Insuring the most at-risk: Micro-offerings set to extend the reach of coverage

For the rural and urban poor, asset losses can be devastating. With little or no savings, a disaster could mean homelessness, while the death of a breadwinner can render an entire family destitute. Sidelined by traditional insurance, the poor have had to find alternative mechanisms by seeking support from their communities. Insurers in Côte d’Ivoire have typically targeted urban-dwelling and middle-income earners, offering packages that rural populations cannot relate to and premiums that the poor cannot afford.

MICRO-INSURANCE OFFERING: That is starting to change with a deliberate policy by the sub-regional regulator, InterAfrican Conference of Insurance Markets (Conférence InterAfricaine des Marches des Assurances, CIMA), to reach out to the poor. The secretary-general of CIMA, Jean Claude Ngbwa, said at a 2011 conference that the body was “concerned over the lack of insurance products adapted to African realities and that take into consideration the ability of rural and farmer communities to contribute.”

By 2012, CIMA had added a seventh chapter to its Code, titled “Chapter VII Micro-insurance”. The chapter lays out a new regulatory framework for microinsurance and imposes a minimum capitalisation of CFA500m (€750,000) to engage in micro-insurance activities. It allows micro-insurers to offer both life and non-life products, as long as the life products are not savings products. The chapter also stipulates that if a policyholder wants to take back his contribution, reimbursement of the policy must be made with 10 days to accommodate the fact that he may have an immediate need for the money. The new regulation also insists on the simplicity of contracts so that policyholders understand what they are signing up for. Lastly, any firm with access to the target group, such as telecoms operators and informal credit systems, can offer microinsurance products. Micro-insurance products typically have an annuity of less than CFA35,000 (€52.50).

The move by telecoms operators to increase value-added services by offering micro-insurance products has had an impact in Côte d’Ivoire. Already, MOOV, an Emirati telecoms company owned by Etisalat, has developed, in collaboration with insurer Stamvie, a microinsurance with an annuity of CFA12,000 (€18). The product is a hybrid of phone credit, burial and accident insurance for the policyholder and his or her family.

BUILDING CREDIBILITY: Recent regulatory changes will help burnish the image of insurers who had gained a bad reputation for slow claims payment under the old system. With the review of Article 13 of the CIMA Code, insurers are now compelled to make quick claim payments after collecting upfront premiums from the policyholder. In addition, the brokers are not allowed to stall the process by holding on to policyholders’ premium payments when they act as middle-men. Under the new micro-insurance legislation, there is also an emphasis on timely payment by imposing a 10-day deadline within which claims must be paid to micro-insurers.

Earning clientele is almost as hard as keeping them. As low-income earners took back their life insurance coverage during the conflict, it became clear that financial insecurity makes customer retention more difficult. According to the Lloyd’s report: “Customer acquisition and retention for new products [in unformed markets] often demand unusually intense – and costly – levels of high-touch engagement. To cover those high costs, much greater volumes are needed for break-even.”

OFFERING ADAPTED PRODUCTS: That is slowly starting to change, as insurers design new and better adapted solutions. Micro-insurance has focused on health and life, but offerings more specific to the Ivoirian market such as agriculture have also seen encouraging results, especially when increased floods and climate change-related disasters are putting farms at greater risk. Belife, for instance, said it is discussing with a microfinance bank ways to reach cocoa farmers’ collectives. Micro-insurance is sometimes perceived as charity, but the success of microfinance today bears witness to the potential locked in services that target the bottom of the pyramid, through economies of scale.