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Can mutual microinsurance improve the living standard of the marginalized groups? By Sabbir Patel, Senior Vice-President, Emerging Markets, ICMIF AOA Seminar Colombo, Sri Lanka, August, 2014
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Can mutual microinsurance
improve the living standard of the
marginalized groups?
Presented by:
Sabbir Patel
Senior Vice-President, Emerging Markets, ICMIF
AOA Seminar
23-25th August, 2014
Overview of presentation
• Where is the cooperative/mutual insurance
market?
• Where is the mutual insurance market of
tomorrow?
• Potential for mutual microinsurance
• Opportunities for takaful/microtakaful
• ICMIF Development Program
Where is the
cooperative/mutual insurance
market?
Regional split of insurance in
2012
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
Europe North America Asia & Oceania Latin America Africa
Regional split of mutual
insurance in 2012
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
Europe North America Asia & Oceania Latin America Africa
Growth in insurance market
share by region (2007-2012)
-20.0%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
Europe North America Asia & Oceania Latin America Africa
Growth in mutual market share
by region (2007-2012)
Global Mutual Market (2012)
Source: Global Mutual Market Share 2012
The Global mutual
market
Source: Global Mutual Market Share 2012
Number of members/ policyholders
Source: Global Mutual Market Share 2012
811
million
in total
The Top ten mutual insurance
markets (2012)
2012 Rank Country 2012 Mutual Market Share
1 Australia 61.6%
2 Netherlands 53.4%
3 Slovakia 45.1%
4 Denmark 45.0%
5 Germany 43.3%
6 Norway 42.5%
7 Romania 42.1%
8 Japan 41.7%
9 France 40.8%
10 Hungary 38.5%
Source: Global market share 2012, ICMIF;
Swiss Re Sigma No3/2014
Where is the future for
cooperative/mutual insurance?
Top ten largest insurance
markets in the world
Source: Global Mutual Market Share 2012
* Global Rank as per Swiss Re, World insurance in 2012, statistical appendix updated January 2014
Global Rank* Country
2012 Mutual Market
Share
1 USA 34.5%
2 Japan 41.7%
3 UK 8.0%
4 China 0.3%
5 France 40.8%
6 Germany 43.3%
7 Republic of Korea 10.4%
8 Italy 20.3%
9 Canada 19.6%
10 Netherlands 53.4%
Top ten largest insurance
markets in the emerging world
Source: Global Mutual Market Share 2012; *Swiss Re Sigma No. 3/2014
* Global Rank as per Swiss Re, World insurance in 2012, statistical appendix updated January 2014
Global rank* Country 2012 Mutual Market Share
4 China 0.30%
13 Brazil 7.70%
15 India 0.60%
17 South Africa 1.10%
24 Russia 0.90%
27 Mexico 4.80%
31 Thailand 1.20%
32 Indonesia 0.00%
33 Argentina 26.40%
34 Malaysia 13.70%
The uninsured population is in
emerging markets
Continent
Insurance
premiums in 2012
(USD)
Insurance
penetration (% of
GDP in 2013)
Population
(in millions)
Europe 1,532,149,228 6.8 742
North America 1,396,642,000 7.4 355
Asia & Oceania 1,423,585,651 5.3 4,336
Latin America 164,290,048 3.2 615
Africa 64,114,000 3.5 1,110
Source: Swiss Re Sigma No. 3/2014
ICMIF members in emerging
markets
• 73* members in 35 emerging market countries
• Premiums in 2012 was USD 6.7 billion,
representing 1% of total insurance market
premiums
• Premiums 2012 up 14% on 2011
• Asian members up 12%
• Latin American members up 19%
• Assets USD17bn -2011, USD 8.1bn – 2007
*providing insurance
Potential for mutual
microinsurance in emerging
markets
Overview of the
microinsurance sector
Insurance penetration:Insurance premium as a % of GDP (1)
Microinsurance market potential (coverage):Number of 50 largest commercial insurers offering microinsurance products(3)
(1) Swiss Re Sigma, “World insurance in 2012.” (2013)
(3) Microinsurance innovation facility (2012)
Microinsurance growth:Number of people covered by microinsurance 2007 - 2011(2)
5.4 times more policy holders
(2) ILO ,Munich Re, “Protecting the poor: A microinsurance compendium Volume II.” (2012)
= 100 million policy holders
2011: Cca. 500m policy holders2007: 78m policy holders
Microinsurance is untapped in
emerging markets
• About 4-5 billion people live on less than $8 a day
• Potential consumers of microinsurance services estimated to
be about 2.3 billion
• Potential market estimated to be 3-4 billion policies
• Between $30 and $50 billion premium revenue expected
annually
• Total demand growing in excess of 10% a year, with
premium increases outstripping those in developed markets.
