ICII 2024
© Nepal Insurance Authority

International Conference on Inclusive Insurance 2024
Summary

21 - 25 October 2024
Kathmandu, Nepal

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    The International Conference on Inclusive Insurance
    2024: Strengthening economic development through insurance

    By Dirk Reinhard*

    The International Conference on Inclusive Insurance 2024 (ICII 2024) took place from 21-25 October 2024 at the historic Lal Durbar Convention Centre / Yak & Yeti Hotel in Kathmandu, Nepal. Around 500 Experts from 43 countries discussed and identified ways to accelerate the growth and economic viability of inclusive insurance in emerging markets. The conference was hosted by the Nepal Insurance Association and the Nepal Insurance Authority, in collaboration with the Munich Re Foundation and the Microinsurance Network. 

    25 sessions with over 90 speakers - A gallery of the ICII 2024:
    The ICII 2024 agenda addressed critical issues such as climate risk insurance, digital innovation in microinsurance, and overcoming barriers to scaling inclusive insurance. Key highlights included the opening session on 22 October, attended by His Excellency Ram Sahaya Yadav, Vice President of Nepal, who officially opened the conference on the role of inclusive insurance in strengthening financial resilience, particularly for vulnerable communities. Speaking at the opening, Chunky Chhetry, President of the Nepal Insurers' Association, said: "Inclusive insurance is not just a financial product, it is a tool for empowerment and resilience. It enables affected groups to recover from the loss and helps communities to break out of the cycle of poverty, where a disaster could otherwise push them into long-term financial hardship".
    His Excellency, Ram Sahaya Yadav, Vice President of Nepal
    © Nepal Insurance Authority
    Insurance can strengthen a country’s economy. The poor and the deprived can achieve economic security. Inclusive insurance allows them to remain safe in any unexpected event. We need to educate people about the importance of insurance. Governments and insurance companies should work together to ensure that every person has access to insurance – in both rural and urban areas.
    His Excellency, Ram Sahaya Yadav
    Vice President of Nepal
    The conference featured 24 plenary and breakout sessions on topics such as "Climate Change and Disaster Risk Finance", "Bridging the Insurance Gap: Challenges and Opportunities" and "The Role of Technology in Expanding Access to Insurance". The 2024 Microinsurance Network's Landscape of Microinsurance Report was launched, providing insights into global market trends and identifying opportunities for growth in the sector. Pre-conference workshops offered practical approaches to designing and implementing inclusive insurance products tailored to underserved populations in emerging markets.

    The Landscape of Inclusive Insurance

    One of the most eagerly awaited events at each ICII is the first presentation of the Microinsurance Network's forthcoming Landscape of Microinsurance. This provides invaluable insight into the latest trends and developments in inclusive insurance products and services. The 2024 edition of the Landscape, scheduled for publication in early 2025, represents the most comprehensive survey to date, with 294 insurance providers surveyed in 37 countries across Africa, Asia, Latin America and the Caribbean. The study indicates that 344 million people will be covered by microinsurance products in 2023, representing an increase from 300 million in 2022. Life and accident insurance continue to represent the majority of the market, followed by agriculture. The latter is dominated by large national agricultural insurance schemes, of which India's PMFBY alone covers around 40 million people. However, insurance still only reaches less than 10% of the target market, leaving most of the 2 billion people in Asia without access to affordable risk management.

     

     

