10th International Microinsurance Conference
11 to 13 November 2014, Mexico City
New study reveals that the total premium of microinsurance in Latin America and the Caribbean exceeds US$ 800m. Mexico is a vital microinsurance market. However, better regulation is needed for migrant workers.
The 10th International Microinsurance Conference was our third international gathering in Latin America, and brought together some 400 participants from 54 countries to discuss recent challenges and opportunities. The preliminary results of the new “The Landscape of Microinsurance in Latin America and the Caribbean (LAC) 2014” study, published at the conference by Munich Re Foundation and the Microinsurance Network, revealed that coverage in the region has grown from 7.6% to 7.9% between 2011 and 2013. More important: the premium now totals US$ 830m making it a business case.
Mexico leads the market
One of the key observations of the study is a slowdown in growth between 2011 and 2013 to an average of 2%. “According to our findings, this slower growth represents a more “considered” growth,” said Michael McCord, which means, among other things, that non-profitable products were discontinued and that companies were looking more carefully at their market approaches. Most of the eight new providers that entered the market were active in several different countries. One example is Bradesco, the largest insurer in Brazil, which sold its first microinsurance policy in 2013. Some of the companies that had stopped offering products specifically designed for the low-income market said that their reason for doing this was a strategic shift to focus on the mass market. Another interesting finding of the study was the shift in distribution channels. Microfinance organisations have played a key role in the past years, but alternative channels such as utility companies have substantially gained in market shares and are continuing to grow.
But can microinsurance be profitable? The answer is yes. Seventy-five per cent of the schemes that were willing to report financial results in the landscape study reported claims ratios lower than 40%. The average claims ratios were 26%. Reported distribution and administration costs lay between 15% and 55%, while the average commission was 24%. However, some schemes reported commissions of up to 60%, which makes profitable sales of products difficult. At the same time this also demonstrates the market power of certain distribution channels such as utility companies.
Despite the market potential, the challenges remain substantial. As too the solutions. “At the first International Microinsurance Conference in 2005, no-one could have imagined that we would one day sell products through mobile phones,” said Craig Churchill, Chairman of the Microinsurance Network. He added: “The conference has made a major contribution to market development. During the past ten years, many participants reported that attending the conferences was a turning point for them, providing new ideas and approaches.”
With the 11th International Microinsurance Conference to take place in Morocco in November 2015, Munich Re Foundation and the Microinsurance Network will continue their efforts to provide a platform for the exchange of knowledge and experience, and accelerate even more learning curves in the future.
About the 10th International Microinsurance Conference
20 November 2014