Issues Monitor: Issue Digest

KPMG INTERNATIONAL
Issues Monitor
Issue Digest
KPMG INTERNATIONAL
Sharing knowledge on topical issues in the

International Development Services Industry
Month
Microinsurance
2011, Volume XXXX
January
2013
kpmg.com
FOR INTERNAL USE ONLY
2 | Issue Digest: January 2013
Executive
summary
01
02
03
04
05
Microinsurance
Microinsurance provides protection
and risk mitigation; is also a market
with vast potential
Microinsurance refers to insurance products designed for

people living on low incomes.
Estimated potential market of about four billion customers
and US$40 billion in premium income per year.
Products
Increasing focus on innovating
products that combine consumer
needs with affordable premiums
Credit life is the dominant microinsurance product;

however, health and agriculture insurance are also slowly
gaining prominence.
Designing need-based products that are affordable and
create shared value for insurers and society remain key
areas of concern.
Distribution
Insurers investing to find the right
mix of distribution channels that are
effective and efficient
Microfinance institutions (MFIs) and cooperatives are the

most-preferred distribution channels; however, the role and
significance of different channels differ across regions and
product segments.
Regulations
Countries around the globe rapidly
adopting separate regulations for
microinsurance
Governments are trying to step up efforts to provide risk

protection to a wider segment of the population by adopting
favorable regulations as well as requiring insurers to create
insurance awareness among the low-income group.
Outlook
Good practices emerging, expected
to stimulate further growth
The microinsurance industry is expected to witness

significant growth led by increasing insurance awareness
through low cost innovative products and distribution
channels being gradually introduced by the insurers.
Government participation through NGOs, public private
partnerships (PPP) and Community-based Organizations
(CBOs) are also likely to help in the enhancement of
microinsurance and the upliftment of the poor.
2013 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG
International. KPMG International provides no client services. All rights reserved.
01
What is
microinsurance?
Microinsurance refers to insurance products that are designed to provide risk

cover for the low-income population. These products have lower premiums and
coverage limits as compared to the traditional insurance products. Microinsurance
is a form of microfinance, akin to microcredit which provides small loans to people
on low-incomes. For example, in India SKS finance distributes small loans that
begin at about US$44-260 to poor women for starting and expanding simple
businesses. Microinsurance is not only providing risk covers to low-income
households but is also seen as a risk management option. Also, the corporate
social responsibility drive towards developing microinsurance solutions in
emerging markets is rapidly gaining significance.1, 2, 3
World population by income
2.6 billion people
US$33 billon market
Microinsurance statistics
Number of people covered by
microinsurance (in millions)
500
2011
135
2009
78
2007
0
100
200
300
400
500
Source: Protecting the poor, ILO, 2012, 7th

International Microinsurance Conference, 2011
Microinsurance premium potential

US$40 billion
per year
US$0.8-1.2 billion
1.2
2010
2.6bn
Low income
5/d
ay
Potential
market
It is estimated that the current penetration of

microinsurance is close to 23 percent of the
potential market
Microinsurance
Source: Swiss Re Sigma Report 2010
$4/day
Social
protection
Extremely Poor
1.4bn
1.4 billion people

US$7 billon market
People covered by geographies

(in millions)
Classic
insurance
50
44
2.3bn
400
poorest
Middle & high income
richest
Source: World Bank, Allianz Group 2012, Swiss Re Sigma Report 2010
Asia
Latin America
Africa
Source: Protecting the poor, ILO, 2012, 7th

International Microinsurance Conference, 2011
1. Swiss Re Sigma Report: Microinsurance risk protection for 4 billion people, 2010
2. Microinsurance Innovation Facility
3. 7th International Microinsurance Conference 2011
Microinsurance has seen significant growth in Asia Pacific, particularly in markets such
as India and China. Asia is seen as a region with a vast potential for microinsurance
as it is home to about 70 percent of the worlds low-income population. Largely,
Bangladesh, the Philippines and Indonesia are witnessing rapid growth in
microinsurance. While Africa remains an undertapped market for microinsurance,
insurers are increasingly making an effort to cover the African population by
introducing need-based and easy-to-understand products. In Latin America, Brazil was
one of the first markets to introduce microinsurance with Mexico, Peru and Colombia
following suit. In Central and Eastern Europe, growth in microinsurance has not been
as swift as compared to Asian and Latin American regions.2, 3, 4, 5, 6
Microinsurance products*
Distribution channels**
8%
12%
29%
25%
29%
14%
8%
14%
Life endownment
Credit
Health
23%
Accident & disability

