Making inclusive insurance work: SMEs

The UNEP-PSI and ILO webinar series

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Making inclusive insurance work - A webinar series by the International Labour Organization’s Impact Insurance Facility and UN Environment’s

Principles for Sustainable Insurance (PSI) Initiative

As part of the global agenda of insuring for sustainable development, the Impact Insurance Facility (www.impactinsurance.org) and the PSI Initiative

(www.unepfi.org/psi) are organizing a six-part webinar series with the theme, “Making inclusive insurance work”.

Today’s session will focus on insurance for SMEs

Interfacing with the webinar system

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Making inclusive insurance work: SMEs

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Presenter:Nick Smith,

Global Head of SME,AXA

Facilitator:Alice Merry,

Research Analyst,Impact Insurance Facility

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Presenter:Jeremy Gray,

Economic Researcher, Cenfri

Small businesses vital to all economies

They face substantial risks which they struggleto manage

Yet, they are generally underinsured or haveno insurance at all

Background

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Potential insurance products

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Risk Potential insurance covers

Fire and other property damage Fire insurance

Multi-risk property insurance

Windstorm and other natural perils Weather insurance

Theft and other crime, Theft insurance

Political violence insurance

Money insurance

Fidelity guarantee insurance

Personal injury Personal accident insurance

Workers compensation insurance

Business interruption Business interruption insurance

Disease and disability Health insurance

Permanent disability insurance

Liability claims Public liability insurance

Products liability insurance

Liquidity Trade credit insurance

Credit Credit-linked insurance

Potential insurance products

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Hazard risks

Financial risks

Risk Potential insurance cover

Fire and other propertydamage

Fire insurance

Multi-risk property insurance

Windstorm and other naturalperils

Weather insurance

Theft and other crime, Theft insurance

Political violence insurance

Money insurance

Fidelity guarantee insurance

Personal injury Personal accident insurance

Workers compensation insurance

Business interruption Business interruption insurance

Disease and disability Health insurance

Permanent disability insurance

Liability claims Public liability insurance

Products liability insurance

Liquidity Trade credit insurance

Credit Credit-linked insurance

Examples seen in the study

Challenges and emerging good practices

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Product design

Distribution

Insurance culture

Which of these are most challenging for insurerslooking to serve small businesses?

• Product design

• Distribution

• Insurance culture

Audience poll 1

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The symbiosis between

SMEs and insurers

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Jeremy Gray, Economic ResearcherCenfri

Insurance assists all MSMEs to be resilient

Insurance can enable MSMEs with growthpotential to take productive risks

In the longer term, insurers intermediatecapital

The insurance industry plays multiple

roles to assist MSME development

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All MSMEs need greater resilience,

but most risks are personal in nature

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$175

25% of MSMEs identified illness in the household as a major risk

10% of MSMEs identified experienced the death of a main income earner in the household 11% the death of another household member as major risks

15% of MSMEs identified drought, 12% harvest failure and 7% flooding as major risks experienced

8% of MSMEs identified theft or loss of property as a major risk

15% of MSMEs identified competition as a major risk

Risks faced

Segmenting the MSMEs allows us to

better understand the differences

and different needs of MSMEs

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Access to finance is identified across

developing countries as a barrier to

MSME growth. Insurers intermediate

long term capital

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Growing business insurance is also a

key step in the development of the

industry

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Insurers offers MSMEs greater resilience in the face ofshocks

Insurers enable some MSMEs to undertake risky,profitable ventures, by protecting existing wealth andassets, and protecting against default

A more developed insurance industry pools greatersums of long-term capital for intermediation

As MSMEs grow, the nature, timing, and extent ofinsurable risk exposures is likely to differ; creating abusiness case for different insurance product offerings

Conclusion

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Cenfri (The Centre for Financial Regulation & Inclusion) is a global thinktank that bridges the gap between insights and impact in the financialsector.

We are driven by a vision of a world where all people live their financiallives optimally to enhance welfare and grow the economy.

Our core focus is on generating insights that can inform policymakers,market players and donors seeking to unlock development outcomesthrough inclusive financial services and the financial sector morebroadly.

www.cenfri.orgJeremy Gray: Jeremy@cenfri.org

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Cenfri

AXA & SME

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Nick Smith, Global Head of SMEAXA

SMEs – Who are they?

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At AXA we consider an SME to be a company with less than 50 employees

Companies have very different

concerns depending on their size

and maturity

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SME primary focus is on day to day business issues

Risks from Climate change are real

with SMEs demanding more help

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At AXA we are putting our

customers at the centre of our SME

proposition

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Becoming more aligned with SME business interests

We are developing new offers and

communicating more clearly

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Becoming a Partner to SME through

services

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But we are also human… or not!!

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Challenges and emerging good practices

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Product design

Distribution

Insurance culture

Consider small businesses’ existing risk-management mechanisms

Cover multiple risks, even with limited cover.

Limit customization

Health is a priority for small businesses, and alargely unaddressed business opportunity forinsurers

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Product design

Consider existing mechanisms: aligned advertising withthe way in which clients connect business risks withtheir families

Cover multiple risks: covers fire, earthquake, civil unrest,natural disaster, robbery, cash in premises and transit,electronic and mobile devices and breakdown ofmachinery

Limit customization: standardized product with stagesfor different sizes of businesses

Health: value-added services have proved particularlyattractive (help line and transport to hospital)

Case of Pacifico, Peru

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Financial institutions

Buyers

SuppliersAgent

networks

Government

Business associations

Distribution

The most promising distribution channels:

Making inclusive insurance work: SMEs

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Presenter:Nick Smith,

Global Head of SME,AXA

Facilitator:Alice Merry,

Research Analyst,Impact Insurance

Facility

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Presenter:Jeremy Gray,

Economic Researcher, Cenfri

Making inclusive insurance work: SMEs

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Presenter:Nick Smith,

Global Head of SME,AXA

Facilitator:Alice Merry,

Research Analyst,Impact Insurance

Facility

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Presenter:Jeremy Gray,

Economic Researcher, Cenfri

Q&A

Our next webinars

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Making inclusive insurance work - A webinar series by the International Labour Organization’s Impact Insurance Facility and UN Environment’s

Principles for Sustainable Insurance (PSI) Initiative

The topics and schedule of the next webinars are as follows:

5. Agriculture and climate risks – 11 April 2017

6. Health – Part 2 – date TBA

7. Insurance regulation – date TBA