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Frequently asked questions

1. What is microinsurance?

Microinsurance, as defined in the 2007 IAIS-CGAP Issues Paper on the Regulation and Supervision of Microinsurance, is insurance that is accessed by the low-income population, provided by a variety of different entities and run in accordance with generally accepted insurance practices.
This means that the risk insured under a microinsurance policy is managed based on insurance principles and funded by premiums.
Microinsurance covers a broad variety of products, for example, life insurance, funeral cover, health, invalidity, livestock, crop and asset insurance.

2. Why is access to insurance important?

Access to insurance plays an important role in helping to reduce poverty. The inability to manage the risk of vulnerability caused by the sudden death of a family member, an illness, or the loss of income or property can perpetuate poverty. Low-income consumers very often do not have social or financial protection to help them withstand such shocks. By helping them to mitigate shocks that could worsen their financial situation, insurance can support asset accumulation or prevent asset loss and help improve welfare over time, contributing to poverty reduction and social protection.

 3. Why are policy, regulation and supervision important?

The primary functions of insurance policy, regulation and supervision are to protect consumers and to contribute to market development by improving market  efficiency. Policy, regulation and supervision are critical for enhancing access to insurance because:

  • they affect how trust is developed between insurance providers and low-income consumers, many of whom may not have been previously exposed to insurance or financial services;
  • they determine who can enter and operate in the market;
  • they can affect the costs incurred by the insured;
  • compliance requirements for insurers influence insurers’ willingness and ability to operate in the lowincome market;
  • they can enforce the provision of certain types of insurance; and
  • they impact on the development of the payment system.

4. What is meant by the term financial inclusion?

Financial inclusion denotes a situation where consumers, particularly low-income consumers, can access and use on a sustainable basis, financial services that are  appropriate to their needs. The level of financial inclusion is determined by market or regulatory factors that might exclude or discourage individuals from using  financial services, or could discourage financial service providers from offering such services to the low-income market. At the Toronto Summit in June 2010, the G20 endorsed nine principles for innovative financial inclusion, defined as improving access to financial services for poor people through the safe and sound spread of new  approaches.

5. What is meant by the Insurance Core Principles?

The Insurance Core Principles (ICPs), established by the IAIS, comprise essential principles that need to be adhered to for an insurance supervisory system to be  effective. These principles set out the framework for insurance supervision, identify subject areas that should be addressed in legislation or regulation in each  jurisdiction, and provide a basis for the IAIS on which it develops more detailed international standards and guidance.
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6. Is the Initiative focused solely on microinsurance?

The goal of the Initiative is to enhance broad-based, demand-oriented and sustainable access to insurance for low-income customers. This requires a comprehensive look at all actors in the insurance sector. By definition, microinsurance is a part of the overall insurance sector. Thus, while the Initiative has a special focus on microinsurance (as insurance targeting the low-income segments), it supports the overall enabling environment for insurance market development.

7. How does the Initiative work with the insurance industry?

The Initiative works with supervisors and it consults the industry and other stakeholders throughout the diagnostic study, as well as the process of policy and  regulation development. It shares knowledge in stakeholder dialogue events to enable the industry to benefit from lessons learnt. Industry representatives,  alongside other stakeholders, are a key part of the process to develop appropriate products, delivery channels and consumer protection approaches for low-income  clients. At the global level, the industry is represented in the Joint Working Group, as IAIS observers and in the Microinsurance Network.

8. How can a supervisory authority avail support from the Initiative?

The Initiative works in emerging markets and developing economies across the world. A supervisory authority does not need to be an IAIS member. The Initiative  warmly welcomes all supervisors committed to improving access to insurance. Insurance policymakers, regulators and supervisory authorities that would like to work   with the Initiative can write to the Secretariat at info[at]access-to-insurance.org to express their interest and their commitment to access to insurance. This will form  the basis for further interactions with the Initiative.