Report - 13th International Microinsurance Conference, 7 - 9 November 2017, Lima, Peru

Plenary 2 - The landscape of microinsurance in Latin America and the Caribbean

By Maria Victoria Sáenz

Microinsurance, no longer the “Cinderella” of financial inclusion, is now widely acknowledged as a key player. To help keep track of the rapid p rogress, the World Map of Microinsurance (WMM) – a joint effort of the Microinsurance Network and the Munich Re Foundation – provides a detailed and regularly updated overview of regional markets. The focus of this year’s landscape study, reviewed in this plenary, was Latin America and the Caribbean (LAC).

Key findings of LAC landscape 2016:

  • Lives covered: 52.1 million
  • % of population: 8.2 % covered
  • Gross written premiums: US$ 420 million

The methodology included requiring products to satisfy microinsurance criteria, that is, products explicitly developed for the low-income population, managed based on risk and business principles, and priced to be affordable to the low-income sector. Data was self-reported by insurers, supplemented by figures from regulators and other secondary sources.

 

 
Left to right: Alex Proaño, Principal - MSME Finance, A2F Consulting, United States; Doubell Chamberlain, Chair of the Board of Directors, Microinsurance Network, South Africa; Andrea Camargo, Chief Strategy Officer, MiCRO, United Kingdom; Carla Chiappe, Head of the microinsurance working group of ASSAL, SBS, Peru.

The accessibility of data for this study was particularly challenging. Despite using the same criteria for microinsurance products, isolating them is difficult in markets evolving at great speed in the region. With insurers submitting information on a voluntary basis and no obligation to complete the survey, the gathering of information is hampered by non-disclosure caveats and a lack of trust. Plus, in most jurisdictions there is no regulatory requirement to report microinsurance data as a category. The regulator calls for indications on the design and development of life or general microinsurance policies, but not specifically for reporting of their sales. Usually, data from the private sector shows higher levels of outreach and premium collection than the regulatory agencies.

Growing outreach
Reconciling data from primary sources with secondary research on the 21 largest markets in the region has yielded notable results. A preliminary briefing note was distributed at the conference, ahead of the study’s publication in the first quarter of 2018. According to the study, an estimated 52.1 million people are now (micro)insured – some 8.2 % of the region’s population – and there is significant growth in the supply of property (P), personal accident (PA) and agriculture (A) lines that is changing the markets’ composition (see Figure 6).

A change worth noting is that in LAC the use of mobile distribution channels is catching up with the highly developed examples in Africa. A quarter of the new insurance products are now drawn from partnerships between mobile service providers, banks, microfinance institutions, and insurers.

Some countries had incredible growth in premiums between 2013 and 2016: 1,799 % in Brazil, 284 % in Nicaragua and 95 % in Peru. Coupled with this is a decline in the levels of commissions, from an average 20 % to 12 %. Only 17 % of the products now earn commissions of more than 30 %, down from 25 % in 2014 – indicating a more competitive market aimed at the low-income population.

  
Left to right: Juan José Durante, Financial Markets Lead Specialist, IDB, United States and Katharine Pulvermacher, Executive Director, Microinsurance Network, Luxembourg; Raúl De Andrea, Secretary General, FIDES, Peru.

Complementing the landscape study results, FIDES (Federación Interamericana de Empresas de Seguros or the Inter-American Federation of Insurance Companies) presented highlights of a survey of its member national insurance associations. FIDES groups insurance associations from Latin American countries as well as the US and the Iberian Peninsula.

The survey shows that microinsurance is a reality that is being progressively implemented in the countries in the region. The most common step their supervisors have taken is to define microinsurance – in Argentina, Brazil, Colombia, Costa Rica, Honduras, Mexico and Peru. In Bolivia, the insurance sector itself has agreed on a definition. Although many countries have a definition, only the supervisory bodies in Honduras and Brazil measure the microinsurance volume. In Mexico and Colombia, this is the task of the insurance associations.

The increasing involvement of regulators has played a significant role in the development of the market. An example of this is the willingness of Peru’s authorities to make changes to the regulation after the Access to Insurance Initiative (A2ii) diagnostic study of the microinsurance market. One of the key changes introduced by the Superintendencia de Banca, Seguros y AFP (Administradoras de Fondos de Pensiones) is the improvement of data reporting to make information more reliable and complete.

 

Lessons learnt
  • Design strategies to motivate the private sector to share more information. The market can develop better if accurate information about it is available.
  • It is important to keep analysing the data to draw a better landscape of the industry in the region and also to design a more systematic approach or process for gathering information.
  • What is needed is not “spurious accuracy” but slightly more in-depth knowledge of what the market needs – including both the “appropriate” products and the “desirable” ones. In this sense, LAC has done a great job by defining microinsurance and identifying products for the mass and inclusive markets.
  • All in all, the creation of awareness of risk among the target market remains a challenge.

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