Inclusive Insurance in the Central and Eastern Europe and the Transcaucasian (CEET) region - Challenges and Opportunities
1-2 September 2021 – Digital Edition
Challenges and opportunities for Inclusive Insurance in the CEET region
Appropriate risk management including insurance plays a key role in economic development. Insurance solutions addressing the specific needs of low-income consumers, as well as micro- and small and medium-sized enterprises, have the potential to promote resilience and support sustainable growth in terms of income and well-being. Analysing market barriers and opportunities, and determining what should be done to support market development, were the goals of a digital conference on inclusive insurance in the CEET* region that concluded on 2 September 2021.
*According to the IAIS classification: Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Georgia, Hungary, Israel, Kazakhstan, Kosovo, Kyrgyzstan, Latvia, Lithuania, Macedonia, Moldova, Montenegro, Poland, Romania, Russia, Serbia, Slovakia, Slovenia, Tajikistan, Turkey, Turkmenistan, Ukraine, Uzbekistan
The concept of microinsurance, or inclusive insurance as it is more frequently called, has attracted increasing interest, especially in developing countries in Latin America, Asia and Africa. However, inclusive insurance is still in its infancy in the 31 countries of the CEET region and not a top priority for key stakeholders including the insurance industry and supervisory authorities. The insurance markets in the region are highly diverse in terms of their size, concentration, and level of maturity - the insurance penetration ranges from 0.75% in Armenia to 5% in Slovenia. Overall, insurance penetration in the region is estimated to be three times lower than the European Union average.
The CEET insurance industry is dominated by the non-life sector. Life insurance plays a less significant role and is still fairly undeveloped, excepting a few EU jurisdictions. Motor insurance remains the main business segment in CEET, accounting for 53.4% of the non-life insurance premiums. Taken together, the top five markets in the region account for about three-quarters of the regional non-life business (Based on the a2ii report on the Inclusive Insurance Regulatory Landscape in the CEET Region). None of the 31 countries in the CEET region has a specific inclusive insurance regulation or an established definition for microinsurance/inclusive insurance.
However, products intended to address the needs of low-income markets are available in 11 countries, with agriculture being available in eight countries (See Figure 1). This is particularly interesting, since microinsurance is usually dominated by credit life. With nearly 40%, insurance agents make up the largest share of the regional gross written premium volume. Web-based distribution (internet) only accounts for 2%.
Type of inclusive insurance/microinsurance and number of jurisdictions
|Type of product||Number of countries where this insurance is available|
|Agriculture / Climate risk (including index-based insurance)||8|
Developing a national financial inclusion strategy is an important step for inclusive insurance. Examples from the Philippines and Zambia show that a joint effort on the part of the insurance industry, donors and supervisors can accelerate market development. However, according to the study, of the 31 countries in the region, only three (Albania, Kazakhstan and Lithuania) plan to develop or have already sought to develop a strategy for an inclusive insurance market , while another 10 have developed NFIS.
Agriculture and climate risks play a key role
Managing climate risks is becoming increasingly important, since agricultural income still plays an important role for many countries in the region. The agricultural sector accounts for over 12% of the total export in Northern Macedonia and over 19% in Serbia. In both countries, nearly one out of six jobs is in the agricultural sector. However, there is no established “insurance culture” and one of the main barriers to its development is the ex-post direct compensation from government sources, based on political priorities. Government payment losses are inferior compared to the efficiency, speed and cheaper service offered by insurance. At the same time, insurers in the region still reach for the low-hanging fruits. However, experts agree that subsidising agricultural insurance would help to improve its affordability.
Furthermore, according to the chairman of the Georgian Insurance Association, qualified claims management and reliable data remain a key challenge in the provision of agricultural insurance solutions. A reliable enabling regulatory environment, together with corresponding education, would be an important step toward market development. In light of the small size of many countries in the region, reaching scale while simultaneously reducing costs remains a major challenge. Harmonising regulations, as well as the development of insurance pools and even multinational approaches, would make it possible to sell the same product across different countries to achieve scale.
