30-31 May 2016, Cairo, Egypt
Microinsurance Learning Sessions Egypt “Paving the way for financial inclusion”
Consultations on new microinsurance regulation will start in July 2016
Around 150 representatives from the insurance industry, distribution channels, supervisory authorities and donor organisations met in Cairo to share their experiences and discuss innovations to advance insurance for emerging consumers in Egypt. The event provided participants with an opportunity to share knowledge and learn from other parts of the world. It also helped to improve understanding of the Egyptian market and its opportunities and challenges.
Expectations in the Learning Sessions were high. “We want to see active discussions and expect practical solutions”, said Mr. Sherif Samy, Chairman of the Egyptian Financial Supervisory Authority (EFSA). Many Egyptian governmental entities, including the EFSA, today have increased their efforts to make financial services available in the country. “Efficiency remains a key challenge in microinsurance”, according to Mr. Kotb, Chairman of the Insurance Federation of Egypt. “We need efficient products, enabling regulation, a market that understands the products, which needs education, including educating actuaries and effective distribution channels”.
A big market with many opportunities
Only 0.3 million of the approximately 90 million people living in Egypt are covered by microinsurance today revealed the latest figures from the World Map of Microinsurance. There are three microinsurance providers, and the premium income stands at only US$ 0.2m. The overall insurance premium has increased from nearly 30% from 2014 to 2015. However, the total insurance sector accounted for only about 3.5% of the GDP.
Access to financial services, in general, is a challenge in the country. 65% of the population currently do not have access to formal banking systems. To improve the situation, a mobile payment system was introduced in 2013, which today has nearly four million users. The system allows a maximum balance on the account of US$ 500, and transfers or withdrawals of US$ 300 per day. With roughly 100 million mobile lines currently active, there is a huge potential for expanding mobile payment systems. However, according to experts, one of the many challenges remains the legal environment that needs to be more flexible to allow more ways of using the mobile payment system.
Develop favourable regulation first – but don’t forget about capacity building
According to the “Access to Insurance Initiative”, 18 countries today have microinsurance regulation in place; in 22 countries, including Egypt, such regulation is under development. “Regulation must not hold innovations back from being developed”, said Michael Kofi Andoh, Head of Supervision at the National Insurance Commission of Ghana. “The regulator too can play a much bigger role, especially in the field of education” he added. Participants agreed that it is important to identify the key stakeholders and thus develop a strategy for reaching out to and educating them. The insurance regulator can also increase trust in insurance by clearly communicating that certain insurance products have been approved by the regulator, and clarifying which contacts are available for clients in case of difficulties.
Microinsurance needs a long-term approach.
The question still remains as to why the insurance industry is still not very active in reaching out to the low-income sector in Egypt. The potential is immense, and results from the Landscape Studies clearly show that insurance for emerging consumers can be profitable. However, there are still a lot of challenges to be solved. Achieving scale is key, and compulsory products can be the first step in achieving this. Use of the (right) technology – and especially the use of mobile phones – can increase outreach and efficiency, but regulation needs to allow innovations. To achieve success, microinsurance needs a long-term perspective of at least five to seven years. Short-term success is very unlikely. As a first step, insurance providers should conduct market research to understand the demands of the clients and also develop the requisite organisational set-up for microinsurance in their company. Controlling claims costs and managing expenses is key to sustainability and profitability. Experts agreed that partnerships with other stakeholders such as Mobile Network Operators (MNOs) and donors can help to overcome challenges more easily.
Mass distribution channels, including MNOs, are the most important distribution channels globally, according to Michael McCord, President of the Microinsurance Centre and Chairman of the Microinsurance Network."With microfinance institutions currently being the main distribution channels in Egypt, it will be difficult to reach scale”, said McCord.
The EFSA announced that by July 2016, further steps will be taken to develop microinsurance regulation in close consultation with the insurance association. Issues such as new distribution channels will be addressed, as well as the kind of reporting that will be required by the insurance providers. At the same time, the EFSA is aiming at awareness campaigns in the media to show the importance of microinsurance. This should be complemented by further market education as well as capacity-building efforts for associations and other supporting organisations. “Citizens must feel there is an easy way to access products and receive a claim”, concluded Mr. Sherif Samy. The vision for Egypt is the implementation of an incentivising insurance regulation, a more proactive private-sector participation, and measures ensuring the education of the market. Munich Re Foundation together with its partners will continue to support the development of microinsurance in Egypt to achieve this vision.
About the Microinsurance Learning Sessions Egypt
The Microinsurance Learning Sessions Egypt were jointly organised by the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH on behalf of the Federal Ministry for Economic Cooperation and Development (BMZ) through its programmes for the “Promotion of the Microfinance Sector in the MENA Region” (MFMR) carried out with funding by the European Union, the partnership for “Making Finance Work for Africa” (MFW4A), Munich Re Foundation and the Microinsurance Network and the SANAD Fund for MSME´s Technical Assisstance Facility, with funding from the European Union. The sessions are organised in collaboration with the Egyptian Financial Supervisory Authority (EFSA), the Insurance Federation of Egypt and the Microfinance Federation.