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Regaining momentum? Update on microinsurance in South Africa

In South Africa, the proposal for a microinsurance regulatory framework has been on the table since 2008, when National Treasury released a Discussion Paper on the Future of Microinsurance Regulation. The Discussion Paper initiated a consultative process with the National Treasury, Financial Services Board and the insurance industry – supported by FinMark Trust and Cenfri – that was finalized in 2011 with the release of the South Africa Microinsurance Regulatory Framework. The 2011 policy document entrenched and refined the proposed regulatory framework that was envisaged to be incorporated into a forthcoming Microinsurance Act and subordinate legislation. However, in 2013 the decision was made to no longer pursue standalone microinsurance legislation, but rather to incorporate microinsurance provisions under the new financial sector regulatory structure to be implemented in South Africa under the so-called “Twin Peaks” framework, with a number of interim measures to start giving effect to microinsurance from 2014 onwards.


With implementation yet to take place more than five years since the discussion paper was first published, the question arises: are the proposed elements of the regulatory framework still relevant given changes in the market and regulatory environment?


Cenfri, on behalf of FinMark Trust, embarked on research to answer this question and assess the local microinsurance environment some five years after the initial discussion document was published. The purpose was to assess the continued relevance of the proposed microinsurance regulatory framework given market trends as well as delays in implementation.


The initial findings were presented at a workshop in March 2014 and revealed that the trends witnessed in terms of insurance usage, supply-side movements and broader regulatory developments together entrench, rather than undermine, the continued relevance of the microinsurance framework.


Growth in insurance penetration has not kept up with adult population growth, implying a slight decrease in overall usage as a percentage of adults. In the lower-income market this trend has been even more pronounced, with the number of people with insurance being slightly lower in 2013 than it had been in 2008. Neither has formal insurance gained significant ground vis-à-vis informal uptake.  Thus the policy imperative to enhance formalisation and uptake in the low-income market remains as strong now as it was in 2008.


The sense from the supply-side is that the microinsurance framework will still add value, even more so given broader regulatory trends which impact on compliance cost and complexity. While a few aspects of the proposed microinsurance regulatory framework may be problematic, the proposed parameters for the most part still meet market realities. However, there is an imperative for microinsurance regulatory change to happen soon, to go hand in hand with an effective enforcement strategy, as well as to create certainty and lead to simplification rather than to add complexity through yet another layer of regulation.


Please click here to download the full report (PDF, 0.9MB)


In addition to assessing the continued relevance of the proposed microinsurance regulatory framework, FinMark Trust has so far commissioned two “microinsurance readiness assessments” as part of their on-going support to microinsurance development in South Africa. These assessments apply a detailed template of each of the proposed aspects of the microinsurance regulatory framework against the business parameters and realities of potential new microinsurance licence holders to assess what the impact of obtaining a licence would be on their operations. The assessments are intended to support local providers with their compliance strategy as they gear up for the microinsurance framework, as well as to provide a reality check on the potential impact of the proposed microinsurance framework to the National Treasury and Financial Services Board as they finalise the regulatory framework.


Please click here to download the microinsurance readiness assessment for the case of a funeral administrator (PDF, 1.12MB) 

Regulating m-insurance in Zimbabwe: managing risk while facilitating innovation

M-insurance is insurance sold through and/or with a mobile network operator (MNO) and has gained significant attention in recent years due to its rapid growth in African and Asian markets and its potential to grow inclusive insurance markets. According to CGAP's brief on the emerging global landscape of mobile microinsurance, over 70 m-insurance schemes have been launched globally across 15 countries, with one initiative winning an award from the insurance supervisor for its innovation and value to the consumer.

However, not all schemes have had the same success. In Zimbabwe, the dramatic failure of EcoLife resulted in 20% of the adult population losing cover over night and highlighted the critical need to balance the sometimes competing financial policy objectives of financial inclusion (of which m-insurance could be a powerful driver), financial stability, integrity, and consumer protection (also known as 'ISIP').

