THE LANDSCAPE OF
MICROINSURANCE IN LAC:
GAPS AND OPPORTUNITIES
MICROINSURANCE FORITO
XVI INTER-AMERICAN FORUM ON MICROENTERPRISE – FOROMIC 2013
MICHAEL J. MCCORD
MICROINSURANCE CENTRE
29 SEPTEMBER, 2013
Microinsurance in LAC
7.6% of the region’s
population is covered by
microinsurance
7.8% without Brazil and
Mexico
2.6% without top five
(JM, PE, EC, CO, MX)
No. Insured, MM
Coverage ratio
However, this is primarily
by low-value life and
personal accident
products
 Need to expand beyond
basic products and increase
volume of people covered
Market could be over 300 million
covered with premiums of over
USD 6 billion.
2 questions:
What gaps in microinsurance
development do we see?
What opportunities are there for
addressing them?
Start by identifying various market types…
Country allocation by market typology
Criteria:
macroeconomic,
commercial,
development, other
market issues
Characteristics
• MI just starting/about to start
• Few insurers, maybe one basic product
• Often small population
Gaps
• Know-how
• Product development
• Actuarial analysis
• Voluntary sales
• Regulatory support
• Working with non-MFI
channels
• IT, especially back office
• Consumer protection
Recommendations
• Regulation:
• Proportional
supervision
• Meso level:
• Technical assistance
capacity building
• Sharing lessons
• Distribution
• Enhance capacity
• Micro level / private
goods:
• Paradigm shift facilitation
• Institutional structuring for
MI
The Case of Costa Rica
• Characteristics:
• Insurance was statecontrolled monopoly until
2008
• First private insurers began
sales in 2010
• No MI identified yet
• Gaps:
• Lack of distribution channels (MFIs
reach only 25,000)
• Lack of insurer motivation or
capacity for microinsurance
• Lack of client demand and
knowledge
Recommendations/
Opportunities – Costa Rica
• Regulation:
• Learning from other
jurisdictions
• Meso level:
• Leverage REDCAMIF
regional network
• Distribution
• MFI network is looking to
partner w/ an insurance broker;
pilot in progress
• Need creativity in distribution,
as MFI outreach is low
• Micro level / private goods:
• Niche markets:
microentrepreneurs and
Nicaraguan immigrants
• Overcome the ‘brand’ of the
state-run company
• Characteristics
• MI market is driven by MFIs
• Limited growth from other
distribution channels
Gaps
• Voluntary sales
• Back office and IT capacity
• Brokers and
intermediaries
• Cost accounting and
controls
• Health covers
• Ag covers
• Claims assessment
technologies
• Consumer protection
Recommendations
• Regulation:
• Assess structures in relation
to IAIS paper on inclusive
insurance
• Proportional supervision
• Consumer protection
strategies
• Reduce/eliminate taxes
• Meso level:
• Capacity building of insurance
associations and their institutes
• Insurance training institutions
• Actuaries and risk tables
• Technical assistance capacity
building
• Develop IT systems
• Sharing lessons
• Distribution
• Coordinate with other
regulatory bodies regarding
new distribution channels (e.g.
