The Quarterly e-Newsletter of the Gender Network March 2011 | Vol. 5 No.

1
ember 2010 | Vol. 4 No. 4

Access to Insurance in Low Income Markets for Women and the

Poor – the Role of Enabling Policy and Regulatory Frameworks
Arup Chatterjee, Senior Financial Sector Specialist, Office of Regional Economic Integration

Background

Microinsurance is central to the promotion of inclusive financial systems. It enhances

the ability of the poor to deal with various risks, beyond the combined impact of microfinance
programs, safety nets and existing, informal mutual support systems. Recent evidence from
many developing countries has demonstrated that not only can the poor afford to make small
periodic contributions towards insuring them against risks, but that the risks they face are
eminently insurable. The size of the potential market is estimated to be between 1.5 to 3 billioni
policies, with a significant demand for a range of products like protection of assets, lives, health
and retirement. In a sense, it is similar to providing basic services like sanitation, electricity, or
water and therefore seen as a mantra for poverty reduction and social harmony. Even though
broadening and diversifying the customer base is also one of the important steps towards
expanding access to affordable and accessible insurance products, together with enabling
market access reforms, the importance of regulation and supervision cannot be undermined.
While efficient regulation provides adequate consumer protection, effective regulation instills
trust, and trust is at the core of all such relationships.

Policy and regulation matters

Enabling government policies and an enabling regulatory environment will ensure that
the financial system delivers affordable financial services to excluded populations with greater
efficiency, without compromising on acceptable levels of safety and reliability. Such policies
have resulted in a decisive impact on shaping the insurance business environment for
developing access to insurance by the private sector in many countries. Evidence available on
the ground, based on the country studies initiated by the Access to Insurance Initiative,ii
demonstrates that the G20 Principles of Innovative Financial Inclusioniii are well founded and
consistent within the microinsurance arena (see Table below). Over time, risk has shifted from
governments and corporations to individuals. Insurance markets can offer choices to consumers
for equitable management of risks. As a result, insurance awareness and literacy is essential for
making informed choices. The challenge is to align private incentives with public interest
without taxing or subsidizing private risk taking. The implementation of policy and regulations
for promoting access to insurance needs to be tailored to the risk characteristics of low-income
households and small firms. All policies for improving access should have clear and measurable
objectives, on access and usage, and their effectiveness should be quantitatively monitored with
transparent public reporting.

Gender Dimensions

Poor women have traditionally managed risk by selling assets, relying on their
husbands, pulling children out of school to earn income, or using informal mechanisms, such as
self-help groups for support. Some risk management strategies, while perhaps effective in the
short-term, can lead to enduring adverse secondary implications, perpetuating a cycle of
poverty. In many cultures, women are further disadvantaged in terms of their decision-making

1
power within the family, their control over the use of household incomes, and in their access to,
and ownership rights over assets. Being poorer, less educated, and overrepresented in informal
work arrangements without adequate safety nets, they are more vulnerable in times of distress.

Microinsurance offers a promising alternative way for poor women to manage risks and
use their assets more productively, although in many instances the means are indirect, in
improving gender equality. By reducing the susceptibility of women to economic shocks, it is a
key to increasing labor productivity and raising human capital. All policy choices come with
opportunity costs. For supporting gender-responsive access to insurance, the policy framework
could include the identification of the types of risks that women are exposed to, the specific
product features that they prefer to be insured against, the type of investments they wish to
finance; and, the collection of sex-disaggregated data and creation of gender- sensitive
indicators. Gender analysis of risk management can help identify the most pertinent indicators
for gender-differentiated responses to risk. Allowing for technological and institutional
innovations that reduce the risk and cost, could lead to better access and usage. Facilitating
insurance provision by mutuals, cooperatives and community-based organizations may thus be
an important step forward. Simplifying insurance contract language and the process and
requirement to make claims and receive benefits, can contribute to strengthening confidence in
the value of these products. Many women remain excluded from the formal financial sector, due
to collateral requirements and the perceived risks associated with insuring them. A gender focus
would also influence policy choices, particularly those promoting women’s increased property
rights, control over assets or access to credit.

