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