Webinar on "Developing Inclusive Insurance Markets"

Developing Inclusive Insurance Markets

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Profile of participantsMore than 300 registered

participants

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Developing Inclusive Insurance Markets

Presenter:Joselito Almario

Director Department of Finance - National Credit

Council, Philippines

Presenter:Peter Van Den BroekePrincipal administrator

International Association of Insurance Supervisors

Presenter:Caroline Phily

Microinsurance OfficerMicroinsurance Innovation Facility

Presenter:Lemmy Manje,

Microinsurance CoordinatorFinmark Trust/ILO, Zambia

Moderator:Jasmin SuministradoKnowledge Officer

Microinsurance Innovation Facility

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Discussion flow

1. The role of supervision in developing insurance markets

2. The different stages of microinsurance development

3. Stimulating a nascent market : The case of Zambia

4. Pushing for microinsurance diversification: The case of the Philippines

5. Learning from the experiences of Zambia and the Philippines

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The role of supervisors (1)

• The objective of insurance regulation and supervision is to protect policyholders.

• The need for protection is higher when access to insurance markets is first extended. Protection will enhance the trust of the consumer in the insurance sector.

• Effective supervision needs - as a precondition - a sound and sustainable financial sector policy. This policy could include the development of insurance markets.

• If preconditions for effective supervision are missing the supervisor should address these. This includes:• Raising awareness of the government and • Using additional powers to deal with the weaknesses in the system.

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The role of supervisors (2)

• Supervisors need to take a proportionate approach when checking insurers’ compliance with insurance regulation.

• This means considering the nature, scale and complexity of the business, risk and organisation when verifying whether the objectives of supervision are met.

• This approach helps to develop the insurance sector and to avoid regulatory burdens and barriers to innovations.

• Possible examples for small enterprises with simple risk profiles:• Lighter touch oversight and registration

• Special conditions to allow pilots

• Lower required solvency capital

• Shared actuarial functions

Stages of development

Nascent

Few MI products, mainly credit life

Growing

Simple products are scaled up

Diversifying

More complex products are developed

Competition

Clients have choice of products

and providers

Quality products, distribution, demand

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Barriers to development

• Awareness and interest

• Skills (basic)• Data• Understanding

&Trust

• Distribution & business case

• Product value

• Skills (advanced)

• Business case & PPP

• Consumer protection

9 • Supply side• Demand side

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The stakeholder approach

Many stakeholders can impact the development of inclusive insurance.

There is a need for a coordinated and systematic process for market development, where capacity building, research in the pre-competitive space and innovation would be collectively design and shared.

Risk carriers and delivery

channels

Regulators and

supervisors

Policy makers Enablers and donors

Impact on Supervision

Nascent

Few MI products, mainly credit life

Growing

Simple products are scaled up

Diversifying

More complex products are developed

Competition

Clients have choice of products

and providers

Moving to next stages will in general show an increase in risk profile, organisational growth and more complex products and operations.

This will affect the proportionate application of regulation which might lead to stricter requirements.

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Stages of development: Zambia and the Philippines

Nascent

Few MI products, mainly credit life

Growing

Simple products are scaled up

Diversifying

More complex products are developed

Competition

Clients have choice of products

and providers

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ZAMBIA PHILIPPINES

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Zambia: Microinsurance before 2009

Regulation

• No specific regulations on microinsurance

• Supportive regulator

• Hesitant and risk averse providers

Product

• Product offerings narrow and limited

• Mismatch between demand and supply

• Inappropriate and unaffordable products

• Complex and complicated contracts

Awareness

• Low understanding

• Low experience• Misconceptions• Distrust of

insurers

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2009

2 active insurers among 12 insurers

Less than 1% microinsurance penetration

Mainly Credit life< 90,000 policyholders

estimate

Distribution mainly via MFIs and banks

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Zambia: Microinsurance landscape

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Zambia: Accelerating microinsurance development

• Diagnostic report completed• Creation of a steering committee (SC) and multi-stakeholder

technical advisory group (TAG) to oversee strategy development and implementation process

• Microinsurance development strategy/action plan finalised in January 2010

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Zambia: Microinsurance development process

Regulatory review and formulation

Supplementary studies on the

supply side

Business opportunity awareness

Capacity building

interventions

Supporting product

development and marketing

Consumer education

and product awareness

• Technical assistance to regulator

• Industry consultative workshops

• Supplier assessment study

• Aggregator study• Finscope analysis

• Microinsurance Innovation Seminars

• Capacity diagnostic study• Training workshop• Technical assistance• Microinsurance Acceleration

Facility

• Microinsurance marketplace

• Media programmes• Technical assistance

to insurers and distributors

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Zambia: Market developments

2012

5 active insurers (Life)and 3 in the pipeline (non-life)