The challenge of making insurance digital and understandable
The recent pandemic has boosted digitalisation in all areas, including distribution, claims management, and customer engagement. However, insurance remains a product that needs to be explained and is still difficult to understand, especially for those who were never insured before. The digital transformation of inclusive insurance requires a holistic approach, which includes having the right products that create value for the customer, taking the consumer perspective into account when creating digital applications to make them easy to use, a “digital-friendly” approach to regulation, availability of data, and investing in education. The results of a survey conducted in Bulgaria clearly show that higher levels of insurance literacy result in higher trust in and use of insurance. The language used must be tailored to the target audience, which could also be part of consumer protection regulations, as an example from South Africa shows.
The way forward
The protection of people and assets is a key component of sustainable development. In the absence of any formal protection mechanism, when faced with risk events, people with low incomes typically rely on informal coping mechanisms for recovery. … Without effective insurance, it is unlikely that sustainable development will ever be truly achievable.
Inclusive insurance could be a win-win situation for consumers, the insurance industry, government, and societies in the CEET region, while creating resilience and sustainable economic growth at the same time. Raising insurance awareness and eventually establishing an insurance culture is key. Insurance for the low-income and under-served is still in its infancy in the region, but some insurers as well as supervisory authorities have shown interest in exploring opportunities for market development further. Regulators have to take on the task of being dynamic and open for innovation but also prudent when designing a regulatory environment for inclusive insurance. Given the growing number of severe natural disasters, governments should acknowledge the role of the insurance industry in terms of providing efficient risk management tools and invest in PPPs as well as international collaborations. Digitalisation has the potential to increase affordability, which is still one of the key criteria for insurance take-up. But most importantly, insurance needs to be tailored to the customer’s needs in order to create value.
The interest in this conference exceeded the organisers’ expectations, clearly showing that inclusive insurance is also an important topic for the CEET countries. This has encouraged the organisers to support further discussions on inclusive insurance in the region in the future.
Agenda - 1 September 2021
Click on each session for session details and speakers.
IAIS regional coordinator for the CEET Region and Managing Director at the Insurance Supervision Agency, AZN, Slovenia
Head of the Secretariat, A2ii, Germany
Access to affordable insurance plays an important role in sustainable economic development. The significant uninsured exposure raises concerns and the need for all stakeholders to work together in narrowing the insurance protection gap in the CEET region. The first session will explore the perspective of inclusive insurance market development for the region, with special focus on the role of policy actions and insurance regulation
Deputy Executive Director, Albanian Financial Supervisory Authority, Albania
Case study from the region: why is inclusive insurance relevant for our country/region?
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The session will discuss different climate risk and agricultural solutions as well as challenges and barriers for the development of climate risk and agricultural solutions in the region. What needs to be done to overcome those challenges and barriers? What role does technology play? What is the role of the government as well as other stakeholders? Panelists will present lessons learnt from Azerbaijan, Georgia, Kosovo, N. Macedonia, Serbia and Ukraine.
Vice Chair, Munich Re Foundation, Germany
Agenda - 2 September 2021
In this session, panelists will discuss how digitalization, use of mobile/smart phones and emerging digital insurance models have helped enhance greater insurance inclusion in emerging markets. Following an overview of the current status of use of digital business models and trends in digital insurance in the CEET region, practitioners working globally on designing and implementing digital insurance solutions for the low-income and agricultural sector will share their experiences with the audience. In addition, it will be highlighted how regulatory frameworks can help digitization of insurance services and how regulators can encourage digitization of insurance in their jurisdictions.
Advisor, Access to Insurance Initiative A2ii, Germany
Understanding – and meeting – the needs of customers lie at the heart of every successful effort to reach scale in emerging insurance markets. In this session, we provide an overview of customers in the CEET region before exploring best practice examples that support uptake.
Regional Head of Emerging Customers, Asia, AXA, Thailand
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Head of the faculty of law at STADIO (a Private Higher Education Institution), South Africa
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Professor of Law, University of South Africa and President of the International Association of Consumer law, South Africa
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About the event
The 2021 Conference on Inclusive Insurance in the CEET Region was hosted by the Munich Re Foundation, the Access to Insurance Initiative (a2ii), the International Association of Insurance Supervisors (IAIS), the Microinsurance Network and the Insurance Supervisory Agency of Slovenia (AZN). 188 participants from 44 countries attended the conference.
14 September 2021 - Dirk Reinhard, Vice Chair, Munich Re Foundation; Klime Poposki, Associate Professor, University of St. Kliment Ohridski, N. Macedonia