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

1. Can mutual microinsurance improve the living standard of the marginalized groups? Presented by: Sabbir PatelSenior Vice-President, Emerging Markets, ICMIFAOA Seminar23-25thAugust, 2014

2. 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

3. Where is the cooperative/mutual insurance market?

4. Regional split of insurance in 2012
0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% EuropeNorth AmericaAsia & OceaniaLatin AmericaAfrica

5. Regional split of mutual insurance in 2012
0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% EuropeNorth AmericaAsia & OceaniaLatin AmericaAfrica

6. Growth in insurance market share by region (2007-2012)
-20.0% 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% EuropeNorth AmericaAsia & OceaniaLatin AmericaAfrica

7. Growth in mutual market share by region (2007-2012)

8. Global Mutual Market (2012)
Source: Global Mutual Market Share 2012

9. The Global mutual market
Source: Global Mutual Market Share 2012

10. Number of members/ policyholders
Source: Global Mutual Market Share 2012
811 million
in total

11. 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

12. Where is the future for cooperative/mutual insurance?

13. 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%

14. 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%

15. 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

16. 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

17. Potential for mutual microinsurancein emerging markets

18. 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)
5.4times more policy holders
(2)ILO ,Munich Re, “Protecting the poor: A microinsurance compendium Volume II.” (2012)
= 100 million policy holders
2011: Cca. 500m policy holders
2007: 78m policy holders

19. Microinsuranceis untapped in emerging markets
•About 4-5 billion peoplelive on less than $8 a day
•Potential consumers of microinsuranceservices estimated to be about 2.3 billion
•Potential market estimated to be 3-4 billion policies
•Between $30 and $50 billion premium revenueexpected annually
•Total demand growing in excess of 10% a year, with premium increases outstripping those in developed markets.
Source: Succeeding at Microinsurancethrough differentiation innovation and partnership-Accenture, 2012.

20. 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

21. Benefits of mutuality in microinsurance
We 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 process
UNCTAD, 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

22. Opportunities for Takaful/Microtakaful

23. 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

24. Source: www.muslimpopulation.com
7.6% 32% 0.4% 52.4% 1.5%1.8% Percentage of Muslim populationEuropeAsia & Middle EastLatin America andCarribeanAfricaOceaniaNorth America

25. The lack of insurance penetration in Muslim countries
Source: Human Development Report 2011 & Sigma (2011) World Insurance in 2010

26. Potential Takaful markets
Source: The World Takaful Report 2012, Ernst & Young

27. Can Takaful impact the take up of microinsurance?
“Cultural and religious values (also) affect the demand for microinsurancein 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 Microinsurancein Africa, 2010)
“ One reason for the low insurance penetration among Muslim population is that Shariahforbids 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)

28. 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

29. The ICMIF Development ProgramTime to step up and realize our potential

30. Key Challenges for mutual/takafulinsurers 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 microinsuranceproducts
•Low insurance penetration
•Unstable economic conditions/ political instability
Source: AllNationsSurvey 2013, ICMIF

31. 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

32. ICMIF Development Program
ICMIF Development Committee
Advocacy Working Group
Microtakaful Working Group
Research Working Group
Technical Assistance Working Group
ICMIF Development Fund

33. 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 mutualsin emerging markets
•In-depth field visits to 5 member countries
•Overview on how mutualsare 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

34. 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

35. 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 MicroinsuranceSimulation
Year Three:
•Disseminate relevant publications from other working groups
•Create partnerships with other external organizations working with the low-income sector

36. 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 takafuloperators.
•Work with members to establish microtakafulschemes
.

37. Strategy for Implementation
Country by country approach
2.Country
Diagnostic
1. Identification
of country
3. Needs identification
4. Country
program
Advocacy,
Takaful,
Technical Assistance
5. Implementation with
partners

38. 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

39. 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

40. ICMIF Development ProgramInsurance for the People, By the People
Thank you