Property
Others***
20%
9%
MFIs/Banks
NGOs
CBOs
9%
Agents and Brokers
Retailers
Others****
*, ** The figures correspond to a survey conducted by Microinsurance Network in 2011. The study
sample is composed of: 20 insurance companies, two insurance and reinsurance brokers, and two
reinsurance companies.
*** Others include legal expenses, index and casualty products. Index insurance pays when certain
parametric triggers are met, for example crop index insurance might make payments based on
rainfall data or when temperature drops below freezing. The challenge is establishing parametric
triggers which minimize basis risk.
**** Others include, local offices of development agencies, direct distribution by the insurance
company itself, associations, utility companies and self-help groups, CBOs, government,
employers, churches, and cooperatives.
2.
3.
4.
5.
6.
Microinsurance Innovation Facility

7th International Microinsurance Conference 2011
Commercial insurers in microinsurance Micro insurance network, 2011
Protecting the working Poor, ILO, 2012
Microinsurance at Allianz Group, September 2012
02
Products and
innovations
Insurers are driving innovation and introducing microinsurance products that

are simple to understand as well as low in premiums. Despite new product
developments, life insurance still remains the most prevalent microinsurance
product, mainly driven by microfinance institutions as it provides life insurance
protection to borrowers, often grouped with microcredit. Credit life protection
facilitates micro-lending, providing a direct benefit to the lender (enabling the loan
to be repaid in the event of death) but only limited direct benefit to the insured
(enabling them to access microfinance); therefore, industry practitioners are
increasing focus on products that offer comprehensive risk coverage.6
Agriculture and health microinsurance products are gaining popularity; however,
they remain complex in terms of underwriting. These products typically require
a catalyst such as subsidized premiums either in part or full. A public private
partnership could be the key to implement such complex products. Governments
and insurers need to increase insurance awareness among the low-income
population so that simple products with no hidden terms can be introduced to
provide protection to the low-income population rather than to large institutions.
Insurance and product awareness, transaction costs, availability of easy-tounderstand products, infrastructure and need-based products that are affordable
and create shared value are some challenges that the insurers face while
designing products for the low-income group.7
Case studiesproduct
innovation
Aon Bolivia recently launched a new
retirement product targeting the working
class population, which requires regular
payments for 100 months and thereafter
entitles policyholders to receive double
the monthly payment for the next
70 months.
In India, ICICI Prudential Life has
partnered with a tea producer to offer
unit-linked endowment products to
company workers at tea plantations. The
product comes with premium guarantees
and flexible liquidity options.
In 2009, PICC of China introduced a pilot
microinsurance program insuring internal
migrants against accidents and disease.
All the above are examples of innovation

primarily due to need-based products
designed after studying the requirements
of specific groups.
Agriculture and health microinsurance

products are gaining popularity;
however, they remain complex in terms
of underwriting.
Sources: Company websites, FactSet, Swiss Re

Sigma Report: Microinsurance risk protection
for 4 billion people, 2010
6. Micro-Insurance: A Largely Untapped Market, November 2011

