How to boost microinsurance in West and Central Africa

The regulatory body CIMA (Conférence Interafricaine des Marchés d'Assurances) is an international organisation in West and Central Africa – mainly French-speaking countries – whose core objective is to work towards the establishment of a single insurance market. The organisation was founded in 1992 in Cameroon’s capital Yaoundé and is based in Libreville, Gabon. In order to achieve this goal, it relies upon a single set of laws and a single oversight authority to which all 14 member states (Benin, Burkina Faso, Cameroon, Central African Republic, Congo, Côte d’Ivoire, Gabon, Guinea-Bissau, Guinea Equatorial, Mali, Niger, Senegal, Chad, Togo) have transferred nearly all of their powers. In 2012, CIMA released a specific and separate microinsurance regulation for its member countries. These rules are now being implemented in a phased approach throughout the region. As part of this effort, the organisation hosted the “Microinsurance Learning Sessions – Protecting the Working Poor” from 8 to 10 September 2014 in Douala, the economic capital of Cameroon.

Low penetration, high potential
Nearly 140 million people live in the CIMA member countries. But according to the 2012 study “The Landscape of Microinsurance in Africa”, less than 2 million people have microinsurance. Nevertheless, with 162 insurance companies active in the region, microinsurance certainly has great potential. “The existence of stable insurance markets plays an important role in sustainable development” as Jean-Claude Ngbwa, General Secretary of CIMA, stated in his welcome note. How fragile this stability might be is shown by the recent Ebola outbreak, which unfortunately prevented the participants from Senegal from attending the event.

Microinsurance in the CIMA region is still at a very low level. Despite significant growth with substan-tial annual compound growth rates between 2005 and 2011, up to 35% in the case of Burkina Faso and 17% in Cameroon, insurance penetration is still among the lowest in the world. Besides the previously mentioned countries, Benin, Senegal, Mali and Togo are among the more promising countries in the region. But all four, however, were listed only as “hidden talents”, which is the third category in the Landscape Study describing the status of microinsurance development. Looking at the different lines of business, health microinsurance has not developed significantly over the last few years, while outreach in crop and livestock microinsurance products is growing from a very low base. In the recent past, three agricultural insurance companies have been created in Benin, Senegal and Nigeria with the help of the IFC. Credit life remains the most important across the region. With only one out of eight policies covering more than the outstanding loan, the potential for offering more comprehensive products through credit life is still significant.

The business case for microinsurance
Most questions relating to the business case of microinsurance are concerned with how to generate a number of clients large enough to allow the provision of affordable products. With community-based organisations, mutuals and other membership-based organisations still playing a key role in the distribution of microinsurance in the region, there was tremendous interest in the discussions about the use of mobile phones as a distribution channel and its implications for the provider’s IT and management systems. Also, the roles of key stakeholders like the World Bank and insurance supervisors were discussed. It became clear that the governments will have to play a more important role in order to speed up the development of microinsurance. At the same time, countries like Senegal aim to involve the insurance industry more than in the past.

In two sessions discussing successful products, participants agreed that at this point in time the use of mobile phones certainly is the most promising distribution channel. However, they may not be used in all lines of business at the same level, as for example in the case of life and accident insurance. At the same time, the large number of clients accumulated in a short space of time involves substantial reputational risks if systems fail, as examples from Zimbabwe have shown. The challenge remains to move from rapidly growing “freemium” models, where the clients are insured and their level of cover depends on the use of airtime but the mobile phone provider pays the premium, to a model where the phone is mainly used only to transfer money, which requires the client to actively pay the premium.

The way forward
With nearly 350 attendees from 24 countries, the event can certainly be called a milestone for microinsurance development in West Africa. After the 5th International Microinsurance Conference that took place in Senegal in 2009, this was the second largest conference aimed at sharing experience among CIMA member countries. The level of active participation in the various discussions of the 14 sessions at the event exceeded expectations, highlighting the great interest in the topic. Certainly, language plays an important role in that respect. Various participants said between the lines that other international events somehow exclude the French-speaking countries, since English is usually the main conference language. Therefore, events like this recent CIMA conference play a crucial role in getting the discussions going that are necessary to develop the market.

In a strategy meeting after the conference, representatives from the hosting organisations agreed to continue the process led by CIMA.With the support of the French Development Agency (AFD) and other partners, the General Secretariat of the CIMA will finalize a three-year plan to develop insurance and microinsurance in the CIMA region. This plan will be developed in consultation with the stakeholders responsible for promoting the sector, such as FANAF and has two goals: effective implementation of insurance and microinsurance regulation and the creation of an enabling environment for microinsurance in the CIMA region. Furthermore, representatives from organisations such as the Ministry of Finance of Cameroon have also flagged their interest to continue the discussions in local events. The outstanding commitment of CIMA to promote microinsurance in the region is a fundamental basis for the development of microinsurance in the 14 CIMA countries. The Munich Re Foundation will be a reliable partner in that process and is looking forward to working with CIMA and its partners in the coming years.

-------------------------------------------------------------------------------------------------
The Microinsurance Learning Sessions were organised by CIMA with the support of the Ministry of Finance of Cameroon, the Fédération des Sociétés d’Assurances de Droit National Africaines (FANAF), the Munich Re Foundation, Agence Française de Développement (afd), ILO, Making Finance Work for Africa (MFW4), GIZ, Access to Insurance Initiative (a2ii), IAIS, and the Microinsurance Network.