted
insurance core principle
funded by premiums
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What is Microinsurance? (2)
Microinsurance is
 a financial services, besides savings,
credit and cashless payments which the
poor use to manage their risks
 closely linked with other financial
services via clients, products, insurers,
intermediaries, policy decision makers,
regulation and national strategies
 a strategic tool for different development
agendas (pro-poor financing, agricultural
and rural development, social security
development, mitigation of climate change)
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Major Risks in Rural Areas
Major Risks that are insurable:
1. Illness and injury: HIV/AIDS, Malaria and
Tuberculosis, accidents
2. Death: loss of life (accidental and other
reasons)
3. Loss of assets and production due to
harsh weather effects (droughts, flooding,
storm), and other risks such as theft and fire
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Potential Impact of Microinsurance in Rural Areas
Microinsurance can
 help to reduce vulnerability of rural
households and mitigate the perils
threatening their lives, productivity and
assets
 assist in promoting investment and
productivity by securing the lending risk
for agricultural, investment
 support asset building by securing
housing loans and helping to avoid that
savings and other assets are depleted in
case of an emergency
…contribute to spurring rural
development!
.
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Access – Facts & Figures
Access to insurance remains a huge challenge:
 Brazil: insurance premiums account for 3.38% of GDP
 China: 2.70 % of GDP
 Compared to 15 EU countries with approx. 8% of GDP
 Bangladesh: premiums are less than 1% of GDP
In African countries like Nigeria, Ethiopia or Algeria insurance coverage is
less than 1 % of GDP
 South Africa and Namibia are outstanding: 15.3 and 8.11 %
 Average of Africa: 4.35 %
Source: SIGMA Report (2008)
Only 0.3 % of the poor population in Africa has access to microinsurance.
Landscaping Study Microinsurance Centre (2007)
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The Business Environment in Rural Areas (1)
Compared to urban areas, microinsurance
provision in rural areas faces a number of
serious challenges:
(1) Infrastructure is less developed (roads,
hospitals, telecommunication, water and sanitation,
schools)
(2) Banking network is weaker
(3) Weather and health risks are more widespread
and severe
(4) Population density is often low and distances are
far
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The Business Environment in Rural Areas (2)
 Underwriting is more sensitive and costly as risk
exposure related to health, property loss and
business failure is higher.
 Covariant risks strike hard.
 Reaching scale is more difficult.
 Distribution (sales, premium collection, flow of
funds) is more difficult and costly
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Microinsurance Clients in Rural Areas (1)
When buying insurance, low-income
households often suffer from
 weak financial capability and literacy
 misinformation, abuses, and low-value
products and services.
 They lack trust and good experiences.
 Educational levels are lower.
 Clients are more vulnerable.
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Microinsurance Clients in Rural Areas (2)
 Higher investments for financial literacy
work are required.
 Combination
of
financial
services
(insurance as an add-on) has proven
more effective.
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Challenges for Insurers
The mostly urban-based insurers are not ready to serve rural lowincome markets.
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Demand is not known or understood
Products are weakly designed and range is narrow
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Systems are not adapted
 Premium collection
 Back-office administration
 Claims management
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Marketing strategies and distribution are weak
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Costs do not cover high transaction cost
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Risks assessment is difficult (no mortality and morbidity tables)
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Challenges for Intermediaries
Many rural-based intermediaries are reluctant to
sell microinsurance, and have no know-how
on microinsurance.
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Management and staff of banks is often not
convinced about relevance, business potential
and techniques of microinsurance
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Sales force is not sensitized and trained
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Systems are not adapted (premium collection,
claims management)
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Competition about scarce funds of households
with other financial services
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Marketing strategies and distribution are weak
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High transaction cost
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Challenges for the Support Infrastructure
Most networks, associations, training
providers, reinsures, researchers and IT
supporters are ill-equipped in terms of
offering microinsurance support services.
 Public goods (data, transparency, code of
conduct, awareness campaigns)
 Curricula and TOT for training and coaching
is not existent (product development,
marketing, administration)
 Technology solutions are not developed
 Demand studies are lacking, including the
know-how to implement them
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Challenges in the Policy Framework (1)
The policy framework including regulation and
supervision is not conducive to rural
microinsurance development.
