Microinsurance – The first option for the poor to manage risks
Press release/6 November 2008 - 4th International Microinsurance Conference 2008
At the 4th International Microinsurance Conference in Cartagena, Colombia, President Álvaro Uribe urged the poor to think of insurance, not money lenders, as the first option in the event of an emergency.
More than 400 microinsurance experts and practitioners from 50 countries met in Cartagena, Colombia on 5 November 2008 to discuss trends and recent developments in cost-effective insurance for the poor. Two-thirds of the participants at this global summit were from the private sector, with well over half from Latin America.
The President of Colombia, Mr. Álvaro Uribe, opened the conference, stating: “In Colombia microinsurance has the potential to reach even the poorest of the poor. Education about insurance and raising awareness of coping mechanisms is crucial. People must understand that insurance is the first option for dealing with emergencies — be it a personal shock like health problems, financial crisis, or natural disaster. Instead of going to a money lender or the financial black market they should think of insurance first.”
Roberto Junguito, Executive President of FASECOLDA, the Colombian Association of Insurers (Federación de Asegurados Colombianos) said that “In Colombia there has not been a need to modify existing regulations or create new regulations for microinsurance. The private sector is encouraged to seek product innovation, meet changing consumer needs and increasing demand, and grow through competition.” Mr. Junguito underlined the need to create tailor-made and affordable products.
Colombia provides an ideal backdrop to this conference as one of the most important microinsurance markets in Latin America. The market started more than five years ago. Today 11 commercial insurance companies sell microproducts including life, accident, funeral and other lines of business. New property policies are being developed as demand grows.
More than 3 million Colombians have microinsurance policies. Given that funeral insurance covers on average more than two people in a family, the country has more than 5 million people microinsured. This is more than 10 percent of the entire population. The average monthly premium is between 4 cents and 3 US dollars. As in many other countries, the clients show robust demand and pay their premiums regularly. Junguito noted “Markets are healthy and growing steadily with low claim ratios. In 2007 for example, it was below 30 percent.”
In his inaugural speech President Uribe talked about natural disasters. “The government spends US$ 180 million each year to repair damage after floods and landslides. We need public-private partnerships to better cope with these losses. He also spoke about many development programmes in his country for families, for micro-entrepreneurs and for students addressing education, health and nutrition. Microfinance institutions and special banking services are widespread and microinsurance must now find its way into all of these activities.
Craig Churchill from the International Labour Organization (ILO) and Chairman of the CGAP Working Group on Microinsurance, also co-organiser of the conference noted: “Microinsurance is only one tool in a package of services to help the poor. We have achieved a lot. However, the conventional insurance sector now must move from interest to more widespread action.” Churchill added: “More and more microinsurers are now offering relatively easy products like credit-linked insurance. Now it is time to reach for fruit higher up in the tree by developing more sophisticated products.”
Thomas Loster, Chairman of the Munich Re Foundation, said: “Since the first conference in 2005, microinsurance has grown from being a catchword. It now reaches the priority agenda of major emerging economies, and other key leaders. In the G-8 Gleneagles process or the climate negotiations process that is now designing an agreement to follow on the Kyoto Protocol, microinsurance is deemed a widely accepted tool to combat poverty and adapt to changing risks.”
Emphasizing the potential and ability of the poor to partner with the private sector, President Uribe closed his remarks by saying “Microinsurance comes from the heart, but it is a business and not a charity.”
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