What is microinsurance

Microinsurance is a mechanism to protect poor people against risk (e.g. accident [1], illness [1], death in the family [2], and natural disasters [3]) in exchange for payments tailored to their needs, income, and level of risk. 

It is aimed primarily at the developing world´s low-income workers, especially those in the informal economy who tend to be underserved by mainstream commercial and social insurance schemes.

Microinsurance allows policyholders to recover and rebuild after a crisis. It can mean avoiding difficult, often devastating risk coping measures such as putting children to work, eating less food, or selling productive assets. It promotes resilience and contributes to the Millennium Development Goals, including reducing hunger and child mortality, and improving maternal health. 

In the event of shock, the benefits of microinsurance go beyond financial help as it can: 
Reduce risk: Insurance can play a critical role in reducing risk, since insurers have an incentive to prevent risks from occurring; 

Stimulate productivity and asset accumulation: The working poor invest more in their livelihoods, and get higher returns, if they are protected by insurance. They can also build savings through a long-term life insurance policy; 

Deliver tangible benefits: Insurance with tangible benefits, such as a hot line for medical advice or health camps that provide vaccinations and mosquito nets, can make a huge difference in the lives of millions

The Story of Risk

   

Our Natural Inclinations

Every day of our lives we sum up situations and make decisions. Sometimes we make the right decisions and other times our decisions are less than optimal. Our decision making can be active and passive. Sometimes we decide to do something and other times we choose not to do something. Sometimes the passive choice is not a conscious choice but merely an omission.

Influencing the Outcomes of Our Daily Lives

There is so much more happening in our daily lives. We take more chances than our ancestors ever did. Just think of driving in a car or of children and electricity. We live in an information age - in a world that has many more people than yester-year. How often do we stop to consider whether our children know how to get out of the home if there is a fire.

Opportunities and Winners

In the early days of merchants and trading, people very quickly analysed the upside and down-side of business opportunities. Risk was recognised as an opportunity. There would be some people that would gravitate away from risky ventures and others who would discover ways to influence outcomes and seize the opportunity. Those who were able to identify the opportunities to influence outcomes usually tended to be more successful.

Influencing Outcomes

There are many situations that we cannot prevent. In some cases such as storms at sea we may not even be able to have any influence over the outcome. So insurance derived its origins from the concept of the many paying for the few. Given the comfort that this provided, merchants were able to take greater chances resulting in greater benefits.

Evolution of Risk Management

None knew better than insurers of what could happen and what could go wrong. This was because the business of insurance lay in paying for losses incurred by customers. In order for insurers to be viable there needed to be a way of encouraging customers to exercise reasonable care and by rewarding good performance. And so risk management evolved from natural intuition and analytical thinking into a more formal process of communication of the actions to influence outcomes. In other words how carefully opportunities were being managed.

Managing Performance

Today businesses are larger and more competitive than ever before. Society is far less tolerant of poor performance. Government services are subject to increased publicity and public scrutiny - voters punish poor performance. Globalisation of communication and trading has lead to the endless pursuit of competitive edge. The demand for quality service and value has led to diminishing margins for error. Investors are demanding more and more information on how companies are managed. Borrowing money has become ever more competitive and linked to sound management of opportunities. Share prices reward organisations that not only deliver results but install confidence in the future by demonstrating care and diligence.

Managing Confidence

Managing confidence is the challenge of business and governments beyond 2000. The very notion of confidence relates to trust and predictability. It also focuses on stakeholders who by their very perceptions of predictability/confidence/risk will exert ever-increasing influence by punishing unpredictability and increasingly rewarding the generation of confidence. It goes without saying that the best cure is prevention and in cases where outcomes are subject to pure uncontrollable chance such as earthquakes, the generation of confidence through demonstrating preparedness for the unexpected.