7. Protecting the working Poor, ILO, 2012
03
Distribution
strategies
Case studiesdistribution
innovation
HDFC ERGOs rainfall index insurance
product in India covers the diminished
agricultural output/ yield resulting from a
shortfall in the anticipated normal rainfall.
It uses technology-enabled distribution
and along with a messaging service for
policy and claims data updates.
Codenso, the largest power distribution
company in Colombia, leverages its client
base to target microinsurance products
in partnership with Seguros Mapfre.
Distribution of microinsurance products is dependent on factors such as

collaboration, relationship and trust with the low-income group as well as holding
down associated costs. Microfinance institutions and cooperatives are the
most-preferred distribution channels led by their vast established networks and
proximity to the target market. Existing microinsurance channels also include
NGOs, community, retail/ departmental stores, trade unions, utility companies,
religious faith groups, post offices and commercial banks.
The selection of the right channel mix primarily depends on the region and product
segment. In India and the Philippines, MFIs are predominately used to distribute
microinsurance products, while, in Brazil, utility and telecom companies are
increasingly used. Distribution through retailers is being increasingly utilized in Latin
American markets as well as in South Africa. Funeral insurance continues to be
largely sold by informal burial societies, funeral parlors and cooperative societies.
Max New York Life insurance in India

uses handheld terminals, mobile phones
and portals to manage flexible payments
that are small and irregular.
However, insurers are continuously innovating and introducing distribution channels

that are not only cost efficient but also have a wider reach. Technology is being
extensively used to distribute microinsurance products more efficiently and
effectively. For example, mobile banking is gaining prominence as it is not only an
enabler of client communications, but is also helpful in premium and data collection.
However, the channel has limitations where face-to-face interaction is required.
Hollard in South Africa teamed up with

PEP stores to distribute funeral insurance
products. The monthly premiums can be
paid at the store.
Insurers also face challenges in terms of the regulatory norms and licensing
requirements of informal distribution along with the right balance of value and
impact on cost and innovation.8, 9, 10
In Ghana, MicroEnsures mobile

insurance product called Mi-Life
distributed by MTN (Metropolitan
Telecommunications Network) allows
premium payments to be deducted from
the m-wallet monthly. Customers
receive an SMS notifying them that the
premium has been deducted and their
insurance cover renewed.
Sources: Company websites, FactSet and
press releases
In India and the Philippines, MFIs

are predominately used to distribute
microinsurance products, while, in
Brazil, utility and telecom companies are
increasingly used.
8. Succeeding at microinsurance through differentiation innovation and partnership, 2012

9. The landscape of microinsurance in Latin America and the Caribbean, 2012
10. 7th International Microinsurance Conference: Making insurance work for the poor, 2011
04
Regulations
Microinsurance regulations are different from the traditional insurance regulatory

frameworks as most insurance regulators propose lower capital requirements for
micro insurers. Microinsurance regulations are aimed at ensuring simple, easy to
understand products and also encourages new and innovative distribution models,
such as banking correspondents. For example, the South Africa microinsurance
regulatory framework will permit the licensing of a new category of insurers to
provide only microinsurance products. Brazils regulations propose lower capital
requirements for micro insurers (20% of the current base capital required), and
simplified documentation.11, 12, 13, 14
Regulatory authorities
around the globe are
focusing on raising
the awareness and
benefits of insurance
amongst the poor.
Examples of regulatory initiatives/proposals in microinsurance

Mexico
Regulatory approach
adapted to be better tailored
to actual market development.
Second round of regulation
has seen rapid increase in
market penetration
West Africa
Microinsurance regulations in
eight countries for mutual social
health organizations.
India
Separate regulations for
microinsurance; mandate on
rural and social obligations
as part of licensing conditions
Taiwan
Proposed draft microinsurance
regulations for a program
covering traditional life and
personal injury insurance
Colombia
Does not have a dedicated
microinsurance regulation;
still incorporates proportionality
in its regulatory framework
Peru
Has separate regulations for
microinsurance
China
Microinsurance regulations
already implemented
Brazil
Separate regulation with provisions including
specific license for microinsurance providers
and consumer protection regulations
South Africa
National treasury framework
proposed with measures
such as dedicated
microinsurance licenses and
simplified distribution
Philippines
Separate regulations for
microinsurance; mandate on
rural and social obligations
as part of licensing conditions
Source: Swiss Re, Munich Re conference and KPMG analysis
11. Driving Efficiency & Growth in Microinsurance through regulatory intervention A Perspective, 2012
12. 7th International Microinsurance Conference: Making insurance work for the poor, 2011
13. The Millennium Development Goals Report, UN, 2011
14. Weathering the storm: The demand for and impact of microinsurance, September 2012
05
Outlook
Key Highlights
Products
The table below depicts the microinsurance industry and its changing landscape.
Endowment
products
Credit life and

