Top 7 Opportunities for Funders to Advance Microinsurance

The Funder Discussion Group of the Microinsurance Network (MIN) includes donors and investors supporting microinsurance. The group has identified “7 Top Opportunities” for funders to contribute to the healthy development of the sector, illustrated by a sample of activities carried out by the Network and its members. We invite you to contribute with further examples of initiatives under any of the points through comments.

Support market development. Some countries, such as India, South Africa and the Philippines, have seen the development of impressive microinsurance markets because they have managed to approach the situation holistically, improving the regulatory environment  and encouraging insurers and distribution channels to go down market. According to recent landscape studies, however, there are many countries with limited microinsurance penetration.

A lady sits at her micro restaurant.

A proactive approach to supporting market development could accelerate the process. UNCDF’s MAP diagnostic process includes insurance and is a useful starting point to identify obstacles and opportunities, develop a widely accepted road map, and provide a template for local donor coordination.  Another example is The Access to Insurance Initiative (A2ii) that emerged from the MIN’s joint working group with the International Association of Insurance Supervisors (IAIS). Housed at GIZ, A2ii has tools and guidance for insurance supervisors to create an enabling environment for microinsurance. To support governments to integrate risk analysis into public policies the Platform for Agricultural Risk Management (PARM) was initiated at the last G20 meeting. The platform was initiated by AFD and is currently endorsed by IFAD, FAO, WFP, World Bank, African Development Bank, OECD, NEPAD and some bilateral cooperation agencies. 

Catalyse innovation to reduce costs and enhance client value. Much of the impressive growth in recent years has come from basic products, often embedded in other services (e.g. buying airtime, getting a loan). A strong push for additional innovation is required to enable practitioners to respond more effectively to the risk management needs of low-income households and improve delivery models. Many MIN members are experimenting with new approaches including Microensure through it recent joint venture with Telenor in Ghana. In agriculture insurance, Allianz, GIZ and SDC are experimenting with remote-sensing for agriculture insurance (RIICE project). Mercy Corps, Guy Carpenter and the IDB are pioneering catastrophic insurance coverage in the Caribbean while  IFAD and WFP are conducting research funded by AFD to test five types of remote-sensing approaches to understand if and how they can be used for index insurance.

Build capacity. As a new field with specific technical requirements, a key way of supporting the expansion of microinsurance is to build the capacity of more microinsurance professionals. Three target groups warrant particular attention: (1) risk carriers, (2) delivery channels and (3) “multipliers” such as consultants and trainers. The MIN’s Capacity Building working group and the ILO’s Microinsurance Innovation Facility are coordinating efforts to develop training materials and support “multipliers” to offer courses for insurers and distribution channels. The Facility itself was launched in 2008 with funding from the Bill & Melinda Gates Foundation to learn and promote how to extend better insurance to the working poor. Additional funding has gratefully been received from several donors, including the Z Zurich Foundation and AusAID.

Promote data collection and transparency. To measure the development of microinsurance at national, regional and global levels, and to improve viability for the provider and value for the client, there is a need for more systematic data collection. Funders including the ILO, Munich Re Foundation, IADB, GIZ and Making Finance Work for Africa with some support from the Microinsurance Network commissioned the Microinsurance Centre to conduct landscape studies of specific regions. Such data collection practices should be done regularly to track trends.

Facilitate information sharing. Effective approaches need to be explored to take advantage of the knowledge and lessons learnt that have already emerged from the sector. The ILO’s Microinsurance Innovation Facility has an important “Knowledge  Centre”. In addition, the CGAP supported Microfinance Gateway is a valuable repository of publications on microinsurance. Munich Re Foundation  also supports the International Microinsurance Conference which brings together experts from around the world and from all types of institutions to exchange experiences and discuss the challenges of extending insurance services to low-income people each year since 2005.

Fund impact research. Besides demonstrating the viability of microinsurance, it is also important to better understand whether, under what circumstances, and how the poor benefit from insurance coverage, and under what circumstance.  The MIN’s Impact working group has developed a guidance tool for researchers to improve the quality of microinsurance impact studies and enhance the use of common indicators to enable the comparison and aggregation of studies (upcoming). The Bill and Melinda Gates Foundation funded the MicroInsurance Centre to develop  a “client math” methodology to better understand if insured households can manage risks more effectively than un-insured households when crises occur.

Investing in stronger structures. An increasing number of public and private investors are seeking to explore how their instruments – debt, equity, and guarantees – can be effectively used to stimulate the microinsurance sector. As the markets develop and regulations evolve, new structures and capital needs are emerging. Distribution channels might want to transform into formal insurance providers or existing structures are looking for additional capital to kick-start innovative product development and new distribution channels. The MIN Funder Discussion Group, facilitated by the Grameen Crédit Agricole Foundation and CGAP, is organizing a roundtable in September 2013 to generate new knowledge on the role and opportunities for investors in microinsurance. The roundtable will bring together investors, leading insurers, and microinsurance practitioners to understand their experiences to date, discuss investment opportunities, and assess the possible paths forward.

This piece was put together on behalf of the MIN Funder Discussion Group by Craig Churchill (ILO) and Thérèse Sandmark (Grameen Crédit Agricole Microfinance Foundation). Moving forward, the Funder Discussion Group of the Microinsurance Network will be continue to work on determining top priorities for funders. Please react and make suggestions here:  www.microinsurancenetwork.org/workinggroup/Funders/17.php

Craig Churchill heads up the ILO’s Social Finance Programme, which houses the Microinsurance Innovation Facility. He is also the Chair of the Microinsurance Network and on the governing board of the Access to Insurance Initiative. Thérèse Sandmark is micro-insurance officer at  the Grameen Crédit Agricole Microfinance Foundation.