According to a recent study entitled “The Landscape of Microinsurance in Africa” published by the Microinsurance Innovation Facility of the International Labour Office (ILO) 2.1 percent of Africa’s 700 million working poor have insurance coverage. The study found that, assuming a feasible insurance coverage level of five percent of gross domestic product (GDP), the potential size of the microinsurance market would be USD 25 billion, as compared to the current market size of USD 257 million.

The study from ILO indicates that the most common type of microinsurance available to Africans is life insurance with coverage of 9.5 of the estimated potential market through credit life coverage and 3.2 percent through other life products. Health insurance products cover about 0.3 percent of the low-income population, and the study indicates health products “are often cited as the most in need”. Property insurance and agriculture coverage reach about 0.2 percent and 0.1 percent, respectively, of their estimated potential market.

“The findings of the study are very interesting and promising. They show that only 2.1 percent of the target population has access to some sort of microinsurance. The explanation is two-fold. On the one hand, potential clients do not understand very well what insurance is about and have difficulties paying premiums. On the supply side, there are deficiencies in terms of information technology, qualified personnel and high administrative costs”, said Michal Matul, research officer from ILO´s facility and one of the authors of the study. Mr Matul adds that broader insurance coverage can not be achieved “by the providers alone. Donors and governments must support these efforts by creating a coordinated movement that will help low-income Africans manage risks and lead safer, more stable lives”.

By: Christine Chang, Research Associate

About International Labour Organization’s (ILO) Microinsurance Innovation Facility:

The Microinsurance Innovation Facility is a program conducted by the International Labor Organization (ILO), an agency of the United Nations. The facility was founded in 2008 with support from the Bill & Melinda Gates Foundation, a charitable organization. The facility attempts to increase access to insurance for the poor by providing grants to organizations that develop innovations in microinsurance. The facility prioritizes insurance related to agriculture, health, life and property. Its grantees include CARE Foundation, Microfinance Opportunities, Protecta, and Freedom from Hunger.

Additional Resources:

POSTonline website: $25bn African microinsurance market mostly untapped, finds report, May 13, 2010: http://www.postonline.co.uk/post/news/1636236/usd25bn-african-microinsurance-market-untapped-report

Microinsurance Innovation Facility of the International Labour Office (ILO) Paper: The Landscape of Microinsurance in Africa, March 2010: http://www.ilo.org/public/english/employment/mifacility/download/mpaper4_landscape_en.pdf

MicroCaptal.org: MEET THE BOSS: Interview with Craig Churchill, Head of the International Labour Organization’s (ILO’s) Microinsurance Innovation Facility, March 10, 2010: http://www.microcapital.org/meet-the-boss-interview-with-craig-churchill-head-of-the-ilos-microinsurance-innovation-facility/

MICROCAPITAL BRIEF: Z Zurich Foundation Contributes $2.83m to International Labour Organization’s (ILO) Microinsurance Innovation Facility to Provide Grants for Innovative Microinsurance Projects, February 2, 2010: http://www.microcapital.org/microcapital-brief-z-zurich-foundation-contributes-283m-to-international-labour-organizations-ilo-microinsurance-innovation-facility-to-provide-grants-for-innovative-microinsurance-projects/

MicroCapital Universe: International Labour Organization’s (ILO) Microinsurance Innovation Facility: http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=International+Labour+Organization%E2%80%99s+%28ILO%29+Microinsurance+Innovation+Facility

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