As we head towards 2024, Katharine Pulvermacher, Executive Director, Microinsurance Network, provides an update on the global inclusive insurance market, and explores how the power of technology and people are critical to its success
“Among the underserved populations of the world there are people who are always one flood, one fire, one death away from slipping back into poverty.” These words were spoken by Sharon Donaldson, President of the Insurance Association of Jamaica, during the 2022 International Conference on Inclusive Insurance (ICII). Speaking from Jamaica’s capital Kingston, her words framed how financial resilience is a crucial element to survival, particularly for climate-vulnerable countries such as Jamaica.
For several years, a microinsurance bill designed to deliver financial support for the Jamaican population had been in discussion; however, it wasn’t until the 2022 conference that progress to push forward this agenda took shape, with Jamaican Minister of Finance Dr Nigel Clarke promising that the long awaited draft legislation would be tabled in Parliament. Donaldson’s words hadn’t just been listened to: they had been heard.
As Clarke pointed out, the realisation of such a bill would be a first in CARICOM; it would make insurance accessible to the people of Jamaica, ensuring their financial stability. And this is the purpose of microinsurance: to provide financial protection to those most vulnerable to climate disasters. It is no wonder this market is intrinsically linked with the Sustainable Development Goals, helping to reduce poverty and hunger, promote good health and gender equality, and build on economic growth and climate action.
Recognised as a path towards financial stability, microinsurance is gaining traction; however, as highlighted in the 2022 Landscape of Microinsurance report, only up to 8% of the population in the countries surveyed were covered by a microinsurance product. The reasons behind such low coverage vary, from regulatory constraints and lack of data, to distribution challenges and a limited number of affordable and viable products. There is also limited awareness of insurance as a financial service, experienced by both businesses and customers. This, combined with limited knowledge and awareness of this market segment, plus a lack of capacity to implement on the supply side, is hindering uptake.
Thankfully, knowledge sharing, collaboration and technology, are helping break down these barriers, allowing insurers to gain access to this USD 62 billion market. Projects, such as the latest venture the Microinsurance Network (MiN) has recently embarked on with the International Labour Organization’s (ILO) Impact Insurance Facility and Generation Foundation, is one such collaboration to note here. The project aims to improve the viability, value and uptake of inclusive insurance, by demonstrating the business case for targeting under-served market segments – for both insurers and policyholders. To deliver this we will provide evidence to support this business case – evidence that illustrates the benefits of public-private partnerships to policymakers, that in turn can help build the capacity of insurers, and ultimately encourage insurers to invest in product development for emerging markets.
The means to scale
Traditionally, product variation in microinsurance has largely been limited, however, product lines are starting to evolve to meet new and emerging needs; and while life, credit and health remain the most prevalent forms of cover in emerging markets, a distinct shift has occurred to incorporate climate change. Data from the most recent Landscape of Microinsurance study supports this trend, with an estimated 13.3 million people now covered for climate risks through 64 different forms of agriculture, property, business interruption and life products.
One such example is from humanitarian agency World Food Programme (WFP), which is working with insurers to provide financial protection to 3.8 million people in Africa, Asia, Latin America and the Caribbean, through climate risk insurance instruments for droughts, floods and hurricanes. The Disaster Risk Insurance and Finance in Central America Consortium (DRIFCA), which the WFP launched last year alongside the Partnership for Central America (PCA) and the World Bank, is one example of how the organisation is seeking to increase food security and financial resilience for smallholder farmers in Guatemala, El Salvador, and Honduras.
Alongside product evolution, advancements in technology and the development of online platforms and ecosystems have enabled insurers to reach people and communities who are often living in remote and isolated areas. Insurtech IBISA, for example, provides climate change protection for more than 254,000 farmers, breeders and pastoralists through distribution partners including AgriTechs, food and beverage companies, banks and even public sector service providers – all made possible by its online platform.
Microinsurance provider and MiN member Blue Marble, is another key insurer using technology to deliver income stability and food security solutions for smallholder farmers, not forgetting income protection for SMES. Since its inception, Blue Marble has created 23 programmes through which it reaches nearly 600,000 beneficiaries across the global south. This has been achievable thanks to its cloud-based technology platforms AgSuite – which digitises policy and customer administration, while also helping with the design and operation of its parametric agriculture schemes – and DxSuite, which enables convenient set up of new products and distributors via a dashboard, helping offer tangible and viable protection for those most in need.
Inclusivity Solutions is another member of ours which has made significant strides in delivering inclusive insurance thanks to its digital insurance solutions. With a focus on hospital cash and life loyalty cover, Inclusivity Solutions delivers affordable insurance policies via mobile phones – a feat made possible through its award-winning digital insurance platform ASPin. Thanks to its open APIs, Inclusivity Solutions is able to partner with financial institutions and mobile operators to enable insurers and distribution partners to offer products quickly and efficiently to unprotected clients in emerging markets. To date, the provider has more than 1.5 million customers registered on its platform, with around 400,000 active policies per month.
In reality, this is just the tip of the iceberg as to how technology and digital platforms can help bridge the gap between insurers and insureds. Insurer Etherisc, for example, is showcasing how decentralised insurance protocols and blockchain technology can enable low-income climate-vulnerable smallholder farmers to access alternative revenue streams, such as carbon credits, to purchase weather-index insurance.
