Report – 2nd International Microinsurance Conference 2006 - South Africa (2007)

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From 21 to 23 November 2006, the Microinsurance Conference 2006 took place in Cape Town, South Africa. The Conference was jointly hosted by CGAP [Consultative Group to Assist the Poor] Working Group on Microinsurance and the Munich Re Foundation with the support of Finmark Trust. This event was a follow-up to the Microinsurance Conference 2005 that took place in Germany in October 2005.


<ul><li><p>Report Microinsurance Conference 2006 A1</p><p>ReportMicroinsurance Conference 2006Making insurance work for Africa</p><p>Cape Town, South Africa2123 November 2006</p><p>Edited byDirk Reinhard and Zahid Qureshi</p></li><li><p>There were a lot of people workingbehind the scenes. Prior to andduring the event, the conferenceteam Angelika Boos, Petra Hinter-amskogler, Ursula Forstner andMarkus Heigl provided significantorganisational support andworked with a lot of passion tomake this a successful event. Lastbut not least, we would like tothank the team of rapporteurs ledby Zahid Qureshi Marco Ger-hardt, Ailsa Holloway, Leigh Sonn,Koko Warner and Gina Ziervogel for helping us gather and docu-ment all the important lessonslearned from the various sessions,which can be found in this report.</p><p>Craig ChurchillDirk Reinhard</p><p>This report is a summary of theMicroinsurance Conference 2006held in Cape Town, South Africa,jointly hosted by the CAGPWorking Group on Microinsuranceand the Munich Re Foundationwith the support of FinMark Trust.The conference would not havebeen possible without the con-tributions, time and efforts of the38 speakers. Thanks to their input,we had a broad range and varietyof experience and important les-sons to share. Their feedback onthe conference report after theevent was also very much appre-ciated.</p><p>This event was aimed at discussingcurrent practices as well as futureconcepts for microinsurance. Itprovided a platform enabling theexchange of ideas and solutionsfor the many problems to besolved. Without the input from the participants, however, it would have remained an emptyspace. We would therefore like to acknowledge the over 150 par-ticipating experts representing 80 organisations from 30 differentcountries around the world.</p><p>On behalf of the organisers, wewould like to thank the peopleactively involved in shaping theconference, identifying suitablespeakers, and structuring theworkshops: Vronique Faber,Brigitte Klein, Jeremy Leach,Thomas Loster, Michael McCordand Gaby Ramm. We would alsolike to thank Andreas Kleiner andGeorge Allen from Munich Re ofAfrica for their guidance on keyplayers in the market, and forhelping us find such a great con-ference venue.</p><p>AcknowledgementsContents</p><p>Opening address</p><p>Introduction by the organisers</p><p>Launch of the new book</p><p>Agenda: Day 1/1</p><p>Panel 1What is insurance for the low-income market?</p><p>Panel 2Institutional options</p><p>Agenda: Day 1/2</p><p>Parallel sessionsCase studies</p><p>Panel 3Challenges and strategies to extendhealth insurance to the poor in Africa</p><p>Agenda: Day 2/1</p><p>Panel 4Commercialising insurance for the low-income market: Role of regulators, policy makers and insurance/reinsurance companies</p><p>Parallel sessionsThematic working groups</p><p>Agenda: Day 2/2</p><p>Parallel sessionsThematic working groups</p><p>Panel 5Beyond life and health: Microinsurance innovations</p><p>Participating organisations</p><p>Acronyms</p><p>1</p><p>2</p><p>4</p><p>5</p><p>6</p><p>8</p><p>11</p><p>12</p><p>21</p><p>23</p><p>24</p><p>26</p><p>29</p><p>30</p><p>34</p><p>36</p><p>37</p></li><li><p>To address the transaction costs ofdealing with low-income households,transactional banking services areessential so that premiums can becollected and claims paid. However,ATM densities in Africa are extremelylow. For example, Tanzania has oneATM per 600,000 people comparedwith over 100 for the same number ofpeople in Brazil. On the other hand,technology could play a unique role,given that the use of mobile tele-phones is high. In Botswana for ex-ample, 43% have access to a mobilephone, including 36% of the un-banked. In the wake of what may be a new mobile phone bankingwave, townships have many airtimevendors, and airtime is becoming accepted as a currency, pointing to the potential of using technologyto increase access.</p><p>The new technology, which holds the key to cutting transaction costs,finally appears to have reached a critical mass, being user-friendly andaccessible, but it requires micro-insurers to change the supply land-scape and address customer-adop-tion issues. A majority of consumersare prepared to use technology (65%)but still prefer to deal with someoneface to face (56%).</p><p>Coupled with technology and the roleof branchless banking along thelines of the Brazilian model is anotable supervisory and regulatoryissue. While policy makers becomemore activist, interventions oftenhave unintended consequences,restraining access. More appropriatetools to improve the enabling envir-onment are necessary. Further, regu-lators will need to consider a regionalapproach, with cross-border assess-ment of interventions and harmoni-sation to facilitate the growth ofregional players.</p><p>Whilst improving access is chal-lenging, a greater use of technology,proactive supervisory involvement,and greater information on the risksand needs of consumers are startingto create the right conditions to in-crease access.