[Microinsurancefocus] Microinsurance, an untapped source of social and economic development in Africa

[MICROINSURANCEMEDIA MICROINSURANCEMEDIA]

Microinsurance, an untapped source of social and economic development in
Africa
 
GENEVA (ILO News) - Little over 2% of Africa's 700 million working poor are
covered by insurance, representing a vast untapped opportunity for social and
economic development, according to a new study by the Microinsurance Innovation
Facility of the International Labour Office (ILO).
 
The study, "The Landscape of Microinsurance in Africa", shows that only 14.7
million low-income workers in Africa have access to microinsurance, a tiny
fraction compared to the approximately 700 million people who can afford it.
 
"The findings of the study are very interesting and promising. They show that
only 2.1% of the target population has access to some sort of microinsurance.
The explanation is two-fold. On the one hand, potential clients do not
understand very well what insurance is about and have difficulties paying
premiums. On the supply side, there are deficiencies in terms of information
technology, qualified personnel and high administrative costs", said Michal
Matul, Research Officer from the ILO´s Facility and one of the authors of the
study.
 
"All this can change through the coordinated efforts of providers, donors and
governments", he added. "We are already seeing signs of progress. Seventy per
cent of the providers we talked to agreed that the number of microinsurance
policies in their national market is expected to grow over 10% in the next
year".
 
Though there is significant microinsurance activity in certain regions
(especially in Southern and Eastern Africa where about 12 million poor people
benefit from a policy), the majority of the African continent remains a vast and
untapped market. From a monetary perspective, assuming a potential for insurance
expenditure levels of 5% of GDP, the value of the market for microinsurance in
Africa is approximately $25 billion. The survey found that received premiums in
2008 amounted to about $257 million, only 1% of their potential value.
 
The most common type of microinsurance in Africa is life insurance, with credit
life products covering close to 9.5% of the market and other life products
around 3.2%. Health products - often cited as the most in need - only cover
about 0.3% of the low-income population. Property and agriculture cover
significantly fewer numbers, about 0.2% and 0.1% of their respective potential
markets. These figures again show there is a great potential for expanding
microinsurance in Africa.
 
"It is possible to reach hundreds of millions of low-income people in Africa
with microinsurance, but this requires a series of prerequisites, such as a
diversity of providers, informed clients who understand the value of
microinsurance, innovative distribution channels, and improved efficiency and
human resource management. None of this can be achieved by the providers alone.
Donors and governments must support these efforts by creating a coordinated
movement that will help low-income Africans manage risks and lead safer, more
stable lives", concluded Mr. Matul. The ILO´s Microinsurance Innovation Facility
was established in 2008 to support the extension of insurance to millions of
low-income people in the developing world, with the overall aim of reducing
their vulnerability to risk. Full results of the study are available in the
Working Paper no.4: The Landscape of Microinsurance in Africa -
http://www.ilo.org/public/english/employment/mifacility/download/mpaper4_landscape_en.pdf
 Contact: microinsurancemedia at ilo.org- www.ilo.org/microinsurance
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