Managing Success

If we can understand the pulse of risk and understand its delicate balance with opportunity we can influence outcomes and increase the chance of achieving our objectives whether they be individual, corporate or community. So we need to make the right choices and do the right things free of omissions by taking care. This is all about strategic thinking, analysing and attention to detail. Strategic thinking is one thing but converting it into the right action is what separates winners from losers. After all, who would you leave your children or your money with - someone who takes care or someone who cuts corners? The common sense laws of everyday life are the keys to the logic of business. Risk management is so simple that it is almost impossible to describe.

This is the story of managing outcomes through doing the right things and building confidence. You could even shift the paradigm and call it managing success.

So what we really are talking about is the phenomenon of risk.

By Jonathan Sesel

CURTESY ROTIMI OLUKOREDE

INSURANCE INDUSTRY MAKES N350BN GROSS PREMIUM INCOME IN 2015

The Nigerian insurance industry recorded an estimated volume of N350bn premium in the 2015 financial period.

The immediate Chairman, Nigerian Insurers Association, Mr. Gus Wiggle, disclosed this during the 45th annual general meeting of the association in Lagos.

“The estimated volume of business underwritten by the insurance industry in 2015 was N350bn as against N294bn, which was written in 2014,” he said.

During the meeting, the Managing Director/Chief Executive Officer, Consolidated Hallmark Insurance Plc, Mr. Eddie Efekoha, was elected as the new chairman of the association.

Wiggle said that with the full implementation of the corporate governance code, improved enforcement of no premium no cover law, better adherence to the prudential guidelines, full compliance with the International Financial Reporting Standard and improved anti-money laundering mechanisms coupled with the administrative acumen and ingenuity of insurance chief executive officers, the industry had continued to be the preferred investment destination from renowned players in the world insurance market.

As part of initiatives to improve business terrain, he said the association developed the Nigerian Insurance Industry Database, adding that reports from the states showed the renewed hope that it would help to reduce the incidence of fake motor insurance in the market.

Wiggle also said that the association sustained its cordial relationship with other bodies in the insurance industry such as the Nigerian Council of Registered Insurance Brokers, Institute of Loss Adjusters of Nigeria and the Chartered Insurance Industry of Nigeria.

“During the year, the association maintained cordial relationship with the National Insurance Commission, the Federal Internal Revenue Service, the Security and Exchange Commission, the National Pension Commission and other government agencies whose oversight functions impact on the business of member companies,” he said.

He added that the association commenced the process of constructing a befitting corporate head office, and with the cooperation of member companies, it was expected that the project would be completed within a short period.

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Effect of under-performance of the insurance sector

Kemi Adeosun

The Minister of Finance, Mrs Kemi Adeosun, said on Monday that the under-performance of the insurance sector was denying the country an annual 1.5 per cent increment in Gross Domestic Product (GDP).

She explained that the increment was capable of creating over 70,000 jobs annually.

Adeosun made the announcement at the 2016 National Insurance Conference (NIC), taking place in Abuja.

She said the persistent under-performance of the sector was revealed during the 2014 Insurance Summit.

According to Adeosun, there is need to immediately address the issues responsible for the under-performance “because a 0. 33 per cent increase in insurance penetration can result to a growth of 0.5 per cent in GDP.

The minister said that the increment was capable of creating over 70,000 jobs annually.

The theme of the conference is: “Expanding National Resources and Infrastructure in Challenging Times”.

Adeosun argued that the industry was under-performing, compared to its pension and banking counterparts.

She identified low awareness as one of the factors responsible for the under-performance of the sector, pointing out that out of 57 insurance companies in the country, less than 23 advertised their products.

“The companies put in less than 20 adverts on television, less than 10 adverts on radio and less than 10 adverts on social media.

“Other factors include poor distribution channels and unethical practices among operators.

“I’m working vigorously with the National Insurance Commission (NAICOM) to ensure that premium discounting is eliminated among practitioners,” she stated.

The minister said there was need for recapitalisation of most insurance companies.

“The first top three banks have over N3 billion capital base each while the top three insurance companies’ capital base is between N20 and 25 million each.”

