Microinsurance covers 52m people in LatAm
In the aftermath of recent natural disasters in the region, a new study on the landscape of microinsurance sheds light on its potential for building resilience among the poor.
Hurricanes including Maria and Irma and two earthquakes in Mexico hit Latin America in the third quarter of 2017, exposing the existing protection gap in the region. The preliminary findings of a study published by the Microinsurance Network and Munich Re Foundation highlights the potential for microinsurance as a source of cover for the population in Latin America.
More than 8.2% of the population in Latin America and the Caribbean (LAC) had at least one microinsurance policy as of December 2016, with 52.1 million people insured corresponding to $420 million in gross written premiums, says the study, The Landscape of Microinsurance in Latin America and the Caribbean 2017.
The study was released at the 13th International Microinsurance Conference (IMC) “Inclusive insurance for the mass market” in Lima, Peru.
The event, which ran to November 9, gathered more than 400 experts from around the world to look at ways to accelerate the growth and economic viability of the microinsurance sector.
“The LAC region has shown substantial growth in microinsurance outreach,” said Dirk Reinhard, vice chairman of the Munich Re Foundation who co-published the study.
“However, recent events such as the floods in Peru, as well as the earthquakes and hurricanes across the region, have demonstrated that there is still not enough protection for people in the low-income market,” he noted.
“Increasing governmental support and implementation of mobile technologies are important steps to develop the market, facilitating fast payouts when disaster strikes,” Reinhard added.
Eduardo Morón, executive president of the Peruvian Association of Insurance Companies (APESEG) and chair of the 13th IMC, commented: “Governments across the region are recognising the important role that microinsurance can and does fulfil in helping people to cope with catastrophic and daily risks.
“Many governments have started improving their regulatory frameworks for microinsurance, with studies on the needs and potential demand for microinsurance underway in several countries,” Morón said.
Regulators within the LAC region reported significant increases in premiums between 2013 and 2016 with a 1,799% premium increase reported for Brazil, 284% for Nicaragua, and 95% for Peru.
In Mexico, the regulator reported that premiums have increased by 36% per year on average between 2007 and 2017. At the same time, preliminary results indicate that commissions have been declining since 2014, with the average commission falling from 20% to 12%, and loss ratios have remained relatively low at an average of 46%, with 69% of products at loss ratios below 41%.
Furthermore, the study found strong growth in agricultural insurance with the number of clients increasing from 35,000 in 2014 to 80,000 in 2016, based on comparable data. In terms of distribution, monetary financial institutions and other financial institutions appear to have acted as the distribution channels for 77% of the 2016 lives covered.
Katharine Pulvermacher, executive director of the Microinsurance Network, explained: “The recent disasters that have struck the LAC region serve as a reminder of the need to leverage insurance that is both effective and inclusive, and to develop risk mitigation strategies to help people—particularly the poor—become more resilient and less vulnerable.
“Our intent is to help develop their capacity to recover and rebuild, and avoid falling back into the spiral of poverty.”
The Microinsurance Network is an international multi-stakeholder platform for inclusive insurance that promotes the development and delivery of effective insurance services for the underserved across the world.
The LAC microinsurance landscape study is part of the World Map of Microinsurance, an initiative that maps global data on microinsurance dating back to 2006. Through this strategic programme, the Microinsurance Network, supported by the Munich Re Foundation and other partners, collects data needed to identify and monitor growth trends in the field of microinsurance.
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