Source: Succeeding at Microinsurance through differentiation innovation and partnership- Accenture, 2012.
Opportunity for mutual
microinsurance
The benefits of mutual and cooperative microinsurance
Born from the grassroots
Affinity
Trust
Cooperating
For the people, by the people
Client centred
Member owned
Transparency and ethics
Community
Know-how
Scale
Empowerment
MUTUALITY
Benefits of mutuality in
microinsuranceWe can’t have a long-term sustainable proposition for microinsurance if clients are not getting value.
You have to be committed, this is not something you can come into for a year or two, there are lessons
to be learnt, a lot has been done in the past ten to fifteen years, and even 100 years ago, those lessons
are there to be learnt.
Michael McCord, President, Microinsurance Centre - A.M. Best webinar, 2012
The United Nations Conference on Trade and Development (UNCTAD) endorses that cooperative
insurance, complimenting other forms of insurance, has a special role to play in the overall
development processUNCTAD, 1977
Mutuals have some key advantages in microinsurance due to their proximity to members, which gives
them a better understanding of members’ needs, facilitates claims settlements with better controls for
fraud, and tends to engender significant trust from policyholders.
Dirk Reinhard, Vice Chair of Munich Re Foundation
Munich Re Foundation Annual Report 2011
Opportunities for
Takaful/Microtakaful
Muslim population by region
Continent
Insurance
premiums in 2012
(USD)
Insurance
penetration (% of
GDP in 2013)
Population
(in millions)
Muslim
population
(in millions)
Europe 1,532,149,228 6.8 742 56
North America 1,396,642,000 7.4 355 8
Asia & Oceania 1,423,585,651 5.3 4,336 1,391
Latin America 164,290,048 3.2 615 2
Africa 64,114,000 3.5 1,110 581
Source: Swiss Re Sigma No. 3/2014; www.muslimpopulation.com
Source: www.muslimpopulation.com
7.6%
32%
0.4%
52.4%
1.5% 1.8%
Percentage of Muslim population
Europe
Asia & Middle East
Latin America and
Carribean
Africa
Oceania
North America
The lack of insurance
penetration in Muslim countries
Source: Human Development Report 2011 & Sigma (2011) World Insurance in 2010
Potential Takaful markets
Source: The World Takaful Report 2012, Ernst & Young
Can Takaful impact the take up of
microinsurance?
“Cultural and religious values (also) affect the demand for
microinsurance in Africa. When people believe that their fortunes
are in God’s hands, they might not realize how insurance can help
them take control of their lives”
(Landscape study of Microinsurance in Africa, 2010)
“ One reason for the low insurance penetration among Muslim
population is that Shariah forbids conventional insurance and
people are often not aware that a Shariah-compliant alternative
exists in the form of Takaful. “
(Islamic Insurance Revisited, Swiss Re, 2011)
Microtakaful – the opportunity
• Large sectors of poverty in many Muslim
countries
• Low penetration of insurance - High economic
growth
• Religion plays a fundamental role in the lives of
the poor
• Not secluded for Muslims only
• Mutual values at the heart of Takaful
• Islamic microfinance growing
The ICMIF Development
Program
Time to step up and realize our
potential
Key Challenges for
mutual/takaful insurers in
emerging markets
• Changes in legislation/regulation
• Strict licensing requirements
• Lack of working capital
• Shortage of technological systems
• Lack of technical assistance
• Product dissemination and education
• Reinsurance of high risk microinsurance products
• Low insurance penetration
• Unstable economic conditions/ political instability
Source: AllNations Survey 2013, ICMIF
ICMIF Development Program
for inclusive insurance
Objectives:
• Strengthen mutual organizations in emerging markets
• Increase the availability and accessibility of simple,
affordable, efficient and effective insurance for the
poor
• Raise awareness and support for mutual model
from external stakeholders
• Develop the fledging industry of microtakaful
ICMIF Development Program
ICMIF Development
Committee
Advocacy Working
Group
Microtakaful Working
GroupResearch Working
Group
Technical
Assistance
Working Group
ICMIF
Development
Fund
Research Working Group
Facilitator: Kumar Shailabh, Uplift Mutuals, India