At the outset, the outcome of such an initiative is obvious: a stable income and insurance enables farmers to be financially resilient to climate-related events. However the benefits go much deeper than this. Etherisc’s system engages farmers with carbon farming practices that capture CO2, helping the long-term climate outlook and their future resilience. Using information from a weather and biomass data provider and its blockchain platform, Etherisc is currently monitoring the CO2 capture from 80,000 farmers, providing them with carbon credits for insurance purposes. The system can even arrange claims payments within five days of an event, providing a full-circle service.
A call to action for collaboration
While technology is driving the scale and reach of microinsurance products, experts from across the public, private and academic sectors of course play an integral role in spurring action and implementation. Working relationships, such as that between African Risk Capacity Limited and African Union (which provides an index-based weather risk insurance pool and early response mechanisms), are helping improve responses to drought, food security emergencies and other natural catastrophes across Africa. By directly linking funds to pre-defined contingency plans, this partnership has helped insure 100 million people and secure USD 165 million in claims payouts.
Projects benefiting from co-funding partnerships is another important point to make note of. The Swiss Capacity Building Facility (SCBF), for example, has co-funded more than 188 projects across 50 countries, reaching more than 3.4 million people. One recent project of importance was the development of a savings insurance product for people in Ghana and Malawi, which covers death of the main insured, disabilities, and hospitalisation. Through its platform, the SCBF enabled the product to cover more than 17,000 lives.
Partnerships are also proving instrumental for raising awareness and driving progress for the inclusive insurance agenda. The MiN, for example, coordinates the Insurance Development Forum’s (IDF) Inclusive Insurance Working Group (IIWG), which I co-chair alongside Dr. Astrid Zwick, Co-Director of the new Global Shield Secretariat; and Garance Wattez-Richards, CEO of AXA Emerging Customers. Through this partnership, the IIWG has been implementing ideation country workshops to develop country roadmaps aligned with the InsuResilience – the most recent of which have been held in Sénégal and the Philippines. Harnessing support from the UNDP, the World Bank’s Global Index Insurance Facility, the International Finance Corporation and the IDF, these workshops bring members and inclusive insurance practitioners together, to share knowledge and project overviews to develop and design country roadmaps as part of the InsuResilience Global Partnership Vision 2025.
Collaborations derived from conferences and networking events are also worthy of mention here, most notably the ICII, which this year is due to be held in September in Accra, Ghana – one of the first pathfinder countries under the Global Shield against Climate Risks. It is fair to say that after the announcement of Jamaica’s microinsurance legislation bill in 2022 at the ICII, great things are expected from the 2023 event.
Knowledge is the critical key
While it is clear that a combination of technology, people and products are needed to roll out microinsurance successfully, we need more critical market knowledge; we need to identify and act upon emerging trends, such as identity theft and cyber security; and we need more gender-specific data which is still lacking throughout the insurance sector. Only by doing so can we be certain to ensure that no one is ever one flood, one fire, or one death away from poverty.
Looking ahead to the future of microinsurance, it is evident that remarkable strides have been made in recent years in expanding financial protection to the world’s most vulnerable populations. The intersection of technology and human commitment has paved the way for inclusive insurance initiatives to flourish, offering stability to those teetering on the brink of poverty due to unforeseen disasters.
The progress achieved within the sector thus far, from developments in legislation and product innovations, to proactive partnerships across different sectors, demonstrates the potential of microinsurance to drive positive societal transformation.
However, our journey towards comprehensive financial resilience is far from complete. We must recognise that the future of microinsurance rests not solely on the accomplishments of today but on the continued dedication of insurance providers, policymakers, and advocates. To ensure the trajectory of success for inclusive insurance, it is imperative for more players within the insurance landscape to rise to the occasion.
We urge insurance companies, policymakers, and stakeholders to amplify their commitment to supporting inclusive insurance initiatives. The untapped potential of this USD 62 billion market calls for a united effort to overcome the barriers that still persist.
Regulatory challenges, data limitations, distribution hurdles, and awareness barriers must be systematically dismantled through collaborative endeavours. By fostering an environment of shared knowledge and collective action, we can accelerate progress and drive the growth of microinsurance coverage to new heights.
The success of initiatives like the InsuResilience Global Partnership Vision 2025 hinges on our collective determination to ensure that no one is left unprotected and vulnerable. And as the global community of microinsurance advocates converges at events like the upcoming 2023 ICII, we anticipate a wealth of ideas, collaborations, and commitments that will propel this transformative movement forward.
Technological innovation will continue to serve as a cornerstone of this mission. The rapid evolution of insurtech and digital platforms has already demonstrated their ability to bridge the gap between insurers and the underserved, reaching remote communities and previously isolated individuals. We encourage the insurance industry to embrace and invest in these advancements, ensuring that every segment of society gains access to the financial safety net that microinsurance provides.
About the Author
Katharine Pulvermacher is a Executive Director and development economist specialised in Africa, Katharine has a background in investment marketing, research and strategy consulting and brings previous experience managing member-based organisations. She is the programme manager for donor coordination, global partnerships, the Landscape Studies and other market intelligence projects, alongside her other strategic and managerial responsibilities.