</p><p>Among the poor in Africa, use ofmobile phones is high, and airtime is being accepted as currency. The question is whether insurerscould use it to collect premiums.</p><p>Regulation lacks enforcement. Policy makers need to harmoniseapproaches and facilitate the growth of regional players.</p><p>Access to financial services clearlymatters. Whether the providers areformal or informal, poor householdsare active users of financial servicesand yet their choices are often sub-optimal, costly and high-risk. Further,research has shown that access tofinancial services is a social and polit-ical priority in that exclusion cancreate social instability and aneconomic priority, with greater finan-cial sector development stimulatingincreased economic growth.</p><p>However, research also shows that the financial sector in Africa isthe smallest in the world, which is a problem in terms of economies ofscale, infrastructure and efficiency.Further, the roll-out of the FinScopeAfrica surveys demonstrates that the lower-income market has littleaccess to formal financial services forthe management of risks, restrictingthem to informal mechanisms.</p><p>Nevertheless, it is not all bad. Globalstudies show that life and non-lifeinsurance are growing at a good ratein emerging economies, includingAfrica. With surveys such asFinScope and Financial Diariesdemonstrating the high propensityfor poor households to activelymanage their finances, the challengewill now be to ensure that thecoverage reaches deep into the low-income market and meets the realrisks. For example, the FinancialDiaries project in South Africa showedhow poor households manage risks.55% of one poor households incomewas placed into formal and informalsavings and insurance products. This example, one of many, certainlypoints to the potential size of themarket and how poor householdsalready manage risk.</p><p>In understanding the market, it iscrucial to understand whether the realrisks are being covered. FinScopesurveys again show that many of the real riIsks that people face areinsurable events, but go uncovered.While insurance companies tend to believe that the access frontiersare the unbanked and non-payrollcustomers, FinScope showed that inaddition to the current 6% of SouthAfricans who have householdcontents insurance, there are 29%within fairly easy reach. Beyond that,the challenges are trickier.</p><p>Report Microinsurance Conference 2006 1</p><p>Opening address</p><p>Jeremy LeachFinMark Trust,South Africa</p></li><li><p>Report Microinsurance Conference 2006 2</p><p>According to recent research from theMicroInsurance Centre, fewer than3% of poor people in the poorest 100countries have formal insurance ofsome sort. Poor households are es-pecially vulnerable to risk, both in theform of natural disasters as well asmore regular occurrences, such asillness and accidents. Recently pub-lished reports on climate change showthat the situation is getting worse.</p><p>Microinsurance is an important tool to reduce risks for people withlow incomes, but there are greatchallenges as well as opportunities.Can we governments, donors andregulators, as well as insurers, rein-surers, and finance and developmentorganisations together find the willand means to effectively serve thissizeable market?</p><p>That was the focus as 150 expertsand practitioners from 30 countriesrepresenting 80 entities gathered inCape Town on 2123 November forthe Microinsurance Conference 2006:Making insurance work for Africa.</p><p>The conference was the second spon-sored by the Munich Re Foundationin cooperation with the CGAP (Con-sultative Group to Assist the Poor)Working Group on Microinsurance. It was held with the support of theSouth Africa-based FinMarkTrust, andenabled microinsurance experts fromEurope, North America, Asia andLatin America to share their views.</p><p>The first conference, held in Munichin October 2005, brought together a hundred specialists from around theworld to look closely at some 20good and bad practice case studiesconducted by the Working Group aswell as technical and operationalissues in microinsurance.</p><p>The second conference featured the launch of the book Protectingthe poor A microinsurancecompendium. This 650-page booksynthesises lessons drawn from thecase studies and experiences ofmicroinsurance pioneers around theworld analysed by 38 authors,including academics and insuranceand development professionals.</p><p>The findings reveal that microinsur-ance is indeed viable, and even prof-itable under some circumstances, buta number of difficulties must be over-come for it to succeed. This reportsummarises the main points made inthe 21 sessions.</p><p>An in-depth and practical look atthese challenges, needs and opportu-nities particularly in Africa thatdrove the agenda of the Cape Townconference. In five panels and 16parallel sessions, 57 presenters inter-acted with the participants to exploreways of enhancing and increasingthe outreach of microinsurance.</p><p>All conference presentations can bedownloaded</p><p>Introduction by the organisers</p><p>Craig ChurchillILO, SwitzerlandChair, CGAP Working Group on Microinsurance</p><p>Dirk ReinhardVice-Chairman, Munich Re Foundation</p></li><li><p>Report Microinsurance Conference 2006 3</p><p>Introduction by the organisers</p><p>Worldwide per capita distribution of insurance premiums</p><p>The world is made up of the insuredand the uninsured. There is a thrivingmarket for microcredits and micro-insurance in the developing world.