FinMark Trust commissioned Bankable Frontier Associates (BFA) and Cenfri to learn lessons from the EcoLife m-insurance case and develop recommendations with the aim of protecting clients and ensuring positive synergies between financial inclusion and these other policy objectives in the m-insurance space. M-insurance offers significant potential to increase access to insurance for the under and unserved populations and supervisors should be encouraged to find ways to support these models. However, unlike traditional micro- credit which takes a long time to grow, the potential for scale can create systemic risk and therefore more focus should be placed on setting rules up front and closely observing the initiatives. So, whilst the dictum "do not rush to regulate" has important lessons for supervisors in a nascent market, there is also a need to set rules ex ante to ensure that one ensures a positive synergy between financial inclusion and a stable and well-functioning insurance sector. In line with the principle of proportionality, there is a need for a more stringent 'test and learn' approach than would typically be the case for initiatives that do not pose the same systemic risk.

This case study and recommendations are only the start of a learning process of how to manage these fast growing schemes. We welcome the opportunity to build off this paper and develop a clearer view on how to ensure synergy between financial inclusion and a stable protected inclusive insurance market.

ILO's Microinsurance Innovation Facility Special Annual Report (2013)

The ILO’s Microinsurance Innovation Facility recently released there 2013 Special Annual Report to mark the end of 6 years of the ILO’s Microinsurance Innovation Facility. In this time the microinsurance industry has grown dramatically to cover around half a billion people with an increasingly wide range of products. Microinsurance has been increasingly taken up by mainstream insurers, with 33 of the world’s 50 largest insurance companies offering microinsurance in 2011, up from just seven in 2005. More and more, governments view microinsurance as an important mechanism to achieve policy objectives.


Throughout the developments of the last 6 years, two fundamental questions have faced the industry – Is microinsurance viable for providers? And does it provide value to clients? The 2013 Special Annual Report makes the case that there is evidence of both. In addition, it includes the Facility's new 5-year Quality at Scale programme (2014-2018) that aims to reduce the vulnerability of an additional 100 million low-income persons.


Please click here to download the complete report (PDF, 5.57MB)


Cenfri and the ILO’s Microinsurance Innovation Facility share the common goal of increasing the availability of better insurance products to a greater number of low-income households on the African continent. As such they partnered to conduct research to achieve the goal. The following are the Cenfri authored or co-authored studies completed in partnership with the ILO’s Microinsurance Innovation Facility in 2013:

Mobile Phones and Microinsurance

Insurers are using mobile phones to address two main challenges facing the microinsurance sector: increasing efficiency and reaching scale. Mobile phones and microinsurance (ILO’s Microinsurance Innovation Facility Microinsurance Paper #26) looks at the mobile phone beyond just a self-enrolment device, but as infrastructure for delivering insurance. By leveraging mobile phone infrastructure insurers have made processes more efficient across the insurance value chain; reducing turnaround times for enrollment, premium collection, claims processing; lowering costs; and bridging geographical distances.


In addition, it reviews partnerships with MNOs and the need to balance incentives to attract and retain clients, with providing evolving value to the end-client.  Mobile network operators (MNOs) provide a distribution channel with immense potential to provide insurance to the vast pool of mobile phone subscribers, the majority of whom do not have insurance, but the opportunity needs to be managed carefully.


In an effort to identify lessons that support practitioners looking to use the mobile phone in microinsurance, the ILO’s Microinsurance Innovation Facility and Cenfri reviewed 13 insurance schemes that are using mobile phones in some capacity. The review reveals good practices and lessons for insurers to consider when implementing mobile-based microinsurance.


The following are the emerging lessons from the study:  

  • Insurers should have a clear objective and understand why and how they want to leverage the mobile phone.  
  • Insurers should find ways to build their brand recognition.  
  • Leveraging the MNO’s brand in the initial phase of market development makes sense from a distribution standpoint. However, the insurer needs to find ways to build brand recognition and get to the “front of mind” of the client if it wants to develop other distribution channels in the future.
  • Insurers need to monitor that commitments to clients are met.
  • A loyalty-based insurance scheme can help build a culture of insurance.
  • Insurers should push for products that provide higher client value.
  • Insurers need to take an active interest in claims processing and ensure claims are paid on time.
  • Insurers can build on the MNO’s interest in retaining customers.  
  • Insurers do not need to partner with the largest MNO.  
  • Insurers should promote persistency of clients.
  • Insurers should build capacity to segment client data. 