The Commissioner for Insurance, Alhaji Mohammed Kari, commended the Insurance Industry Consultative Council for organising the conference to reposition the industry.

Kari pledged NAICOM’s commitment to making the industry the next growth area for economic development.

Over 200 insurance practitioners are attending the three-day conference.

NAN

FEDERAL GOVERNMENT TO ENFORCE COMPULSORY INSURANCES

Minister of Finance, Mrs. Kemi Adeosun

Nike Popoola

The Minister for Finance, Mrs. Kemi Adeosun, has said that the Federal Government will enforce the compulsory insurance policies and ensure that the cost of insurance is included in its expenditure.

She said this during the second edition of the National Insurance Conference in Abuja on Monday, which had in attendance chieftains from all the sectors that make up the insurance industry.

Adeosun said, “We are committed to growing a strong and resilient insurance sector, which will contribute better to the Gross Domestic Product. Government will impose insurance and I will enforce insurance in the Ministry of Finance and in everything we are doing.

“We will ensure that insurance cost is included in government expenses because it is compulsory.”

The minister observed that there were huge opportunities in the insurance sector, but that the penetration was still very low compared to the situation in some other countries.

As managers of risks, she urged the insurers to take the lead by taking more risks.

Adeosun warned underwriters to desist from discounting premium, a development that makes them to charge ridiculous rates, especially in the public sector, adding that this practice was unhealthy for the sector.

To stop the practice of charging very low rates, the minister said she was working with the insurance regulator to eliminate rate cutting and create an eligible pool that would give everyone a fair share of the government’s underwriting business.

She also stressed the need to address the annual review of brokers’ licences, adding that it was necessary to ensure the existence of the brokers in order to boost the confidence of the insuring public in them.

The Commissioner for Insurance, Alhaji Mohammed Kari, said some major achievements of the sector included improved service delivery, improved image, increased awareness, improved consultation between the regulator and the regulated, creation of national wealth and employment, and improved market penetration.

He also said that to address the medium and long-term challenges of penetration, the commission was on the verge of reintroducing the Market Development and Restructuring Initiative.

“We believe that if properly implemented, it will bring the desired result as envisaged,” Kari said.

The Chairman, Insurance Industry Consultative Forum, Mrs. Isioma Chukwuma, said the conference was intended to amplify the IICF’s cardinal objectives of creating a platform for developing and achieving a joint industry agenda and the enthronement of an intra-industry conflict resolution mechanism.

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NEM INSURANCE POST OVER N10 Billion Premium Income

Nem Insurance Plc said its gross premium rose by 10.8 per cent from N9.8bn in the 2014 financial period to N10.9 per cent in 2015.

Its Chairman, Chief Adewale Teluwo, disclosed this during the firm’s 46th annual general meeting in Lagos.

“Notwithstanding the state of the country’s economy in the reporting period, our company still recorded good performance,” he said.

The chairman also said the parent company achieved an increase of 9.5 per cent from N9.4bn in the preceding year to N10.3bn in the year under review.

Teluwo said even though rates crashed to an average of four per cent per annum, the group generated an investment income of N746.2m during the year under review while that of the preceding period was N607.8m, an increase of 22.8 per cent.

He said claims paid by the group during the reporting year amounted to N3.96bn, an increase of 34.6 per cent over that of the preceding period which was N2.9bn.

The chairman attributed the increase in claims to one huge claim of about N600m paid out by the parent company.

He added that an increase of 33.1 per cent was recorded by the parent company from N2.9bn in 2014 to N3.8bn in 2015.

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Recent events-

Recent events

2016 Caribbean Association of Insurance Regulators Annual Conference and meeting
|22-24 June 2016| Paramaribo, Suriname

From June 22^nd- 24^th, the Caribbean Association for Insurance Regulators (CAIR) held its 41^st Annual Conference in Paramaribo, Suriname. The Conference was focused on the topic “Risk-based Capital for InsuranceCompanies- Moving Towards a Regional Standard.