</p><p>Property insurance premiums (non-life including health) per personand per year</p><p>UninsuredUS$125 </p><p>Basically insuredUS$2650 </p><p>Well insuredUS$51100US$101500US$5011,000 &gt; US$1,000 </p><p>No data</p><p>SourceMunich Re, 2006</p></li><li><p>The conference began by launching a new book published by the Inter-national Labour Organization andMunich Re Foundation, Protectingthe poor A microinsurance compen-dium, edited by Craig Churchill fromthe ILOs Social Finance Programme.</p><p>Based on an in-depth analysis of 40 microinsurance schemes aroundthe world conducted for the CGAPWorking Group on Microinsurance,this authoritative book, written by 38 microinsurance experts, bringstogether the latest thinking of leadingacademics and insurance and devel-opment professionals in the microin-surance field. The result is a practical,wide-ranging resource which pro-vides the most thorough overview of the subject to date.</p><p>The book defines microinsurance asthe protection of low-income peopleagainst specific perils in exchange forregular premium payments propor-tionate to the likelihood and cost ofthe risk involved. This definition isessentially the same as one might usefor regular insurance except for theclearly prescribed target market: low-income people. However, as demon-strated throughout the book, thosethree words make a big difference.</p><p>This book brings together the per-spectives and experiences of manyorganisations and experts all in oneplace, said Churchill. The CGAPWorking Group can be proud of pro-ducing such a comprehensive volume,but we cannot rest on our laurels.The next step is to disseminate thebook and the lessons that it contains,and to stimulate further innovation to cover more poor people with betterinsurance products.</p><p>Contents of the book</p><p>Part 1Principles and practices</p><p> What is microinsurance? The demand for microinsurance The social protection perspective </p><p>on microinsurance</p><p>Part 2Microinsurance products and services</p><p> Challenges and strategies to extend health insurance to the poor</p><p> Long-term savings and insurance Savings- and credit-linked </p><p>insurance Meeting the special needs of </p><p>women and children</p><p>Part 3Microinsurance operations</p><p> Product design and insurance risk management</p><p> Marketing microinsurance Premium collection: Minimising </p><p>transaction costs and maximising customer service</p><p> Claims processing Pricing microinsurance products Risk and financial management Organisation development in </p><p>microinsurance Governance</p><p>Part 4Institutional options</p><p> Cooperatives and insurance: The mutual advantage</p><p> The partner-agent model: Challenges and opportunities</p><p> The community-based model: Mutual health organisations in Africa</p><p> Institutional options for delivering health microinsurance</p><p> Beyond MFIs and community-based models: Institutional alternatives</p><p> Retailers as microinsurance distribution agents</p><p> Microinsurance: Opportunities and pitfalls for MFIs</p><p>Part 5The role of other stakeholders</p><p> Role of donors An enabling regulatory </p><p>environment for microinsurance The promotional role of </p><p>governments The role of insurers and reinsur-</p><p>ers in supporting insurance for the poor</p><p> The provision of technical assistance</p><p>Part 6Conclusions</p><p> Strategies for sustainability The future of microinsurance</p><p>The book can be downloaded</p><p>The book can be ordered via the</p><p>Launch of the new book</p><p>Protecting the poor A microinsurance compendium</p><p>Report Microinsurance Conference 2006 4</p></li><li><p>23</p><p>Report Microinsurance Conference 2006 5</p><p>08.3009.00 Opening day 1</p><p>09.0010.30 Panel 1What is insurance for the low-income market? </p><p>10.3011.00 Coffee break </p><p>11.0012.30 Panel 2Institutional options</p><p>12.3014.00 Lunch break</p><p>Agenda Day 1/122 November 2006</p><p>Opening addressJeremy LeachFinMark Trust, South Africa</p><p>Craig ChurchillILO, Switzerland</p><p>Monique CohenMicrofinance Opportunities, USA</p><p>Dominic LiberQuindiem Consulting, South Africa</p><p>Jeremy RowseConsultant, South Africa</p><p>FacilitatorDirk ReinhardMunich Re Foundation, Germany</p><p>Grzegorz Buczkowski (cooperatives)TUW SKOK, Poland</p><p>Doubell Chamberlain (retailers)Genesis Analytics, South Africa</p><p>Bndicte Fonteneau (community-based)University of Leuven, Belgium</p><p>FacilitatorGaby RammSenior Adviser to GTZ, Germany</p></li><li><p>Report Microinsurance Conference 2006 6</p><p>Panel 1 What is insurance for the low-income market?</p><p>Craig ChurchillILO, Switzerland</p><p>Monique CohenMicrofinance Opportunities, USA</p><p>Dominic LiberQuindiem Consulting, South Africa</p><p>Jeremy RowseConsultant, South Africa</p><p>FacilitatorDirk ReinhardMunich Re Foundation, Germany</p><p>Microinsurance helps achieve twoobjectives that are part of the ILOsmission: social justice, and inclusivefinancial markets. It represents notonly a new market for the privatesector, but also social security forworkers in the informal economy andothers classed as poor a vastmajority of whom do not have thepublic safety net which governmentsin developed countries are able toprovide. As a tool agains...</p></li></ul>