Objectives:
• Understand and demonstrate key
characteristics of mutuality in Microinsurance
• Identify reasons for growth/ failure
• Member needs assessment
• “Mutual magic” repository of information
• Standardised tools, benchmarks and templates
• Comprehensive picture of mutual insurance in
emerging markets
• Empower members to address
concerns/biases of external stakeholders
Year One:
• Academic Steering Committee
• High level snapshot of mutuals in emerging markets
• In-depth field visits to 5 member countries
• Overview on how mutuals are regulated
• Growing network of Universities and researchers
Year Two:
• Publication on innovations by mutuals
• Case studies on impact of regulation
• Online information exchange platform
• Standards and parameters for mutuals
Year Three Activities:
• Impact focused publications
• Comprehensive data on mutuals
• Landscape on informal insurance market
• Curriculum on mutual microinsurance
• Mutual management course
Technical Assistance Working
Group
Facilitator: Bert Opdebeeck, BRS, Belgium
Objectives:
• Technical assistance from established
members and donors to developing companies
• Support to MEM invested companies
• Pipeline of investments for MEM
• Develop Tools, standards and best practices
• Provide direct training and technical solutions
• Improvement of access to quality and
affordable mutual microinsurance
Year One:
• Infrastructure for delivering technical
assistance to members
• Guide on “how best to deliver technical
assistance”
• Snapshot on common challenges facing
mutual insurers in emerging countries
Year Two:
• Create a technical support group
• Software to “automate” the match making
function
• 3 pilot projects for technical assistance
Year Three:
• Develop training courses
• Undertake ten technical assistance projects
Advocacy Working Group
Facilitator: Arman Oza, VimoSEWA, India
Objectives:
• Promote concept and practice of mutual
microinsurance
• Engage with regulators and other stakeholders
• Create a network of ambassadors from
members
• Develop a communication mechanism
Year One:
• Three-year communication strategy
• Social media and websites
• Build a network of communication partners
• Increase representation at International forums
• Oversee internal and external messaging
Year Two:
• Engage supervisors in emerging markets
• Raise awareness amongst established members
• Ensure message is heard and included in external
discussion and working groups
• Raise awareness and participation of the
Microinsurance Simulation
Year Three:
• Disseminate relevant publications from other
working groups
• Create partnerships with other external
organizations working with the low-income sector
Microtakaful Working Group
Facilitator: Hassan Bashir, TIA, Kenya
Objectives:
• Increase access to affordable Islamic
insurance
• Develop an internal resource centre
• Raise awareness of Microtakaful
• Understand current practices and schemes
• Build linkages and deliver support to current
providers
• Develop tools and standards
Year One:
• Desk based research on poverty levels
• Landscape of insured and uninsured Muslim
population.
• Network of potential partners.
• Information on practices, experiences and challenges.
• Three pilot projects for in depth study
Year Two:
• Identify potential financial and technical supporters
• Templates and guidelines for establishing
microtakaful.
• Dialogue with regulators and takaful operators.
• Work with members to establish microtakaful schemes
.
Strategy for ImplementationCountry by country approach
2.Country
Diagnostic
1. Identification
of country
3. Needs identification
4. Country
program
Advocacy,
Takaful,
Technical Assistance
5. Implementation with
partners
Critical Success Factors
• Commitment of ICMIF Development Committee
• Cooperation of ICMIF members in emerging countries
• Collection of credible data
• Support from ICMIF established members
• Funding from development agencies and donors
Proposed impact
Desired outcome:
The global expansion and growth of front line
mutual/cooperative organizations in emerging countries
Target:
20% growth in mutual policyholders in emerging markets
over 5 years
ICMIF Development Program
Insurance for the People, By the People
Thank you