    Figure 1: People covered by product in 2023 (millions)
    Source: Nicolas Morales, Microinsurance Network presentation on the Landscape of Microinsurance Study 2023, ICII 2024 
    Figure 2: Share of microinsurance policies by region, 2023
    Source: Nicolas Morales, Microinsurance Network presentation on the Landscape of Microinsurance Study 2023, ICII 2024
    Successful microinsurance portfolios are built on a foundation of patience and sustained investment. The financial sustainability of microinsurance can be achieved over time by reaching sufficient scale. The study revealed that microinsurance products reached a median of more than 10,000 people, with some products, such as credit life and funeral insurance, covering more than 29,000 people. Microinsurance products typically take 3-4 years to achieve significant growth. As products mature, both the number of customers and the premiums collected increase significantly.
    Speakers of the plenary discussing how to promote market development in Nepal. Left to right: Diana Almoro, Regional Lead Asia Pacific, UNDP-IRFF, Thailand; Chirayu Bhandari, CEO, Guardian Micro Life Insurance / President, Nepal Microinsurance Organisationl; Damodar Bhandari, ACEO of Nepal Re; Sushil Dev Subedi, Director, Nepal Insurance Authority (NIA); Poshak Raj Paudel, CEO, Citizen Life Insurance / President of the Life Insurance Association of Nepal; Dip Prakash Panday; CEO, Shikhar Insurance
    In the Nepali market, there are currently 14 non-life and 14 life insurance companies in operation according to data from the life and non-life insurance associations in Nepal. Since 2023, a further seven microinsurance companies have been established, four of which operate as non-life insurers. In addition to a nationwide agricultural and livestock insurance scheme, which is subsidised by the government, micro-life insurance represents the dominant force in the market. In the fiscal year 2023/2024, approximately three million life microinsurance policies were issued. A subsidy in agriculture insurance provides financial assistance to farmers to enable them to purchase insurance. The waiver of value-added tax (VAT) exempts micro, agriculture, and health insurance reduces the cost to the consumer. Those who purchase home and health insurance may be eligible for tax deductions or credits. The recently updated Insurance Act contains provisions that regulate and facilitate micro insurance for low-income individuals.
    Figure 3: Protection gaps in Asia
    Source: Nicolas Morales, Microinsurance Network presentation on the Landscape of Microinsurance Study 2023, ICII 2024

    Box 1: Challenges to increase insurance outreach

    Click on the headlines for more details
    The insurance industry continues to face a significant awareness gap, with many individuals and businesses remaining uninformed about the benefits and importance of insurance. Furthermore, ineffective communication strategies have exacerbated this issue, resulting in low penetration rates and a lack of trust in insurance companies.
    Geographical constraints and limited accessibility persist in remote areas, hindering the growth of the insurance industry. The lack of digital infrastructure in rural areas has also impeded the development of online insurance services. Moreover, the overall infrastructure for insurance companies remains underdeveloped, creating operational challenges.
    The paying capacity of individuals and businesses remains a significant concern, with many unable to afford insurance premiums. Economic volatility and slowdown have further exacerbated this issue, affecting the purchasing power of individuals and businesses. Additionally, the informal economy's substantial size poses a challenge to insurance companies seeking to reach and insure these individuals and businesses. Poor industrialization and employment opportunities have also impacted the overall economy and insurance market.
    The insurance industry is grappling with moral hazard concerns, which can lead to increased claims and losses. High loss ratios also pose a significant challenge to insurers, making it essential to develop effective risk management strategies. Moreover, pricing risks accurately, particularly for climate-related and other emerging risks, remains a pressing concern.
    Government subsidies for (agriculture) insurance can be beneficial, but their effectiveness depends on implementation. However, the lack of historical industry data creates a significant challenge for insurers seeking to assess and price risks accurately.
    A substantial portion of the population lives below the poverty line, making it essential to offer affordable insurance products. Limited access to healthcare services also affects health insurance sales and claims. Furthermore, the outflow of skilled professionals and young graduates can impact the insurance industry's workforce and talent pool.
    Informal insurance arrangements can undermine the formal insurance industry and create regulatory challenges. Additionally, the shortage of skilled actuaries can impact insurers' ability to assess and price risks accurately.
    Source: Nepal Insurers Association, Presentation ICII 2024

    Topline and bottom-line strategies

    The issue of how insurance providers can best address the insurance gap, particularly in the low-income market, was the subject of much discussion at the ICII 2024. Experts agree that the success of microinsurance companies in reaching low-income populations depends on five key strategies: partnerships, distribution channels, standalone units, skilled teams, and digitalisation. Strategic partnerships, such as those Chartered Life Insurance in Bangladesh has formed with organisations like BRAC and UNDP, allow these companies to leverage established networks and foster trust, enabling more effective outreach.

    In terms of distribution, microinsurance providers often utilise B2B2C models, working through intermediaries like microfinance institutions and fintech platforms rather than a direct-to-consumer approach. This approach enables them to expand their operations in a cost-effective manner and reach communities that would otherwise be difficult to access. Furthermore, many insurers establish standalone microinsurance units, or "microinsurance champions," with dedicated leadership focused on tailoring products to the needs of low-income customers. It is also essential to have well-trained teams. At the conference, it was demonstrated that companies have benefited from microinsurance courses, which have equipped staff with the skills needed to enhance customer service and product management. Finally, digitalisation has transformed claim processing, significantly reducing timeframes and enhancing customer satisfaction. For instance, digital tools can now reduce hospital claim times to as little as two hours, which fosters trust and efficiency in microinsurance services.

