Microinsurance Growth and Challenges
Despite the remarkable expansion in the microinsurance sector, a significant 88% protection gap persists, leaving nine out of ten people worldwide vulnerable to escalating risks such as climate change, health emergencies, natural disasters, conflicts, and biodiversity loss. This insight is drawn from a recent report by the Microinsurance Network (MiN).
The report, titled ‘The Landscape of Microinsurance 2024‘, was developed in collaboration with the United Nations Development Programme’s Insurance and Risk Finance Facility (UNDP IRFF). It utilized data from 294 insurers across 37 countries, covering 985 microinsurance products available in 2023.
Geographical and Product Coverage
The research spanned regions including Africa, Latin America & the Caribbean, and Asia & the Pacific. Over the past three years, the number of individuals covered by these products surged by 70%, reaching 344 million across these areas. In 2023 alone, these products generated $6.2 billion in premiums.
Nevertheless, the report highlights a stark reality: only 12% of the estimated 3 billion people who could benefit from microinsurance are currently covered, leaving a substantial 88% protection gap.
Industry Perspectives and Future Potential
Lorenzo Chan, President and CEO of Pioneer Inc., and Chair of the Microinsurance Network Board, remarked, “Microinsurance continues to grow, but sustained investment is essential for scaling and sustainability. We commend the Landscape of Microinsurance for its advancements, reflecting the industry’s dedication to expanding financial protection for underserved communities.”
He added, “However, maintaining momentum is crucial. Insurers must focus on developing products that address changing needs while ensuring they are simple, affordable, and accessible. Improvements in claims ratios and payment speed are vital for building trust among vulnerable groups.”
The report suggests that the microinsurance market has vast potential, with analysts estimating that the 3 billion people in the studied countries represent approximately $41 billion in microinsurance premiums.
The Role of Subsidies and Stakeholder Collaboration
For the first time, the report collected data on premium subsidies, highlighting their critical role in agriculture insurance, where 58% of products receive some form of subsidy. This indicates a possibility for subsidies to speed up the development of other insurance products like property and income insurance.
Matthew Genazzini, Executive Director of the Microinsurance Network, stressed the importance of collaboration, “To broaden microinsurance coverage, public-private partnerships are essential to achieving scale and reaching the most vulnerable. Governments and insurers must collaborate on targeted subsidies to address risks that low-income households cannot independently cover, particularly climate risks.”
He continued, “Simultaneously, improving data systems and sharing will enhance market competition, leading to more innovative and sustainable microinsurance solutions. By working together, we can improve the affordability, accessibility, and trust in microinsurance to meet the evolving needs of those who need it most.”
The report was completed with support from Luxembourg’s Ministry of Foreign and European Affairs, Defence, Development Cooperation and Foreign Trade, Luxembourg’s Ministry of Finance, AXA EssentiaALL, Munich Re Foundation, Barents Re, Swiss Re Foundation, AON Philippines, and the Insurance Federation of Egypt.