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Awareness and know-how of authorities is weak
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The different policy and regulatory frameworks
lack coherence (finance, agriculture, health, social
protection, consumer protection)
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In a landscape of diverse authorities mandates
are disperse for regulation and supervision for the
various types of providers (Insurers, Banks, Credit
Unions, MFIs)
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There are mandate crossings between various
government agencies (e.g. mutuals)
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Subsidies can impede market based solutions.
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Challenges in the Policy Framework (2)
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Supervisory capacity is limited - and
particularly low in rural areas - which
impedes the supervisor from being
proactive (Rural Banks in Ghana, Ethiopian
MFIs).
Policy and regulatory barriers are not
understood.
High fiscal burden on premiums and
intermediation weakens demand.
General customer protection frameworks
and financial literacy work often do not
include insurance or low-income customers
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Challenges in Policy Framework (3)
In most countries, regulations are not adapted
to the specific features of microinsurance.
Insurance Regulations
Other Regulations
• Entry requirements
• Cooperative laws
• Agent rules
• Payment systems rules
• Demarcation between life
and non-life lines
• Foreign investment rules
• Product regulation
• Capping of commissions
• Know-your client rules
• Health regulations
• Definition of insurance
• Banking or microfinance
rules
• Customer protection
• Tax rules
23. Mai 2017
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Challenges in a Systemic View
Consumer
protection
is a policy task,
but also a crosscutting challenge
involving all actors
at the three levels
of the financial
system.
MACRO-LEVEL
The Enabling Environment
MESO-LEVEL
Support Infrastructure
MICRO-LEVEL
Retail Providers
POLICYHOLDERS
Commercial, mutual and informal insurers;
agents, brokers and intermediaries
Reinsurers, insurers, actuaries, market research
organizations, networks and associations, auditors,
adjusters, information technology providers
Policy, legislation, regulation, supervision
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Principles for Microinsurance
Development
1. The quality of value-for-money products is measured
in terms of financial viability, demand-orientation and
broad outreach.
2. Microinsurance is an integral part of the financial
system and should be promoted as such; e g. via an
“Access to Finance Strategy”
3. Coherence with other sector policies (Agricultural
Development Policy, Consumer protection policy of
Ministry of Trade) results in more effective
approaches
4. Actors follow a market-based approach.
5. Customer protection and financial education are of
utmost importance and requires crosscutting the
involvement of all actors.
Source: Draft BMZ Position Paper Microinsurance (2009)
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What can Banks and Microfinance Institutions do?
The poverty oriented financial services industry is a
very important player to promote microinsurance.
They can decide to add microinsurance.
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Sensitization of board, management and staff of
relevance and potential of microinsurance as
complementary financial service for risk management
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Board and management need to choose a strategic
option:
A - Linkage with insurer and acting as an intermediary
B - Creating a new insurer/microinsurer
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Training of staff, development of incentive system,
adapt procedures and systems
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Sensitization and information of clients and marketing
of new business line
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Pushing a national agenda (consumer protection and
financial education)
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What can insurers do?
Insurers can …
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Learn and sensitize their board and management and train
their staff
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Research demand and develop new products
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Implement pilots and study the impact of products and
sales strategies
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Motivate their networks to support them
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Contribute in a national dialogue among the various
stakeholders
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Proactively seek and participate in the policy dialogue. Help
the authorities to understand microinsurance better.
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Cooperate with networks and the government in financial
literacy and consumer protection work.
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Be transparent and truly customer oriented. Honour claims
commitments fast.
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What can networks and other
supporters do?
Networks, research bodies, reinsurers can …
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integrate microinsurance in their own agenda
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support the learning process about relevance
and successful models
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push the implementation of pilot projects
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motivate a national dialogue among the
various stakeholders
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participate in the policy dialogue
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develop public goods (data, research)
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include microinsurance into
agendas including donors
stakeholders’
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What can policymakers do?
Policy makers and regulators/supervisors are the drivers
for a national financial access policy to mainstream
microinsurance. They can…
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develop their understanding, assume ownership for the
process, give the insurance supervisor a development
mandate and provide resources
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identify the key drivers in the policy framework to abolish
policy and regulatory barriers
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combine several policy tools to make them more effective
and achieve greater impact more rapidly
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speed-up regulatory innovations and other policy solutions
by exchanging with other supervisors and
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initiate a national dialogue among all stakeholders
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develop a national agenda for financial consumer
education including microinsurance
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