Effective insurance coverage for the poor
Title: Regulatory framework promotion of pro-poor insurance markets in Asia
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Overall term: 2013 to 2015
People with low incomes are highly vulnerable to financial and health risks, for instance when there are cases of illness, death and incapacity to work within the family or property is lost. In many countries, such risks can be as fateful for the poor as natural or man-made disasters. Whole families can be caught in a vicious circle over many generations, with little hope of escape.
Insurance cover can offer effective protection in this context. Both the public and private sectors have increasingly come to realise that people with low incomes are also insurable. Numerous examples demonstrate that microinsurance products can be offered on a sustainable basis. For the state too, insurance protection can be an effective way of shielding citizens from the consequences of disasters or from agricultural risks, for example.
Insurance markets in Asia have grown rapidly in recent years. However, many public authorities in this region require greater expertise and strategies to create the frameworks needed for pro-poor insurance markets. Such legal frameworks are essential to ensure that these markets can develop sustainably and to protect consumers from bad business practices.
The regulatory and supervisory framework for effective insurance cover for low-income people in Asia has improved.
This regional programme assists Asian countries in improving their regulatory and supervisory frameworks for insurance so that poor people can access insurance products. The programme supports the development of innovative approaches to policy-making and regulation in the insurance sector, with particular reference to micro, small and medium-sized enterprises, disaster risk management and agriculture. As insurance companies are also being encouraged to alter their business practices, a wide variety of stakeholders are to be included in the development of solutions.
In order to enhance the performance capabilities of the insurance supervisory authorities, the programme is drawing on the expertise of the International Association of Insurance Supervisors and its implementation partner the Access to Insurance Initiative. The Initiative offers supervisory authorities in Asian countries training and information on the introduction of microinsurance policies and regulation geared to the needs of the people.
The programme initiates regional training and dialogue events, where insurance supervisors can share their experiences and methods. It also supports supervisory authorities in individual countries in developing and carrying out regulatory reforms through pilot measures.
This regional programme coordinates and consolidates its work with related bilateral projects of German international cooperation in Asia and with the activities of other donors, and complements these.
In a number of international and bilateral projects, GIZ has already initiated significant developments towards improving the conditions for access to insurance. The regional programme ties in with and builds on these activities, especially in Asia. A milestone in this regard was the first mutual exchange forum on inclusive insurance organised by the programme in May 2013. Six Asian countries – Indonesia, Mongolia, Nepal, the Philippines, Thailand and Viet Nam – adopted a joint declaration confirming the importance of inclusive insurance for social and economic development and agreeing to step up their efforts to improve access to insurance in their respective countries.
The programme also supports these six countries in implementing pilot measures. In the Philippines, it has worked with local partners to develop a mechanism for the resolution of disputes between customers and providers, which has now been in place since 2013. At the end of 2013, Indonesia adopted a regulatory framework and national strategy for microinsurance. In Nepal, the Insurance Board agreed on a legal framework for microinsurance in mid-2014. Mongolia and Nepal have developed insurance business models for SMEs and crop protection and sent circulars to inform farmers and businesses of these offers. Insurance supervisors in the six pilot countries have attended three training events on inclusive insurance, the principles of insurance, and proportionality and supervision. This has enabled them to perform their tasks more competently.
The results achieved thus far are also due in no small part to the programme’s close cooperation with the Access to Insurance Initiative, the Asian Development Bank and the region’s only training institution in this field, the ASEAN Insurance Training and Research Institute.