More than 60 supervisors from 18 countries, as well as insurance experts form different institutions, came together to discuss emerging topics and new trends in insurance regulation and supervision. Particular emphasis was given to capital adequacy and solvency, as well as implementation of Solvency II capital standards.

A2ii was invited to present lessons learned from the Inter-American Development Bank (IADB)/A2ii project on the development of inclusiveinsurance markets in Peru, Colombia and Jamaica. On the panel - moderated by Mr. Angus Smith, from Grenada Authority for the Regulation of Financial Institutions - Patricia Inga Falcón (A2ii), Donna Swiderek (MicroinsuranceCentre) and Elizabeth Smith (Financial Services Commission, Jamaica) presented findings from the country diagnostics and lessons learned from implementation process in Peru, Colombia and Jamaica. During the ensuing discussion participants from Haiti, Grenada, Belize and St. Lucia informed others about the inclusive insurance products available in their countries. In addition, a number of questions were raised on how regulatory arbitrage could be avoided when setting up an inclusive insurance regulatory framework.

Microinsurance Network members meeting
|21-22 June 2016| Königstein, Germany

This two day MicroinsuranceNetwork members event in Königstein was attended by approximately 50 participants. The first day was dedicated to panel discussions; whilst the second day provided members with an opportunity to provide feedback on the Draft Network Strategy 2017-2022.

During the first day Hannah Grant (A2ii) participated in a panel debate on the importance of formalisation alongside Richard Lefty, CEO, of MicroEnsure. Although both panelist agreed on the importance of formalisation how and to what extent proportionality should be applied was hotly debated. Discussions focused on the supervision of non-traditional intermediaries such as Third Party Service Providers like MicroEnsure.

For those interested in more information on the event please visit theMicroinsurance Networks website here.

^{Photo Credit: © A. Bianchessi/Microinsurance Network}

9^th Annual IAIS Global Seminar
|16-17 June 2016| Budapest, Hungary

Over 250 IAIS members and stakeholders came together for this two day event. Panel discussions ranged from Insurance Capital Standards to discussions on conduct of business supervision and cyber risk.

The A2ii presented on a panel looking at ‘Selected Insurance Issues in Emerging Economies and Developing Insurance Markets’. Natalie Hurtado (SUSEP) spoke about the progress on their internal restructuring. A presentation was also given by Slovenian supervisor Sergej Simoniti on key issues facing countries in the Balkan region when planning to liberalise motor third party liability premiums. Hannah Grant from the A2ii then spoke about global trends and supervisory challenges in inclusive insurance markets, noting the multiple insurance challenges many countries face and the important role proportionality plays in addressing these. The role of supervisory judgement in applying proportionality was also emphasised. The panel  was moderated by Li Tang (China Insurance Regulatory Commission and Vice Chair of IAIS Implementation Committee).

A2ii Executive Committee Meeting
|14 June 2016| Budapest, Hungary

A2ii’s Executive Committee convened on 14^th June in Budapest. The Secretariat reported on its progress on the 2016 workplan. Discussion then focused on A2iis main activities and funding needs for its next phase (2018-2021). Members also discussed A2iis engagement with the recently establishedInsurance Development Forum and Sustainable Insurance Policy Forum.

IAIS Implementation Committee meeting
|13 June 2016| Budapest, Hungary

The A2ii provided a short report to the Implementation Committee on its recent and upcoming activities. In addition, A2ii spoke up in support of broadening the scope of the IAISs regional funding guidelines and shared its experiences with developing a regional implementation plan in Africa with IAIS members from other regions. An update on the survey on supervisory development needs, which is being developed jointly by the IAIS and the A2ii, was also provided. It is anticipated this survey will be sent out to supervisors in the next couple of months with results reported to the November Implementation Committee meeting. This survey should provide valuable input to A2iis capacity building and regional implementation planning.