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The future world of inclusive insurance – staying ahead of developments

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

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    Modern technology is transforming the insurance industry and offers huge opportunities to close the insurance gap. Microinsurance today reaches a promising 8.3% of the population in Latin America and the Caribbean according to recent studies. At the same time, the lack of cover against natural disasters pushes millions back into poverty again and again when disasters strike. Governmental involvement and the use of modern technology are key factors for making insurance more inclusive.
    Conference report 2017
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    Today more than 8% of the population in Latin America and the Caribbean have some sort of microinsurance cover according to new findings from the “Microinsurance Landscape Study” published at the 13th International Microinsurance Conference. Nearly 5 million policies were found in Peru, which together with Brazil, Mexico and Nicaragua has seen the largest growth in Latin America in recent years. One of the main reasons for this development was increased government involvement.

    The 2017 earthquakes, floods and hurricanes in Latin America, however, have shown that safety nets including insurances are still not strong enough. “Peru is at risk. Earthquakes, floods and drought, also phenomena such as El Niño cause trouble”, says Eduardo Moron, the president of the insurance Association in Peru (APESEG). “Whenever there is a risk there should be insurance for it”, he said at the opening of the conference. “We have to find a way to create insurance products that meet the peoples' needs. With this we can help build a more resilient economy.”

    Protection against natural disasters is a top priority
    César Liendo, Vice Minister of Finance of Peru, reminded the conference participants that “despite economic growth, the middle class is still vulnerable. If a big shock occurs, people can easily fall back into poverty." Thomas Loster, chairman of the Munich Re Foundation stated that “it is key that we include the people at risk and do not miss any single stakeholder including the industry and the regulators.” Stefan Dercon, Professor at the University of Oxford and Chief Economist of DFID pointed out that different layers of protection should be combined. It must be quickly determined, who has the “risk ownership”. Also, it must be clear who covers which risks – and what is not covered. A coordinated, credible plan for post-disaster action must be agreed upon in advance. “A pre-disaster preparedness approach replacing a 'begging bowl' has positive impact on economic development”, explained Dercon. Economic research in Mexico has shown that funds schemes there resulted in a 2 to 4 % increase of post-disaster local economic activity.
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    Stefan Dercon, Dean Karlan, and Glenn Harrison agreed during one of the plenaries that different layers of protection schemes should be combined. Insurance being one of them.
    Technology with a human touch
    The lack of available data and efficient tools remain a key constraint for insurance to become more inclusive. During the conference a number of cases were presented on how technology can help to improve the situation. These underlined the potential of modern IT solutions. Apps developed by IFMR in India, for example, reduced not only the costs of the product but also showed higher take-up of cattle insurance. Chatbots – interactive online communication systems based on artificial intelligence – facilitate first interactions with clients. MARSH developed these cost efficient tools which also improved customer experience. Further, the use of satellite data for agricultural insurance in Kenya has shown first very promising results. Another example discussed at the conference was mobile money and insurance. Today, worldwide over 500 million mobile money accounts exist. Insurance distributed via mobile phone by companies such as BIMA are one of the main drivers of growth especially in Africa and Asia. However, experts agreed that even with technology, humans are still needed to communicate with and educate the customer.
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    Carlos Belloni demanded more leadership engagement from regulatory authorities.

    Government involvement and cooperation are key
    Since technology will transform the way in which products will be designed and delivered, rules and regulations must be developed. “The changes we will be facing in only three years will be gigantic”, said Carlos Belloni, a renown strategic consultant in digital transformation. The former chief operating officer for Zurich Insurance in Latin America warned that “regulators must stay three steps ahead of development.” Therefore a strong governmental involvement is needed. “Climate change is aggravating the risk situation and risk protection against it will not be possible if we do not prepare the markets.” These are changing rapidly and regulation must identify trends in order to prepare them early enough. Appropriate balance between consumer protection and promoting the development of new products and markets is needed, too.

    “High standards and fair practices in the business are important. Also innovations in internal processes will help to broaden inclusion in insurance”, said María del Socorro Heysen Zegarra, Superintendent of the Peruvian Regulatory body (SBS, Superintendenta de Banca, Seguros). Furthermore, an insurance culture must be created to expand outreach. This requires substantial efforts in improving basic financial education such as the education programs currently being rolled out by APESEG Peru. “We need to recognize and acknowledge that we have a long road ahead of us. But recent developments show that we are on track.”

    About the conference

    The 13th International Microinsurance Conference was hosted by the Insurance Association of Peru (APESEG), the Munich Re Foundation and the Microinsurance Network. 415 insurance and development experts from 42 countries participated in the event - which took place for the fourth time in Latin America. Over 80 speakers shared their knowledge in 29 sessions.

    The 14th International Microinsurance Conference will take place in Lusaka, Zambia, from 6-8 November 2018, and will be hosted jointly with the Microinsurance Technical Advisory Group of Zambia (TAG) and the Microinsurance Network.