Please click here to download the complete report (PDF, 1.06MB)

Please click here to read Cenfri's CGAP blog on designing mobile microinsurance products: premium collection 

Scale: Thinking big

Achieving scale is a significant success factor for microinsurance schemes, as low premiums with high costs require substantial volumes to make an initiative sustainable; however to achieve scale is difficult. In an effort to identify lessons that support practitioners, the ILO’s Microinsurance Innovation Facility commissioned Cenfri to review microinsurance initiatives that have achieved scale  to identify and understand their trends and drivers in scale.


Scale: Thinking big (Microinsurance Paper #30) analysed 95 Initiatives that achieved scale and evaluated 8 case studies in detail to understand what drives scale. The study revealed that most initiatives that achieved scale in microinsurance did not build up to scale over time. Rather they sought out and maintained access to large target groups either through mandatory sales, partnerships (including access to voluntary groups, branding and product design) as well as agency.


The following are the emerging trends observed in achieving scale:

  • The majority of schemes (72%) offered at least one voluntary product with only 28% of schemes limiting clients to only compulsory products.
  • 66% of microinsurance is distributed through some form of third party aggregator (banks, MFIs, pre-existing groups such as labour unions, retailers, MNOs, post offices, credit providers or utility companies).
  • 34% cent of microinsurance is distributed through the state.
  • The largest proportion (53%) of microinsurance initiatives to have achieved scale exists in Asia. 
  • India and China have the vast majority of state subsidised initiatives and contribute to the number of health insurance schemes that have achieved scale.
  • The unsubsidised schemes, which account for 50% of all schemes, largely sold life products (including credit life and funeral products).
  • Very few agricultural schemes have achieved scale. 

The following are the emerging lessons from the study:

  • Insurers should align their scale strategy with their target group.  
  • Partnership is a cornerstone of scale, but incentives should be aligned.
  • Mandatory products offer instant scale and can be leveraged to offer other products.
  • Government has an important role to play in achieving scale for health and agricultural products.
  • Appropriate technology is essential for administration, information and communication at scale.
  • Tailoring products and processes to meet client needs increases uptake and retention.  
  • Agency is expensive, but offers substantial benefits if distribution networks are leveraged. 

Please click here to download the the complete report (PDF, 1.0MB)

Please click here to download the eight in depth case studies (PDF, 0.9MB)

Please click here to view the presentation at the 9th International Microinsurance Conference in Jakarta (PDF, 0.8MB)

CISNA MI Forum: Official launch of report on Regulating for Inclusive Insurance Markets in SADC

The report on Regulating for Inclusive Insurance Markets in SADC was officially launched at the SADC Committee of Insurance, Securities and Non-Banking Financial Authorities (CISNA) Microinsurance Forum in Johannesburg, South Africa on 6 December, 2013. This report supports the implementation of commitments made by Member States of the Southern African Development Community (SADC) to align the regulation of their financial sectors with international standards. These commitments are contained in the Protocol on Finance and Investment (FIP) which was adopted by the SADC Summit in 2006 and subsequently ratified (and thus came into force) on 16 April 2010. The report entails an assessment of the degree to which regulatory approaches accommodate financial sector development and financial inclusion as guided by the IAIS Application Paper on Regulation and Supervision Supporting Inclusive Insurance Markets.


FinMark Trust partnered with the CISNA secretariat to support this project. Its interest is to support the regional integration process in the area of inclusive financial services (insurance in this case) and to ensure that regulatory harmonisation is tailored to the domestic priorities and constraints of member countries. 


Please click here to download the full report (PDF, 1.8MB)


Inside the report


SADC faces high levels of exclusion in insurance. It is therefore appropriate for SADC supervisors to pursue inclusive insurance markets based on international guidance. Since the vast majority of SADC populations are excluded from insurance, it also holds that retail markets are extremely small. Microinsurance can therefore form a foundation for building the overall retail insurance market.