mobile service providers)
• Enhance capacity of distributors
• Micro level / private goods:
• Help institutions understand
cost structures
• Institutional structuring for
MI
• Paradigm shift facilitation
The Case of - Bolivia
• Characteristics:
7.23% MI
coverage ratio
• Vibrant microfinance market
• Regulatory requirements of
credit market help drive
microinsurance
• Sophisticated market in terms
of risks covered, accessibility,
and simplicity
• Reasonable MFI commissions
(12-18%)
• Client protection has evolved
• Gaps:
• Distribution is concentrated in
MFIs, credit-linked products
• Lack of affordability for more
complex products
• Lack of client
knowledge/demand outside of
MFI network
Recommendations Bolivia
• Regulation:
• Clarify distribution
requirements to
facilitate alternative
distribution
• Consider incentives to
expand MI market
• Meso level:
• Market education
• Insurance association to
take a larger role in MI
advocacy
• Distribution
• Identify and build capacity
of alternative distribution
channels
• Understand costing
• Micro level:
• Improve capacity of
insurers to respond to
market needs
• Understand costing and
risk to improve pricing
Characteristics
Gaps
• Robust middle class
• Distinction between traditional insurance
and microinsurance is ambiguous
• Reaches large numbers of people, but with
basic products, some with questionable
value
• Consumer protection
• Regulatory support
• Regulatory requirements –
policy content
• Linkages with mission-led
institutions
• IT/Back office efficiencies
• Cost accounting and
controls
• Health and ag covers
Recommendations
• Regulation:
• Assess structures in relation
to IAIS paper on inclusive
insurance
• Proportional supervision
• Consumer protection
strategies
• Reduce/eliminate taxes
• Meso level:
• Capacity building of insurance
associations and their institutes
• Insurance training institutions
• Actuaries and risk tables
• Technical assistance capacity
building
• Develop IT systems
• Sharing lessons
• Distribution
• Clarify legal structures for
distribution
• Coordinate with other regulatory
bodies regarding new
distribution channels (e.g. mobile
service providers)
• Enhance capacity of distributors
• Micro level / private goods:
• Help institutions understand
cost structures
The Case of - Brazil
• Gaps:
5.36% mi
coverage ratio
• Limited distribution to
poorest populations
and rural areas
• Little effort made to
track product value or
social performance
• Characteristics:
• “Popular” or “mass market”
insurance provided mainly by
formal commercial insurers
• Regulators recently developed
“8 Circulares” that address mi
• Significant R&D initiatives
inform insurers
Recommendations –
Brazil
• Regulation:
• Circular implementation
• Careful consumer
protection
• Meso level:
• Distribution
• Improvement in coverage
through MFI/banking
agencies
• Micro level / private goods:
• Development of
• Facilitation of technology to
innovative, marketimprove efficiencies
responsive products
• Expansion to rural areas
• Enhance linkages with
government programs and
others that currently reach
rural areas
Characteristics
• Robust and rapidly-growing middle
class
• Both strong in microfinance and have
many “alternate” delivery channels
• Multiple strong insurers and channels
competing for mi business
Gaps
• Consumer protection
• Regulatory support
• Cost accounting and
controls
• IT
• Health and ag covers
Recommendations
• Regulation:
• Assess structures in relation
to IAIS paper on inclusive
insurance
• Proportional supervision
• Consumer protection
strategies
• Reduce/eliminate taxes
• Meso level:
• Capacity building of
insurance associations and
their institutes
• Actuaries and risk tables
• Sharing lessons
• Distribution
• Clarify legal structures for
distribution
• Coordinate with other regulatory
bodies regarding new distribution
channels (e.g. mobile service
providers)
• Market education:
• Develop for specific needs of
each market
• Monitor effectiveness of
market education efforts
The Case of - Colombia
• Characteristics:
17.23% mi
coverage ratio
• Vibrant, commercially sustainable market
• 25 insurers report MI to FASECOLDA
• FASECOLDA provides market education,
capacity building, data collection,
representation
• Exploring alternative channels due to
growing cost of distribution through MFIs
and utilities
• Competition creates tension between
profitability and value for clients
• Gaps:
• 2 major channels (MFIs and utilities)
are nearly tapped out
• High commissions erode value
• Lack of high value products and high
value innovation
Recommendations –
Colombia
• Regulation:
• Consider impact on MI
implications in decision
making (ex. In-kind
funeral)
• Meso level:
• Continue to leverage
efforts of and share
lessons from
FASECOLDA
• Distribution
• Take advantage of existing
infrastructure such as call
centers
• Micro/institutional level:
• Shift focus to long-term
thinking
• Agriculture insurance
Opportunities/Recommendations
• Further MI development will require both public
and private goods
• Focusing on the gaps identified for each of the
market typologies will have the greatest effect
• Key areas for action:
•
•
•
•
•
Legal framework
Distribution
Market education
Meso level capacity / infrastructure
Micro / institutional level capacity
Microinsurance in Latin America and the
Caribbean – the Way Forward
• Focus interventions on the Credit-led and Mass
market-led country types
• Let early microinsurance champions begin to
develop and show commitment in Frontier
countries before significant interventions are
undertaken
• Hybrid countries need less intervention but can
provide lessons and experience to the rest of the
region
Growth will continue in the region, but without key interventions,
it will continue on the same trajectory of basic products and a push
to mass market
The MicroInsurance Centre
“Developing partnerships to insure the world’s poor”
www.MicroInsuranceCentre.org
23
mjmccord@MicroInsuranceCentre.org