By Lorenzo Chan
The need to enhance resilience within vulnerable communities has never been more urgent, especially in the face of heightened risks posed by climate change and natural disasters. The Microinsurance Network (MiN), in partnership with the United Nations Development Programme’s Insurance and Risk Finance Facility (UNDP IRFF), has conducted the latest Landscape of Microinsurance study, which highlights both the progress made and the gaps that still need to be bridged to protect these communities and break the poverty cycle.
The 2023 Landscape of Microinsurance, based on extensive primary research, paints a picture of progress but also the reality of a significant protection gap still affecting millions. While the microinsurance market across 36 countries is valued at USD 41.4 billion, only 15% of this market is utilised, leaving the majority of potential beneficiaries without insurance coverage.
In 2022, microinsurance reached 330 million individuals, marking a notable uptick in coverage. 11.5% of the target population has some protection. This increase is substantial from 2019 when only a third of this number had some protection. However, close to 90% remain without cover – indicating a significant opportunity and responsibility to close the protection gap.
As the report reveals, the resilience-building impact of microinsurance goes beyond mere statistics; it is a lifeline for marginalised communities, informal workers, and those on the brink of poverty.
A key challenge for insurance providers is how to provide access to the market effectively. Interviews with experts revealed access remains a bottleneck for microinsurance development. Microfinance institutions have emerged as the primary distribution channel globally, followed by other financial institutions, agents, and brokers. This trend underscores their role in distribution and the necessity of physical networks in promoting uptake. Several factors contribute to this: face-to-face interaction builds trust among individuals, and these networks also have an interest to optimize their customer base by integrating insurance into their core offerings. Experts interviewed emphasized the importance of aligning incentives with a broader range of alternative distribution channels to enhance reach and efficiency truly.
The recent study further provides several encouraging examples of progress that have been made.
Rio Uruguay Seguros (RUS), Argentina
Río Uruguay Seguros (RUS), an insurance company in Argentina, actively promotes gender inclusion in the insurance sector. Collaborating with other insurance firms and regulatory bodies, they’ve introduced a “superadores” insurance package tailored for women entrepreneurs. This package includes home insurance covering valuable assets like computers, mobile phones, and household assistance services.
RUS has also developed health insurance packages specifically for women and transgender individuals, based on focus groups to understand their unique challenges. Additionally, RUS promotes employment inclusion by offering scholarships for transgender individuals to become insurance advisors within the company. This comprehensive approach reflects RUS’s commitment to fostering inclusivity and providing tailored insurance solutions to underrepresented groups.
Seguros Bolivar, Colombia
In 2018, Seguros Bolivar launched “Tranquilidad Pymes,” a flexible insurance product tailored to Colombia’s small and medium-sized enterprises (MSMEs). This multi-risk product provides coverage for damage to assets, loss of profit, theft, and damage to third parties. Developed with insights from MSMEs, the product features a simplified contract that eliminates depreciation of insured assets, a single deductible for all coverages, and profit loss coverage equivalent to 5% of the sum insured.
The company digitized the sales process for quick consultations and product packages and streamlined claims resolution with an “extra easy indemnity” hotline. Adaptations prompted by the COVID-19 pandemic include coverage for off-premises equipment and movement of goods without collateral requirements.
Agriculture and Climate Risk Enterprise (ACRE Africa)
Founded in 2014, ACRE Africa serves smallholder farmers across Africa, covering 300,000 farmers by 2022. ACRE Africa leverages technological innovations, including index insurance, AI, and blockchain, to reduce insurance costs.
This technology-driven approach has led to significant cost reductions (30-60% compared to alternatives) and increased access to loans for smallholder farmers, thanks to ACRE’s remote monitoring services and rich agricultural data.
These examples – and many others featured in the Landscape of Microinsurance Study – demonstrate that microinsurance is more than just a financial instrument; it catalyzes social and economic stability, offering a pathway out of poverty. As we confront the threats of climate change and food insecurity, the need to provide access to comprehensive risk management tools can neither be ignored nor delayed any longer.
With nearly 90% of people in low-income countries lacking access to insurance, the global insurance industry must respond swiftly and decisively. Insurers, regulators, and policymakers must work together to democratize access to microinsurance. Continuous focus and effort must be put into defining, guiding and enabling microinsurance. In Latin America, for example, efforts led by the Interamerican Federation of Insurance Companies (FIDES) to guide industry stakeholders in creating more precise and unified definitions of inclusive insurance are crucial.
Promoting microinsurance forms part of a broader mandate to develop insurance markets, enable innovation and close the protection gap. Alongside climate concerns, gender inclusion is gaining attention, with supervisors collaborating with the A2ii to collect sex-disaggregated data.
In Argentina, the national insurance superintendency, Superintendencia de Seguros de la Nación (SSN), conducted the first Gender Equity Survey of the insurance market in 2022. The survey was done in partnership with the A2ii and the Ministry of Women, Gender and Diversity. The results are being used to design initiatives for women’s inclusion.
Several efforts towards financial inclusion have gained traction and must continue if the stakeholders truly wish to move the protection needle decisively and meaningfully. Key pathways to progress include expanding the reach of existing offerings, fostering innovation in product design and distribution, leveraging technology, forging public-private partnerships, and working closely with regulators.
In closing, may the salient findings of the most recent Landscape study be a reminder to insurers of the need for us to live up to the nobility of our industry – to help widows and orphans, to ensure the continuity of lives and livelihoods, to enable communities to restart and rebuild and resume after what will now be temporary setbacks (if they have insurance) after suffering losses – thereby contributing to closing the protection gap and ultimately the minimization, if not eradication of poverty.
About the Author
Lorenzo Chan – Chair of the Board (2021-present) Board member (2017-present). President and CEO of Pioneer Inc. (holding company of the Pioneer Group, Philippines), Lorenzo is considered one of the champions of microinsurance in the country. He brings decades of industry experience to the Network, having continually championed insurance for the middle and low income markets through products and distribution channels beyond the traditional.
