Improving access to insurance for low-income people is no easy task. It requires attention to be given to multiple issues to overcome the wide-ranging constraints to expanding insurance access. Can a market development approach that takes a holistic view, tackling problems of demand and supply, and policy and regulation be successful in developing a microinsurance market? Based on our experience in Zambia, we would argue that the answer is yes.
Photo Credit:Professional Life Assurance Zambia, Sales staff marketing a microinsurance product.
A market development approach was initiated in Zambia in late 2009, following a country diagnostic review. The co-funders of that review - FinMark Trust, the ILO’s Microinsurance Innovation Facility and UNCDF – kickstarted the process by helping to set up a multi-stakeholder group (the Technical Advisory Group, or TAG for short) whose task it was (and still is) to lead the design and implementation of an action plan that set out a ‘logical flow of interventions’ or, in other words, a well-defined series of activities to overcome the various market obstacles identified by the review.
These activities included, among other things seminars, trainings, a regulatory review and an innovation fund. Together, they were aimed at improving understanding, stimulating demand, and strengthening the supply and regulation of microinsurance products in the country.
Our experience shows that working closely with the private sector, regulators and other relevant industry stakeholders is the most effective way of developing a market that can be sustained in the long term, not just until donor or government funding runs out.
It’s still early, but we’ve seen some positive developments since the process was initiated, suggesting that it’s working. We now have new life insurance products available, which are being distributed in ways that are innovative for Zambia, and that are serving tens of thousands of new clients that were previously unserved. Examples include:
- Zambia State Insurance Corporation (ZSIC) Life piloting the use of community-based agents to distribute life insurance in rural areas;
- African Life Assurance Zambia using a leading mobile platform to distribute a simple life plan;
- Professional Life Assurance Limited partnering with Zambia Postal Services to embed a life plan into a money transfer service;
- Madison Life Zambia using microentrepreneur associations to distribute a family life plan.
We also have genuine interest among other insurers and the promise of new long- and short-term products in the near future. And we have a supportive regulator that is leading a reform process to better accommodate this encouraging emerging market.
So, what does it take to move the market?
- Investment in understanding the market before embarking on a market-based approach is money well spent. The initial diagnostic review provided a solid foundation upon which Zambia’s market development framework was subseuently shaped. This has been complemented by ‘deeper dives’ into areas that required further investigation, such as demand, aggregation and insurer-readiness.
- Multi-stakeholder engagement helps promote ownership and partnerships. Since inception, the process has been driven by a multi-stakeholder group (the TAG), with a membership representing the various industry facets of private sector, government, regulators, and with the cooperating partners (primarily FinMark Trust and the Microinsurance Innovation Facility), helping to steer from behind. The governance structure, while flexible in form, has provided much-needed local commitment to, and rooting of, the process within the country, whilst collaborating with cooperating partners has provided essential hands-on coordination support. The active participation of insurers themselves is critical. The success of any market development approach depends, to a large extent, on the responsiveness of insurers to the business opportunities that it can bring. In Zambia, stimulating interest, readiness and active engagement amongst insurers requires a variety of interventions, ranging from demand research and product showcasing, to targeted training and innovation grant support. This has required long-term commitment and perseverance, which has only recently started to yield results.
- A framework is essential for guiding the process towards the end-goal. Zambia’s road map (or ‘action plan’) has helped those involved to articulate the desired goals and to think through the steps needed to achieve them. This has resulted in a systematic flow of activities that gives consideration to demand, supply and regulatory factors, and that build on each other. Importantly, sufficient flexibility within this framework has enabled the process to respond to evolving market needs and challenges.
- Measuring and sharing results helps guide future support and shape best practice. Microinsurance is an evolving field, and international best practice is still emerging. Monitoring progress, measuring impact and distilling lessons is therefore important, not only to refine in-country action, but also to shape market-based approaches and best practice across continents. The lessons distilled and shared from Zambia are making a useful contribution to this global evolution.
------ Juliet Munro is a development consultant who, since 2005, has been managing FinMark Trust’s financial inclusion work in Zambia. Lemmy Manje is an international development consultant with over ten years of professional experience in microinsurance, microfinance, enterprise development and private sector development.
The BASIS for sustainable micro-insurance, as for insurance in general, comprises two parts: (1) risk data collection and management (actuary) and (2) reinvesting pooled risk premiums in a regulated capital market which produces steady returns. The fundamental problem with Micro-Insurance thus is that most clients, their families and their income generating activities are informal, unregistered, not monitored in a constant, transparent, verifiable manner. Consequently no effective tools to protect them.
One would expect from a long-term expert organisation such as FinMark to move on from saying that work has just started and that it still needs to "understand the market".
The fact remains that the current industry players, insurers, regulators and the government have a major role to play by providing the platform to allow formalizaton of most processes. While insurers innovate products, they need a regulatory environment that will allow them reach the informal sections of the economy. However, there is need for deeper insights into the market dynamics, the knowledge levels, the demand for specific products or needs and that microinsurance can meet these needs. Bottom line is we understand the challenges and that is what is important because then we can address them. But first we need all players on board to ensure unit in fostering the change. Thanks to finmark, hoping we can all buy in soonest. Sharing of information becomes very critical, educating the other stakeholders must continue.