    The ICII 2024 marked the 20th International Conference on Inclusive Insurance. Representatives from prior hosting countries – Bangladesh (2019), Peru (2017) and Zambia (2018) – presented their experiences of increasing insurance outreach in their countries and the role that the ICII has played in that respect.

    Obstacles to address climate risks

    Just a few days before the ICII 2024 started, the Kathmandu region has been impacted by extreme rainfall which caused the loss of hundreds of people and destroyed the livelihoods of thousands. This again shows the importance or affordable risk management including insurance to make the most vulnerable more resilient against climate risks. The government and the insurance industry have intensified their activities to develop more solutions to tackle climate risks (see also report of the field trip).

    Parametric insurance has shown great potential in addressing the changing context of climate risk. However, basis risk – the discrepancy between the actual loss experience and the parametric trigger – represents a significant challenge to the success of these products. The root causes of basis risk can be attributed to two primary sources: technology failure and/or data insufficiencies, and inadequate product design. To address this issue, insurance companies may wish to consider combining multiple data sources and developing robust index models that more accurately reflect on-the-ground experiences. Nevertheless, it is important for product designers to exercise caution when introducing complex product components, as these can compromise the transparency and accessibility of the product to the target market.

    It is crucial to recognise that insurance alone is an insufficient method for managing climate risk. Integrating insurance with other risk management tools, such as savings accounts or improved agricultural practices, can help to reduce the impact of basis risk. This multifaceted approach can facilitate the more effective distribution of risk and enhance the resilience of affected communities. To address basis risk, there is a need for iterative improvement and industry collaboration. However, it is unlikely that basis risk can be entirely eliminated due to its intricate nature. Insurers may wish to consider adopting an iterative approach, whereby index designs are continually validated throughout the implementation process. This will facilitate the gleaning of valuable lessons.

    Surya Prasad Silwal, Chairman of the Nepal Insurance Authority, Nepal
    © Nepal Insurance Authority
    Climate change and social inequalities pose unprecedented challenges, which affect low-income households who lack the tools to deal with disasters. Rainfall in three days left 256 people dead and losses worth over 865 Nepalese rupees. The importance of insurance has become more critical in times of increasing uncertainty: insurance is not just about managing risk, it is about providing hope and certainty to the most vulnerable.
    Surya Prasad Silwal
    Chairman of the Nepal Insurance Authority, Nepal

    Next steps in Nepal

    Following the conclusion of the conference, the Nepal Insurance Authority (NIA) extended an invitation to key stakeholders to participate in a discussion on the key learnings, challenges, opportunities and next steps required to facilitate the development of the Nepal insurance industry. The NIA has introduced micro insurance regulation, specifically designed for low-income groups, which provides them with essential financial protection. Additionally, the establishment of micro insurance companies will allow for the provision of tailored solutions to meet the specific needs of this segment. Moreover, a range of insurance products has been developed for the agricultural sector, addressing the diverse needs of farmers and agricultural businesses. Furthermore, the Authority has enhanced policy coverage by making Personal Accident (PA) cover obligatory for family members in home insurance policies and policyholders in agriculture insurance policies, thus ensuring more comprehensive protection for dependents. The release of the Digital Policy Guideline, 2024, provides a framework for digital insurance policies and encourages industry-wide adoption. Additionally, the 'Ghumti Beema' initiative endorses mobile insurance and other non-traditional insurance channels.

     

    Chunky Chhetry, CEO, Sagarmatha Lumbini Insurance / President of the Nepal Insurers' Association
    © Nepal Insurance Authority
    Inclusive insurance is not just a financial product. … It is a tool for empowerment and resilience. It enables the affected groups to recover from the loss and help communities break free from the cycle of poverty, where one disaster could otherwise push them into long-term financial hardship.
    Chunky Chhetry
    CEO, Sagarmatha Lumbini Insurance / President of the Nepal Insurers' Association
    The participants of the "next steps meeting," comprising representatives from major national and international insurance companies, as well as donor organisations, expressed their intention to provide support for market development. The national stakeholders, led by the NIA, will analyse the experiences of other countries in formulating a national insurance strategy, as well as the insights from the ICII 2024. This initiative is designed to maintain the momentum and commitment to expand coverage and enhance the resilience of the most vulnerable in the country.
    *The author would like to thank for the input by Pujan Dhungel Adhikari, Chunky Chhetry, Michael McCord, John Caroll and Rishi Raithatha and the Rapporteur Team of the ICII 2024!