The main objectives of the study were to:
- Develop a comprehensive information base on which strategies for the development of microinsurance in Zambia can be based; and
- Provide the basis for dialogue amongst the key stakeholder categories, including potential clients, providers, intermediaries, government and donor/multilateral agencies; in order to
- Support a strategy process “owned” locally by the various market and regulatory stakeholders.
To do so, it included a review of the demand-side, supply-side and regulatory dimensions of the market, including the relevant socio-economic and financial sector context.
The study forms part of a series of country studies commissioned by the ILO/UNCDF looking to support country-level microinsurance strategies and to develop cross-cutting insights on designing and implementing such strategies. In the case of Zambia the study was conducted in partnership with FinMark Zambia and the FinMark Trust South Africa and seeks to inform FinMark Trust’s own engagement in developing this sector.
Main findings. The study finds scope for microinsurance development in Zambia to, as a first order priority, almost triple the current reach of the insurance sector. Given the structure of the economy, microinsurance is likely to mean any development of the insurance sector beyond the current focus on the formally employed market. It therefore entails breaking open the informal market and finding ways of delivering appropriate products offering a compelling value proposition to individuals in a feasible way. To do so, the role of aggregators or networks of individuals will be crucial.
The most relevant products are likely to be credit life (where the focus needs to fall on creating value for the customer, raising awareness and utilising the scope for cross-selling of voluntary products to credit life customers) and funeral insurance (where a number of interesting project plans and pilots are already underway, the impetus for a number of them stemming from banks rather than insurers). The demand-side discussion indicated a real need for health financing, but the analysis highlighted the challenges in this particular sector and the need for a dedicated dialogue process between industry, the insurance regulator and the Ministry of Health to solve the deadlock regarding a comprehensive health insurance and health financing regulatory framework. As the largest “employer” in Zambia, the role of the agricultural sector in distributing microinsurance was also emphasised – not necessarily in providing agricultural risk cover (with the exception of a few strong value chain groupings such outgrower schemes that may have an interest in channelling agricultural insurance to their members), but of other insurance products, such as life and health, that are of relevance to smallholder farmers.
With more than twice the current reach of the insurance sector, the potential posed by the bancassurance market is not yet reaped. By tapping the full banked market, as well as the pockets of networked individuals in the informal economy (including the agricultural sector), the insurance market has the scope to triple its reach as first order priority.
A number of themes were indentified that are likely to shape the development of the market going forward. These include some regulatory challenges as well as challenges posed by the nature of the industry.
Stakeholder workshop. The findings of the study were presented at a stakeholder workshop in Lusaka on 11 June 2006. The workshop was attended by 63 representatives of a wide range of stakeholders from the regulatory and market sphere. Within the market, the insurance and broker sector as well as the banking sector, microcredit sector, agricultural aggregators and various informal economy organisations were represented. The regulatory sphere was represented by the Pensions and Insurance Authority (PIA), the Bank of Zambia/Ministry of Finance Financial Sector Development Plan Secretariat and the Ministry of Finance. The workshop raised awareness of the issues and opportunities and also triggered lively discussion on some of the key issues. Foremost in the discussion was the challenges relating to the distribution of insurance, most notably the issues around bancassurance and aggregator distribution.
The workshop participants agreed on the need to take the process further to work to resolve key issues and implement select programmes for the development of the industry. Following the workshop, a follow-up meeting between the sponsors and the regulator was held to deliberate the way forward.
This process will culminate in a strategy for microinsurance in Zambia, developed by local stakeholders and with the buy-in of the various stakeholder groups as well as the regulator.