retail products
Credit life, savings linked plan and retail

products
Saving and wealth

accumulation
products
Low sales
volume
Bundling with
micro credit
Rural channel
upscaled
Strong
technology usage
Poor
persistency
High-value
sales to offset
operational
expenses
Unit Linked
Insurance Plans
(ULIPs) savings
plan launched
Consumer
awareness
Focused
approach by
insurers, largescale needbased programs
Regulatory
guidelines for
microinsurance
Technology
usage for
increased
efficiency during
client interface
Servicing
challenges
Supply chain
innovations
Technology
innovation to
improve the policy
administration and
claims process
Distribution
NGOs
Flexible savings
and term
products
Collaborating
with larger banks
on financial
inclusion projects
Public private
partnership
Products
providing
risk cover
against health,
agriculture,
house and
education to
grow
Advance
technology-led
distribution
Governmentsponsored
programs
MFIs
MFIs
RRBs
RRBs
NGOs
NGOs
Banks
Regional Rural
Banks (RRBs)
RRBs
Producer
companies
Banks
NGOs
Co-operatives
Co-operatives
MFIs
MFIs
Retail chains
IT kiosks
200103
Infancy stage
200408
Startup stage
200911
Evolving stage
2011
Growth stage
2012
Way forward
Source: ICICI Microinsurance presentation and KPMG analysis
With the risk management needs of four billion low-income people largely unmet, the potential market for microinsurance
is vast. In addition, for insurers, the segment is expected to become a meaningful avenue for growth going forward.
However, the role of the government is very important in this sector as there is a growing need for a supportive regulatory
framework that facilitates broad-based insurance growth.
Issue Digest: January 2013 | 9
KPMG information
Further reading
Microinsurance issue page
Insurance mega trends
The Intelligent Insurer
Global Climate Change and Sustainability
FS High Growth Markets workstream
Protecting the seeds of growth the Rise of
Microinsurance - article in September 2010 Frontiers in
Finance
Click here for more Thought Leadership
How KPMG firms can help

International Development Assistance Services
In todays economic climate, the developing world faces
a number of critical challenges: strengthening capacity
in all areas, enhancing accountability of states towards
their citizens and developing systems to deliver public
services. With local expertise in each country, KPMG is
one of the most experienced providers of professional
services to the public and development sectors in
countries and regions where economies and finances
are emerging.
Climate Change and Sustainability Services
Today, climate change and sustainability issues are
rising to the top of corporate agendas. Business is
engaged; global trends and stakeholder demands
have seen to that. Energy pricing and security, natural
resource pressures, population growth, lifestyle