CoverageLife: 220,000+

Credit life: 115,000+

Broader distribution (MFIs, banks, Mobile Network

operators, workers unions, microenterprise associations,

community based agents)

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2009

2 active insurers among 12 insurers

Less than 1% microinsurance penetration

Mainly Credit life

< 90,000 policyholders estimate

Limited distribution (mainly via MFIs and banks)

Stages of development: Zambia and the Philippines

Nascent

Few MI products, mainly credit life

Growing

Simple products are scaled up

Diversifying

More complex products are developed

Competition

Clients have choice of products

and providers

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ZAMBIA

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PHILIPPINES

Inadequate Policy and Regulatory

Framework

• Vague government policy direction

• Unclear regulation and guidelines on microinsurance

• Hesitant providers

Inappropriate Products

• Not tailor-fitted

• Unaffordable• Complex and

complicated contracts

• Cumbersome requirements

Lack of Awareness

• Distrust of insurance providers

• “Leave it to destiny” mentality

• No immediate benefits

• Additional financial burden

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Philippines: Microinsurance before 2009

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Philippines: Microinsurance landscape

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2008

2 Commercial insurers

6 Mutual Benefit Associations

7 Products approved

About 3 million individuals covered –50% informal

insurance , mostly credit life

GOVERNMENT SECTOR

(Policy/Regulatory Bodies)

PRIVATE SECTOR

(Insurance providers, intermediaries,

microfinance institutions)

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Identification of themes

Creation of Technical Working

Groups based on themes

Drafting of framework

Consultation with stakeholders and

public, and finalization of

framework

Drafting and

issuance of guidelines/ regulations

Regional dissemination seminars and

nationwide trainings/ workshops

Philippines: 2009 convergence

• Performance Standards Formulated

• Alternative Dispute Resolution Mechanism Established

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Market Conduct Product Innovation and

Development

Financial Literacy and Advocacy

Consumer Value and Protection

POLICY AND REGULATORY

ENVIRONMENT

• Microinsurance Defined• Microinsurance Providers Identified• Formalization Process Clarified• Microinsurance Agents/Brokers Created

(CBOs included)• Reporting Standards Established• MBA Chart of Accounts Revised

• Prototype Product Developed: composite product

• Contracts Simplified

• Branding and Slogan Conceived• Trainings on MI Advocacy and

Seminars

Philippines: Key interventions

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Philippines: Market developments

201235 Commercial insurers

(Life – 17, Non-life 18)

19 Mutual Benefit Associations

89 Products approved

(Life – 38, Non-life – 25, MBAs – 26)

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2008

2 Commercial insurers

6 Mutual Benefit Associations

7 Products approved

About 3 million individuals covered –50% informal

insurance , mostly credit life

About 12 million individuals covered – excluding

government sponsored schemes

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Lessons in developing inclusive insurance markets

• Need for in-depth analysis of the barriers for market development

• Create buy-in thanks to a well-structured stakeholder process

• Customize intervention to support progressive development

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NascentFew MI products, mainly credit life

GrowingSimple products

are scaled up

DiversifyingMore complex products are developed

CompetitionClients have choice

of products and providers

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Learning from Zambia’s experience

• Ownership• Effective engagement of key stakeholders and local ownership of the process

• Leadership • Support and leadership from the Insurance Regulatory Authority• Executive support and coordination of process• Dedicated multi-stakeholder technical working groups

• Road map• Goal, action plan, strategy, market development interventions, performance

indicators

• Action research• Link research to action at different levels ensuring that research outcomes are

integrated into programming [e.g. supplier capacity building plan/interventions should be based on supplier assessments]

• Monitoring, impact assessment and information dissemination• Measure and share impact and emerging lessons within the industry and

globally

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Learning from the Philippine experience

• Institutionalize inclusivity• Set up strategic public-private sector collaboration• Provide effective mechanisms for multi-sectoral dialogues

• Build trust• Formulate broad-based frameworks through consultations as an initial step• Involve community-based organizations in the whole process• Issue clear guidelines/regulations (providers/distribution

channels/products/contracts/claims settlement, etc.)

• Ensure consumer value/protection• Require discernible marks in contracts for approved microinsurance products• Localize redress mechanisms to ensure accessibility and least cost

• Broaden financial literacy• Include all sectors, not only clients• Design key messages pertinent to each major stakeholder• Involve local government units• Create a core of advocates at all levels

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Developing Inclusive Insurance Markets

Presenter:Joselito Almario

Director Department of Finance - National Credit

Council, Philippines

Presenter:Caroline Phily

Microinsurance OfficerMicroinsurance Innovation Facility

Moderator:Jasmin SuministradoKnowledge Officer

Microinsurance Innovation Facility

ON Q&A

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Presenter:Peter Van Den BroekePrincipal administrator

International Association of Insurance Supervisors

Presenter:Lemmy Manje,

Microinsurance CoordinatorFinmark Trust/ILO, Zambia