IDF Publishes Report on Benefits of Micro-Insurance

The Insurance Development Forum (IDF), a public/private partnership led by the insurance industry and supported by the UN. World Bank
and other leading international organisations, is calling on the insurance sector and its
stakeholders to harness the latest technological advances in data collection to help close the
protection gap at the micro-level.

The call for action coincides with the publication of the IDF’s latest report, Technology and
Innovation: Tools to help close the Protection Gap in Microinsurance Markets. Published today,
the paper highlights how technology can be used to develop and deliver insurance solutions to
address the unique issues faced by populations in the lower and emerging middle-classes of the
economic spectrum.

Led by the IDF’s working group on Law, Regulation and Resilience Policies, and developed in
collaboration with global law firm Clyde & Co, the whitepaper explores the latest advancements
in data processing, analytics and artificial intelligence. Using multiple case studies and expert
analysis, the authors demonstrate how the insurance industry and others can use such
technology as powerful tools.

From using satellite data for parametric insurance models in agriculture, to improving disaster
warning communications, and even connecting with unbanked consumers through mobile
platforms, the paper draws on insights from around the world to demonstrate how technology
can extend the reach of insurers.

In light of these technological developments, the report also includes a review of current laws
and regulations, and how these could be adapted to ensure they are fit for purpose.

This is the second in-depth exploration on how technology can be leveraged to improve
resilience. It follows on from the IDF paper How Technology Can Help Bridge the Protection
Gap, published in 2019, which focused solely on the use of technology in connection with
sovereign and sub-sovereign risks.

Ekhosuehi Iyahen, Secretary General of the Insurance Development Forum, commented:

“There are great social, economic, and humanitarian benefits to be gained by increasing access
to insurance at the micro-level – particularly in developing countries. And yet the protection gap
at the micro-level remains immense, and progress in closing it has only been incremental to
date.

There is undoubtedly tremendous scope for the insurance sector to help close the protection gap that exists at the
micro-insurance level and in both developed and developing markets. Real progress in this area
will depend on using technology positively to meet individual market needs, and we hope this
paper helps demonstrate how this can be achieved.”

Bill Marcoux, Chair, IDF Law, Regulation and Resilient Policies Working Group, said:

“What we have seen from our research is that technology can extend the
reach of insurers, enabling better product design, more accurate pricing of risk, reducing
distribution costs, increasing the speed and ease of claims settlements, and even assist in fraud
detection.

Technology is not a solution itself, it is a tool, and when used correctly, it can be a vital means to
address the insurance requirements of those who require greater protection and support from
the insurance sector. Within the report we reflect on the role of insurance regulation and the
necessary evolution that must take place to accommodate and appropriately regulate InsurTech
and other technological innovations.”

Nigel Brook, Partner, Clyde & Co, added:

“Encouraging innovation while protecting consumers is a delicate balance, and regulators and
supervisors have an important role to play in achieving this. Much of the innovation in the
microinsurance field is enabled by both established and cutting-edge technology which can rise
to the challenge of designing and distributing affordable cover.

More than ever, cross-cutting collaboration will be required to address the protection gap. Given
these rapid technological advancements, a coordinated approach along with coalitions that
foster global learning and supervision, will become important avenues to build and maintain
trust among consumers, regulators and other stakeholders.”

Access the full report here