changes, and consumer preferences are compelling
companies to act. Even those who are following the
global climate change debate from afar understand
that their key stakeholders are already focused on
these issues and the need to capitalize on them. As
a result, there is a new clarion call for executives:
leverage sustainability as a strategic lens on business
operations to enhance processes, grow revenue,
manage risk, strengthen reporting, optimize costs, and
spur innovation.
Business Performance Services (Margin
Enhancement Services)
Business Performance Services helps clients measure
enterprise performance and improve business
outcomes. We put a strong emphasis on monitoring
and assessing strategic and operational risk. We
understand the role of innovation in achieving a
competitive advantage.
Financial Risk Management (Market Risk)
Evaluate existing risk management and trading
control frameworks; identify any weaknesses; offer
practical and appropriate advice on how to strenghten
the controls.
Preparation for internal Value-at-Risk (VaR)
model approval.
Quantitiative validations of both VaR and derivative
pricing models.
Advice on market-to-market and fair value appraisals;
prepare existing portfolios for hedge effectiveness
testing to comply with IAS requirements.
Contact us
Mary Trussell
Partner, KPMG in the UK
T: +44 20 7311 5461
E: mary.trussell@kpmg.co.uk
Erik Bleekrode
Seconded Partner, KPMG in Brazil
T: +55 11 2183 1775
E: erikbleekrode@kpmg.com.br
Serena Brown
Global Citizenship Senior Manager,
KPMG International
T: +44 20 7694 8303
E: serena.brown@kpmg.co.uk
Gerdus Dixon
Partner, KPMG in South Africa
T: +27 8 2492 8786
E: gerdus.dixon@kpmg.co.za
Walkman Lee
Partner, KPMG in China
T: +86 10 8508 7043
E: wakman.lee@kpmg.com
Shashwat Sharma
Partner, KPMG in India
T: +91 22 3090 2547
E: shashwats@kpmg.com
Liz White
Global Executive, Insurance,
KPMG in the UK
T: +44 20 7311 5526
E: liz.white@kpmg.co.uk
Una OSullivan
Global Knowldge Leader, Financial
Services, KPMG in the UK
T: +44 20 7311 1443
E: una.osullivan@kpmg.co.uk
Rupesh Kumar
Global Insurance Sector Analyst
KPMG in India
T: +91 12 4612 9270
E: rupeshkumar2@kpmg.com
Issue Digest: January 2013 | 11
Notes
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual
or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is
accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information
without appropriate professional advice after a thorough examination of the particular situation.
2013 KPMG International Cooperative (KPMG International), a Swiss entity. Member firms of the KPMG network of independent
firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to
obligate or bind KPMG International or any other member firm vis--vis third parties, nor does KPMG International have any such
authority to obligate or bind any member firm. All rights reserved.
The KPMG name, logo and cutting through complexity are registered trademarks or trademarks of KPMG International.
Designed by Evalueserve
Contact: Vipin Kumar
Head of Global Sales and Markets Research
KPMG in India
Tel.+91 124 612 9321
Publication name: Issue Digest
Publication number: 12 006
Publication date: January 2013

Issues Monitor: Issue Digest

Hochgeladen von

Dokumentinformationen

Originaltitel

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Issues Monitor: Issue Digest

Hochgeladen von

Copyright:

Verfügbare Formate

KPMG INTERNATIONAL

Sharing knowledge on topical issues in the

2 | Issue Digest: January 2013

Microinsurance refers to insurance products designed for

Credit life is the dominant microinsurance product;

Microfinance institutions (MFIs) and cooperatives are the

Governments are trying to step up efforts to provide risk

The microinsurance industry is expected to witness

Microinsurance refers to insurance products that are designed to provide risk

Source: Protecting the poor, ILO, 2012, 7th

Microinsurance premium potential

It is estimated that the current penetration of

1.4 billion people

People covered by geographies

Source: Protecting the poor, ILO, 2012, 7th

4 | Issue Digest: January 2013

Accident & disability

Microinsurance Innovation Facility

Insurers are driving innovation and introducing microinsurance products that

All the above are examples of innovation

Agriculture and health microinsurance

Sources: Company websites, FactSet, Swiss Re

6. Micro-Insurance: A Largely Untapped Market, November 2011

6 | Issue Digest: January 2013

Distribution of microinsurance products is dependent on factors such as

Max New York Life insurance in India

However, insurers are continuously innovating and introducing distribution channels

Hollard in South Africa teamed up with

In Ghana, MicroEnsures mobile

In India and the Philippines, MFIs

8. Succeeding at microinsurance through differentiation innovation and partnership, 2012

Microinsurance regulations are different from the traditional insurance regulatory

Examples of regulatory initiatives/proposals in microinsurance

Source: Swiss Re, Munich Re conference and KPMG analysis

8 | Issue Digest: January 2013

Credit life and

Credit life, savings linked plan and retail

Saving and wealth

Source: ICICI Microinsurance presentation and KPMG analysis

Issue Digest: January 2013 | 9

How KPMG firms can help

resource pressures, population growth, lifestyle

10 | Issue Digest: January 2013

Issue Digest: January 2013 | 11

Das könnte Ihnen auch gefallen