The document contains three sections:

  • The market analysis provides an overview of the current level of development of national insurance markets in SADC focusing on population size and income levels , the risk experience of the target market, the players in the formal insurance market as well as the size of the formal market, and also considers informal risk mechanisms being utilised in the various countries. This provides context to the rest of the discussion but also illustrates the market drivers of regulatory approaches.
  • The section on market risks discusses the key risks perceived by the SADC insurance supervisors, as regulatory design and enforcement is often driven by these. This may range from consumer protection risks (e.g. particular abuses occurring in segments of the market) through to threats to market stability (e.g. where providers are not financially sound or able to comply with reserve requirements).
  • Finally the regulatory section seeks to understand how facilitative the national insurance regulation within SADC Member States for the development of inclusive insurance markets is. Whilst at the same time providing the background information for crafting proposed guidance for the harmonisation of regulatory frameworks in the area of microinsurance. In respect of each regulatory topic, the relevant guidance provided by the  IAIS Application Paper on Regulation and Supervision Supporting Inclusive Insurance Markets is reflected and used as a benchmark for the evaluation of existing regimes in SADC.

This document therefore takes a holistic approach to examining the current state of access to insurance in SADC, whilst also examining the potential for greater harmonisation of approaches across countries to providing insurance to the unserved within the region.

9th International Microinsurance Conference

At the 9th International Microinsurance Conference hosted by the Munich Re Foundation and the Microinsurance Network in Jakarta, Indonesia Cenfri presented the following work on behalf of the FinMark Trust and the ILO's Microinsurance Innovation Facility 

1st Consultative Forum Jakarta, Indonesia (2013): Microinsurance business models, risks and regulatory implications

It has now been five years since the findings from the original five A2ii microinsurance diagnostics in Colombia, India, the Philippines, South Africa and Uganda were synthesised and key themes extracted and disseminated through a series of focus notes. The process elicited insights into how regulation affected the evolution of these microinsurance markets and provided a guide for policy-makers, regulators and supervisors looking to support the development of microinsurance in their jurisdiction.


Since then, diagnostic studies have been rolled out in more than 10 further countries, prompting the A2ii to embark on a new round of cross-country synthesis to extract key overarching themes. This cross-country synthesis is conducted by Cenfri on behalf of FinMark Trust and with co-funding from GIZ. It comprises two outputs:

  • Identifying evolving microinsurance business models and their regulatory implications.
  • Analysing the overall regulatory approaches to catalyse microinsurance market development, considering what triggers each specific approach so as to inform regulators and supervisors in the decision of what the most appropriate approach would be in their context.

The findings from the first output were presented by Stefanie Zinsmeyer of the A2ii at the first Consultative Forum faciliated by Véronique Faber and hosted by the Microinsurance Network and the International Association of Insurance Supervisors (IAIS) in Jakarta, Indonesia on Tuesday November 12, 2013. 


Please click here to download the consultative draft of the presentation (PDF, 3.56MB)


The findings are also used as input to the forthcoming IAIS Issues Paper on Market Conduct, Distribution and Consumer Protection in Inclusive Insurance Markets.

Main findings from focus group discussions (FGDs) in Mozambique

Cenfri recently released a summary of the main findings from the focus group discussions (FGDs) in Mozambique conducted and authored by the International Capital Corporation (ICC) of Mozambique. The FGDs form part of the demand-side analysis inputs into the forthcoming Access to Insurance Diagnostic in Mozambique commissioned by the United Nations Capital Development Fund (UNCDF) and Gesellschaftfür Internationale Zusammenarbeit (GIZ) in Mozambique and funded in partnership with the FinMark Trust. 


At the core of the diagnostics is the demand-side analysis which uses a combination of qualitative and quantitative survey techniques to understand the low-income market's experience of risk, the severity of different risks and their interaction with insurance where conducive. FGDs are used to draw out qualiative insights that provide a deeper undertanding of perceptions and the motivation behind behavior. This provides a key input into the diagnostic which aims to identify the barriers to and opportunities for insurance market development, on the basis of which regulatory and market-related recommendations are then made for future development. 


Please click here to download the full report (PDF, 0.9MB)

Cenfri Learning Journey (2012)

Cenfri and the ILO's Microinsurance Innovation Facility have partnered to achieve the common goal of increasing the availability of better insurance products to a greater number of low-income households on the African continent. As an output to the partnership, Cenfri documents emerging lessons learned from its microinsurance activities. In an effort to share these emerging lessons with the wider microinsurance community, Cenfri in collaboration with the ILO's Microinsurance Innovation Facility has drafted a learning journey that chronicles Cenfri's research activites in 2012. 


