Delegates from Cenfri recently attended the 9th International Microinsurance Conference (IMC) hosted by the Munich Re Foundation and the Microinsurance Network in Jakarta, Indonesia, to participate, facilitate and present on behalf of its partners. The conference was well attended by 400 participants from over 60 countries. Delegates from Cenfri had the following roles:
Herman Smit presented the Business case for retailers from Cenfri’s work with FinMark Trust at the parallel session on Distribution: Selling microinsurance profitably and facilitated a parallel session on the Business case for microinsurance.
Mia Thom presented Scale: thinking big from Cenfri’s work with the ILO’s Microinsurance Innovation Facility at the parallel session on Drivers of scale.
Jeremy Leach presented Understanding the impact of m-insurance failures from BFA/Cenfri’s work with FinMark Trust at the parallel session on Failures and Exploring new frontiers: the potential of micro-insurance investments from BFA/Cenfri’s work with the Microinsurance Network at the parallel session on Impact Investment.
In the opening of the 9th International Microinsurance Conference, Craig Churchill, Team Leader of the ILO’s Microinsurance Innovation Facility and Chair of the Microinsurance Network, told a story about the relationship between girls’ school attendance in Uganda and rainfall patterns. Researchers compared 24 years of school attendance data in rural Uganda and found that girl’s attendance decreases much more than boys’ during droughts. This pattern feeds through to test scores. Girls who stay away from school during droughts did much worse in exams at the end of primary school than boys. The paper suggests that girls are put to work at home to support the family’s income in the short term. But what if farmers were compensated for loss of income due to drought? Could the girls have potentially remained in school? The story highlighted the opportunity that microinsurance has to make an impact.
But designing and delivering the products needed to generate this impact and protect both girls and farmers is not easy. The parallel session on Drivers of Scale revealed that very few products with this potential impact – namely agriculture and health – have achieved scale, and most of those that have, have done so with government or donor subsidies. But these challenges are increasingly being better understood and addressed by the microinsurance community. This conference marked 9 years of the IMC, 5 years of the Microinsurance Innovation Facility and 5 years of the Microinsurance Network. These organisations have played a critical role in creating an opportunity and platform to share ideas and learn from each other to support market development.
The session of the Magical Balance between client value and business case highlighted the top learnings emerging from this community over this time. The parallel session on Drivers of Scale revealed the progress made in microinsurance where nearly a hundred schemes have achieved scale in microinsurance, and exactly half have done so without subsidies (mostly with life cover). The session on the business case for microinsurance showed that insurers are improving profitability by managing claims ratios and tracking data is becoming more and more common to the point that insurers are able to report on break-even sales numbers for microinsurance offerings.
The microinsurance community continues to push new frontiers. The increasing insight into the potential benefits of agricultural and health insurance products are starting to push new conversations and revisit old ones in microinsurance about the role the state can play. The Asian Microinsurance landscape study revealed that with subsidies insurance penetration was 50% and without only 4.8%. Over 90% of the subsidised covers were health-related insurance products. The Indonesian vice-Minister of Health made the case that microinsurance is playing a role in achieving universal health coverage and the ILO has published a paper with cross-country evidence on the issue. There is an increasing understanding by policymakers of the role microinsurance can play in achieving broader public policy objectives.
As a result, the microinsurance community is beginning to rethink the definition of viability. Nowhere was this clearer than in the Asia microinsurance landscape study, where the researchers struggled to come up with a strict definition of microinsurance as risks are indemnified by the state, insurer and community. The business case for microinsurance session further supported this with two out of three of the studies presented specifically looking at both private and public health microinsurance schemes in India and Bangladesh. The study in India by MILK specifically looked at the drivers of sustainability in both private and public schemes. It was revealed that no HMI schemes were sustainable without government subsidies, but the drivers revealed new insights into the reasons why. Rather than loss ratios driving sustainability, expense ratios were. Private HMIs find it difficult to administer attractive products at affordable price. As a result, they cannot achieve the scale necessary to drive down unit costs. A cycle ensues.
At the same time as pushing new frontiers, the current conversations within the microinsurance community are being discussed at a more granular level. Distributors and insurers are seeing how their goods and services can complement each other to deliver value to customers at a profit. For example, mobile network operators and their service providers are increasingly seeing how insurance can complement their voice and data offerings. In addition, what motivates retailers to offer financial services is not only the increase in revenue through the direct sales of financial services, but rather the drive to increase football and drive more profitable behaviour. The interplay is not just between players in the value chain, but also between financial services. Insurance is only one element of a portfolio of financial services that meet the discrete, yet inter-related needs of low-income households. This interplay between financial services will be a major focus of the MAP initiative developed in partnership between Cenfri, FinMark Trust and UNCDF.
At the same time, more countries are focused on tailoring regulation to accommodate microinsurance and improve access. With innovation, regulation is also facing new challenges. The session on Failures reminded participants just how disruptive it can be when products and markets fail and give rise to consumer abuse. In Zimbabwe, 1.6 million people lost cover overnight through disputes between partners in the value chain. Demand-side research highlighted the negative impact this event has had on consumer trust of the Zimbabwe insurance industry. The longer value chains and multiple parties that provide access to the scale of clients needed to deliver microinsurance is becoming an increasing focus for regulators. This was highlighted at the 1st Consultative Forum hosted by the Microinsurance Network in cooperation with the International Association of Insurance Supervisors (IAIS), where the A2ii presented on emerging microinsurance business models and their related risks.
In summary, the community has been pushing the next frontier of microinsurance for a few years now, but the current conversations are only slowly winding down. Many countries and markets are still in the early phases of microinsurance development and the lessons highlighted in the session on the Magical Balance will serve many of them well. Going forward it will be exciting to see what the next frontier looks like at the 10th International Microinsurance Conference held in Mexico City next year.