Role of Donors in Expanding Inclusive Insurance

Carol Stewart PSDI Coordinator , Timor Leste Pacific Microfinance Week Nadi, Fiji, October 2013

A Donors Perspective
Political Risk Agricultural Yield Natural Disaster Title Insurance Securing Collateral Credit Life Access to Finance Bond Guarantees Construction

Encouraging Investment

Accident
Health Workers Compensation Pensions

Risk Management

Social Protection

Insurance

Securing Assets

Fire

The Stakeholders
Policy Makers Regulators Distribution Channel Client

Risk Carriers

Donors

Businesses of all sizes Entrepreneurs Farmers Students Men & Women Families Communities

Sound Regulation, Valuable Products, Efficient Delivery, Inclusive Markets

The Role of Donors

Promoting inclusive market growth
Understanding the Market Identify key constraints Demand research: client needs + willingness to pay Enabling Environment Build regulatory capacity Training for insurers and intermediaries Financial literacy and customer awareness. Partner Formation Risk carrier + distribution channel Innovative models Public private partnerships Product Design Address actuarial data constraints Provide expertise for product design Imbed KPIs for client value Knowledge Portal Monitoring & Evaluation Developing and sharing tools and best practices Capacity building

Understand the Market

Going beyond traditional markets

Phases and Challenges

Nascent: Few MI products, Mainly Credit Life
Lack of data Limited skills Low interest Low client awareness, trust Regulatory barriers

Growing: Simple products are scaled up

Distribution channel innovation needed Improve products for greater client value Build client awareness and experience

Diversifying: More complex products are developed

New skills needed by provider Business case and PPPs Need for client protection mechanisms and robust supervision

Competitive: Clients have a choice of products and providers

Adapted from ILO Microinsurance Innovation Facility, Webinar on Developing inclusive insurance markets

Timor Leste PNG Fiji

Nigeria Tanzania Vietnam

Ghana Philippine Brazil

India Mexico South Africa

Understand the Market

Identifying barriers and unlocking potential Supply Side Constraints
Who can underwrite? Who can distribute? What is their capacity? What are their interests? Role of technology?

Market Demand
What are the significant risks? How can insurance play a role? Whats affordable?

Regulatory Considerations
Allowable distribution channels? Reporting requirements? Licensing requirements? Consumer Protection

Understand the Market

Identifying barriers and unlocking potential Supply Side Constraints
Who can underwrite? Who can distribute? What is their capacity? What are their interests? Role of technology?

Regulatory Considerations
Allowable distribution channels? Reporting requirements? Licensing requirements? Consumer Protection

Understand the Market

Identifying barriers and unlocking potential Regulatory Considerations
Allowable distribution channels? Reporting requirements? Licensing requirements? Consumer Protection

Understand the Market

Identifying barriers and unlocking potential

Promote an Enabling Environment

Training in Risk Based Supervision Assistance to develop model regulations / guidelines for expansion of inclusive insurance. Training in Reinsurance

Integrate Inclusive Insurance with the National Financial Inclusion Strategy

Drawing on international standards and good practice:

1. 2. Ensure a sound framework based on Insurance Core Principles Promote a risk based approach to supervision to enable safe experimentation for inclusive approaches

Catalyze Partner Formation

Field workers
Churches Volunteers Insurance Agents Brokers

Banks Credit Unions Online MFIs Mobile Phones

Self-help Scratchgroups Trust and Access Cards Barrier NGOs Health workers Retailers Service Providers

Catalyze Partner Formation

1. Leverage existing structures rather than creating new ones. 2. Assess institutional capacity and ensure underwriting risk carried by competent partner 3. Encourage innovation and promote distribution models that can effectively reach the last mile 4. Assist with training and capacity building where needed

Support Innovative Product Development

Example: Public Private Partnership for health care

Government
OBJECTIVE CHALLENGE OPPORTUNITY DONOR
Social Protection Target: access to health care for those below the poverty line Lacks specialized skills to manage a health fund Subsidize premium for a segment of the population; Fiscal risk transfer

Insurer
Expansion into new markets

Lacks access to required scale; target market unable to pay premium Work with health care providers and manage the health portfolio

Assist with: Demand Research, Program Scoping and Pricing, Competitive Selection of Insurance Provider, Consultations with Health Care Providers, Community Engagement, Monitoring and Evaluation
See: Rajiv Aarogyasri Health Insurance Scheme in Andhra Pradesh

Assess Results and Build Knowledge

Category Product awareness & client satisfaction

Indicator Coverage Ratio Growth Ratio Renewal Ratio Promptness of Claims Settlement Claims Rejection Ratio Incurred Expense Ratio Incurred Claims Ratio Net Income Ratio

Service quality

Product value

Financial prudence

Solvency Ratio Liquidity Ratio

Provide Tools
General Resources
Suggested Microinsurance Reading List Microinsurance Innovation Facility Resources CGAPs Microinsurance Web Resource Guide

Understanding the Market Guidelines for Market Research on the Demand for Microinsurance Business Planning for Microinsurance

Regulation IAIS Insurance Core Principles Access to Insurance Initiative (a2ii) Toolkit Issues in the Regulation and Supervision of Microinsurance

Partnership Formation Managing Microinsurance Partnerships: Handbook Partnership Assessment Questionnaire

Product Design Improving Credit Life Microinsurance Health Microinsurance Schemes: Feasibility Study Guide

Assessing Value Financial KPIs for Microinsurance Social KPIs for Microinsurance How to conduct a PACE client value assessment

Thoughts in closing
Insurance as part of a greater financial inclusion and market development strategy Microinsurance sector development should not precede insurance sector development. Cant expect quick results: assist in phases, withdraw assistance in phases Overcoming the trust barrier requires innovation in business models PPPs may be a good option for scaling products in countries with small populations

Thank you.

More information contact :

Pacific Liaison and Coordination Office www.adb.org/offices/pacific/main psdi@adb.org