The document has the following structure:

  • Section 1 explores Cenfri's approach to research
  • Section 2 identifies common barriers to microinsurance market development emerging from the diagnostics conducted in China, Mozambique and Tanzania
  • Section 3 reviews the emerging lessons from a study tour reviewing microinsurance business model innovations in Latin America by a South African insurer and retailer
  • Section 4 provides insights from the review of the low-cost insurance product standards developed by the industry in South Africa to promote activity in the low-income market
  • Section 5 looks ahead to the activities planned by the ILO's Microinsurance Innovation Facility and Cenfri for 2013

Please click here to download the full learning journey (PDF, 0.8MB) 

The nature of informality in the South African funeral services market - implications for policymakers and regulators

Funeral insurance is the most prevalent form of insurance in South Africa with just less than 90% of all risk cover being attributed to this form of insurance, more than a quarter of which is informal.


Cenfri recently released a study on the nature of informality in the South African funeral services market. The study was funded by the International Development Research Centre, Ottawa, Canada and set out to understand what the implications of the new South Africa Microinsurance Policy Framework will be on the funeral assistance business.


The study aims to provide empirical evidence to address new questions arising from interventions set forth by the government:

  • What is the nature of informality in funeral service market?
  • What are the drivers of informality which translate to barriers to formalisation?
  • What would be the implications of the proposed formalisation on the industry based on how insurance provision by funeral service providers works in practice?
  • What insights can regulators take into account when finalising the microinsurance regulatory framework and the approach to formalisation?

Please click here to download the short focus note (PDF, 0.4MB) 

Please click here to download the longer focus note (PDF, 0.8MB) 

ILO's Microinsurance Innovation Facility Annual Report (2012)

As one of the ILO’s Microinsurance Innovation Facility’s official partners Cenfri is pleased to announce the release of the Microinsurance Innovation Facility's 2012 Annual Report.


The ILO's Microinsurance Innovation Facility and Cenfri have partnered to achieve the common objective of increasing the availability of better insurance products to a greater number of low-income households on the African continent. The Facility's Annual Report contributes to this by documenting the learnings from existing microinsurance activities, which will help to understand the success factors necessary for the development of valuable microinsurance products


The Microinsurance Innovation Facility's 2012 annual report is organized as follows:

  • Part 1 summarizes the Facility’s 2012 accomplishments and thoughts on their next phase of operation, beginning in 2014
  • Part 2 describes microinsurance development and the experiences of the Facility’s partners across the world
  • Part 3 presents lessons and new findings in microinsurance that were generated by the Facility’s partners
  • The Annexes list:
    • Facility’s innovation grantees and strategic partners (Annex I)
    • knowledge products (Annex II)
    • capacity-building activities (Annex III)

Please click here to download the Facility's 2012 Annual Report (PDF, 4.5MB) 

Tanzania Access to Insurance Diagnostic


Cenfri recently released the Tanzania Access to Insurance Diagnostic study on behalf of FinMark Trust. The study was funded as partnership between Financial Sector Deepening Trust Tanzania (FSDT) and FinMark Trust, with the support of the Tanzania Insurance Regulatory Authority (TIRA).


The study comprises a series of 8 documents consisting of one headline findings summary document and seven input documents, each focusing on a specific thematic area, that build up the evidence base to headline findings.


The series was designed so that readers can focus on the Headline Findings document, drawing on specific input documents for the evidence base and as per their area of interest. 


Please click here to download Document 1: Headline findings (PDF, 1.10MB)


Click read more below to access the main Tanzania Access to Insurance Diagnostic homepage with the complete list of documents

Kenya microinsurance landscape: Market and regulatory analysis (2010)

"If only 1 million M-PESA users and 1 million Kenyans with bank accounts who are currently uninsured buy insurance through these channels, market size will increase by more than three-fold from 3% to 10% of Kenyan adults."


This is just one of the many opportunities and findings from the recently completed Cenfri study, commissioned by the Insurance Regulatory Authority (IRA) of Kenya and funded by the International Labour Organization (ILO), United Nations Capital Development Fund (UNCDF) and Financial Sector Deepening Trust Kenya (FSDK) to consider the opportunities and challenges to microinsurance development in Kenya.