What is micro-insurance?
Micro-insurance is insurance, which is appropriate for the low-income earners in respect to cost, terms and conditions, coverage and delivery mechanisms. At the core of the micro-insurance concept is the inclusion of low income earners.
This implies that micro-insurance products are primarily designed for low income earners (though anyone else including high net individuals can buy such products), in a viable manner and on the basis of generally acceptable insurance principles.
Why micro-insurance strategy?
The results of the 2014 Finscope Survey that were published in February 2015, indicated that 70 percent of adults do not have any form of insurance and of the 30 percent of the population that have insurance, 77 percent of the insurance they have is in the form of funeral cover. From this statistic, it is evident that a huge market remains untapped.
Low-income households are vulnerable to risks and economic shocks, as such one way they can protect themselves is through insurance. Micro-insurance can be used as a poverty alleviation strategy that assists low income households manage risk by providing them with a sense of financial confidence in the face of significant vulnerabilities such as death, injury and illness, loss of property, effects of drought and other contingent events.
Objectives of the micro-insurance
The primary objective of this framework is to promote the development of micro-insurance in Zimbabwe by establishing a basis for the regulation and supervision of micro-insurance activities and providers. In doing so, the Commission intends to create an environment in which an optimum balance is created between minimising regulatory barriers to financial inclusion on one hand and putting in place effective measures to promote and protect the interests of policyholders and good market conduct on the other.
To the extent that these objectives can be achieved, the Commission can contribute towards a stable financial sector for the benefit of all. Given the foregoing macro objectives, the micro-insurance regulatory framework is therefore designed and expected to achieve the following specific objectives:
a) Define the scope of micro-insurance activities
b) Ensure protection of the insuring public
c) Establish the licensing framework for micro insurers and products
d) Establish minimum standards for the conduct of micro-insurance business
e) Formalise micro-insurance activities
Characteristics of micro-insurance products
In general, micro-insurance products should have the following characteristics:
a) Simplicity – The policies, conditions, procedures and marketing must be simple. Vernacular languages will be used.
b) Understood – The risk pooling method, procedures and coverage must be unambiguous and easily understood.
c) Accessibility – Micro-insurance products must be accessible to the target market in terms of purchase, premium payments and claims.
d) Valuable – Micro-insurance products or services should be designed to meet the needs of clients, be beneficial, fair in price and coverage.
e) Efficiency – The delivery/distribution channels must be efficient to both the insurer and the policyholders.
What is not covered by
The following do not qualify under the definition of micro-insurance:
a) Special risks – unique risks which are not underwritten based on the principle of pooling of risk.
b) Motor insurance
c) Professional indemnity and
d) All risks with a sum assured in excess of that which may be prescribed by the Commission on a particular risk or class of risks from time to time.
The role of IPEC
The Commission has the sole prerogative of designating products as micro-insurance, using its internal verification process.
In doing so, the Commission will at its discretion refuse to designate certain products as micro-insurance and give reasons for such refusal.
In the final analysis, a product will only be offered to the market as micro-insurance if it has been designated as such by the Commission.
IPEC will in partnership with Government and Non-Governmental Organisations work together to promote micro-insurance.
We also have a radio programme, “Inside Insurance and Pensions” on Star FM radio station every Wednesday from 7:30pm-8:00pm.
For any enquiries on insurance and pensions, please contact us on the following details: 160 Rhodesville Avenue, Greendale, Harare Tel: (04) 443358 /443361 /443322 Cell: 0772 154 281 /2 /3/ 4 WhatsApp: 0772 154 281 Email: [email protected] Facebook: Insurance and Pensions Commission Twitter: @IPECZW