A RECENTLY published study on African microinsurance markets, shows that the number of low-income households benefiting from insurance services, has grown significantly in the last three years.
In the study, Making Finance Work For Africa (MFW4A) and Munich Re Foundation, have established that during the last three years over 44 million people have benefited from insurance services, which reflects a growth rate in excess of 200 per cent. "This is a tremendous achievement.
The expansion of quality insurance services to large numbers of low-income households can have a significant role in achieving the Millennium Development Goals (MDGs)," says an expert with ILO, Mr Craig Churchill, who is also the Chairperson of the Microinsurance Network. MFW4A Partnership is an initiative to support the development of African Financial Sectors.
It is a unique platform for African governments, the private sector, and development partners to coordinate financial sector development interventions across the continent, avoiding duplication and maximizing developmental impact. The MFW4A has its secretariat at the African Development Bank (AfDB) headquarters in Tunis, Tunisia.
The Microinsurance Network promotes development and delivery of effective insurance services for low-income people by encouraging shared learning, facilitating knowledge generation and dissemination, as well as providing multistakeholder platform. The network, in collaboration with Munich Re Foundation and the Tanzanian Insurance Regulatory Authority (TIRA), is cohosting the the three-day, 8th International Microinsurance Conference in Dar es Salaam, Tanzania, which starts on Tuesday.
During the three-day conference, the study will be officially launched. The conference is expected to bring together over 500 experts from 62 countries to discuss the challenges and opportunities in microinsurance, while also focusing on how to build upon the current achievements. "One striking issue highlighted in the study is that the vast majority of Africans with insurance coverage, that is to say, close to 40 million people, are covered by life insurance.
"Other insurance products, related to health, agriculture, accident and property, are not as developed on the continent, which is inconsistent with the demand, especially for health insurance," says Stefan Nalletamby, Partnership Co-ordinator of MFW4A. In geographical terms, the study noted that over 38 million of the insured people are concentrated in Southern and Eastern Africa, with South Africa alone covering 27 million.
In Tanzania, the microinsurance sector is developing at a steady pace. "With 3.3 million people covered by microinsurance, which represents a growth of around seven per cent in three years, TIRA has been focusing its efforts on raising the awareness and benefits of insurance amongst the poor, as well as working together with Access to Insurance Initiative (A2II) to stimulate the market through new regulations," says Mr Israel Kamuzora, TIRA Chief Executive Officer (CEO).
Mr Kamuzora told the 'Daily News' over the weekend that it is for this reason that Munich Re Foundation and MFW4A decided to convene the 8th International Microfinance Conference in Tanzania. The TIRA chief said that microinsurance has bright prospects in Tanzania, where the insurance market is growing at around 20 per cent annually, a rate which is three times the country's gross domestic product (GDP) growth.
Mr Kamuzora noted that the key players in driving microinsurance include microfinance institutions such as Savings and Credit Co-operative Societies (SACCOs), Vikoba, Pride and mobile phone service providers including TIGO, Vodacom and Zantel. He said the telecom firms have agreements for various insurance packages payable through airtime and other means. "This is working very well," Mr Kamuzora explained.
He further said that TIRA's focus on microinsurance was in line with National Development Vision 2025 and National Strategy for Growth and Poverty Alleviation (MKUKUTA). Conference organisers say, in Latin America and the Caribbean, another recent study identified over 40 million low-income people covered by microinsurance, and the publication of the second edition of the Microinsurance Compendium should continue to fuel additional interest in the sector.
"With nearly 220 organisations providing microinsurance in Africa, the study clearly shows the rising interest in insuring the low-income market. "This is underlined by the fact that the conference will welcome insurance regulatory and supervisory authorities from over 20 countries who will pave the way for increasing outreach and improving client value," says Dirk Reinhard, Vice-Chairman of Munich Re Foundation and Board member of the Microinsurance Network.
According to ILO, lowincome households are vulnerable to risks and economic shocks and one way for the poor to protect themselves is through insurance. "By helping low-income households manage risk, microinsurance can assist them to maintain a sense of financial confidence even in the face significant vulnerability.
"If governments, donors, development agencies and others are serious about combating poverty, insurance has to be one of the weapons in their arsenal," says ILO in a recently published book entitled: 'Protecting the poor : A microfinance compendium,' edited by Mr Churchill. Low-income persons live in risky environments, vulnerable to numerous perils, including illness, accidental deaths and disability, loss of property due to theft or fire, agricultural losses and disasters of both natural and man-made varieties.
The poor are more vulnerable to many of these risks than the rest of the population, and they are the least able to cope when the crisis does occur. ILO argues that on its own, cannot eliminate poverty. Yet if it is available to poor women and men along with other risk-management tools, health and life insurance for the poor can make valuable contribution to achieving the Millennium Development Goals (MDGs).
The MDGs, established by the UN in early 2000s, provides more than 40 quantifiable indicators to assess the progress made toward global economic and social development by 2015. The MDGs serve as a development framework, helping to focus the attention of policy-makers, donors and development practitioners on the most critical objectives. Microinsurance is now branching into areas such as offering farmers policies against extreme weather.
Over 140 million people, mostly in Africa and Asia, are now covered by affordable insurance premiums, and studies showed the potential market is up to three billion, according to the Munich Re Foundation. Churchill was recently quoted as saying that more than half of microinsurance products were focused on life and health while less than 10 per cent cover farms.
"We're still at the experimental stage in offering products that could cover agriculture," he said, adding there was huge potential growth for such products, citing impacts of typhoons Ketsana and Parma in the northern Philippines in late 2009. Those typhoons, and Typhoon Megi in October, caused deaths, flooding, landslides, and damage to crops and infrastructure.