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.

Additional Info

  • Country: Zimbabwe
  • Institution: FinMark Trust, BFA
  • Date Published: 2014
  • Document Type: Briefing Notes
  • Author/s: Sandisiwe Ncube, Jeremy Leach

Search news, publications and events

 

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.

Additional Info

  • Country: Zimbabwe
  • Institution: FinMark Trust, BFA
  • Date Published: 2014
  • Document Type: Briefing Notes
  • Author/s: Sandisiwe Ncube, Jeremy Leach

Search news, publications and events