Conclusion

Even though women are often the key beneficiaries of microinsurance schemes, the
current regulatory and supervisory approaches to financial inclusion have largely ignored
integration of gender dimensions for the formulation of policies and regulations on financial
inclusion. Public policy that leads to better-integrated contractual savings programs can help to
widen the risk pool, allowing the financial system to more easily handle localized shocks.
Making insurance more safe and convenient, will go a long way to helping to expand credit
access, and fostering basic risk-management programs which can provide promising ways to
help poor households help themselves in the face of adversity.

2
 Table: G20 Principles for Innovative Financial Inclusion – Country examples from insurance sector

1. Leadership Cultivate a broad-based government commitment to financial inclusion to help alleviate poverty.
China: All work done by the government is aimed at enabling the people to "lead a better-off and dignified life", and making society more
impartial and harmonious.
2. Diversity Implement policy approaches that promote competition and provide market based incentives for delivery
of sustainable financial access and usage of a broad range of affordable services (savings, credit,
payments and transfers, insurance) as well as a diversity of service providers.
India: IRDA, with its Microinsurance regulations, has relaxed agent regulations, promoted linkages between regulated insurers and
nongovernmental organizations (NGOs) and self help groups, introduced product features, and allowed composite insurance services.
3. Innovation Promote technological and institutional innovation as a means to expand financial system access and
usage, including by addressing infrastructure weaknesses.
Kenya: „Kilimo Salama‟ - Uses a low-cost, mobile phone payment and data system, and automated, solar powered weather stations, to offer
farmers affordable, “pay as you plant” insurance to protect their investments in high-yielding seeds, fertilizers, as well as other farm input.
4. Protection Encourage a comprehensive approach to consumer protection that recognizes the roles of government,
providers and consumers.
South Africa: Legislation prescribes minimum standards in respect of business practice, policies and policyholder protection.
5. Empowerment Develop financial literacy and financial capability.
Ghana: The National Insurance Commission supports literacy work including a focus on the low-income segment.
6. Cooperation Create an institutional environment with clear lines of accountability and co-ordination within
government; and also encourage partnerships and direct consultation across government, business and
other stakeholders.
Philippines: Termination of "informal insurance" or "insurance-like schemes" offered by different organizations within a year and to either
partner with commercial insurers or incorporate themselves into an insurance firm, a cooperative, or mutual benefit association (MBA)
7. Knowledge Utilize improved data to make evidence based policy, measure progress, and consider an incremental “test
and learn” approach acceptable to both regulator and service provider.
IAIS’s global approach: Insurance supervisors and industry participants from over 40 developing countries have actively participating and
using the lessons for adapting their national approaches for development of microinsurance markets consistent with international standards.
8. Proportionality Build a policy and regulatory framework that is proportionate with the risks and benefits involved in such
innovative products and services and is based on an understanding of the gaps and barriers in existing
regulation.
West Africa: The UEMOA legislation has developed a multinational framework which allows mutual social health organization to underwrite
health insurance and simplified accounting requirements have been prescribed for such providers.
9. Framework Consider the following in the regulatory framework, reflecting international standards, national
circumstances and support for a competitive landscape: an appropriate, flexible, risk-based Anti-Money
Laundering and Combating the Financing of Terrorism (AML/CFT) regime; conditions for the use of
agents as a customer interface; a clear regulatory regime for electronically stored value; and market-
based incentives to achieve the long-term goal of broad interoperability and interconnection.
India: KYC norms have been relaxed by exempting microinsurance clients from the requirement of submission of recent photograph and proof of
residence on all the life insurance policies held by a single individual up to a total Annual Premium of INR10,000 (US$ 220 approx. )

3
i Llyods 360 Risk Insight and Microinsurance Centre (2009): Insurance in developing countries: Exploring opportunities in
Microinsurance.
ii Details of Access to insurance initiative are available at http://www.access-to-insurance.org/
iii G20 Toronto Summit Declaration: 26-27 June, 2010

The views expressed in this article are the views of the author and do not necessarily reflect the views
or policies of the Asian Development Bank (ADB), or its Board of Governors, or the governments they
represent. ADB does not guarantee the accuracy of the data included in this article and accepts no
responsibility for any consequence of their use. The countries listed in this article do not imply any view
on ADB's part as to sovereignty or independent status or necessarily conform to ADB's terminology.