Report 14th International Microinsurance Conference 2018
Parallel session 10
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Insurance to support MSME development Hosted by GIZ
By Pedro Pinheiro
Challenges of insuring MSMEs
Micro, small and medium-sized enterprises (MSMEs) make up at least 90 % of businesses and more than 50 % of employment worldwide. While insurance is increasingly recognised as a valuable risk management tool for their development, insurers still face numerous challenges to offer products that are valuable, appropriate and affordable to that segment. This session hosted by GIZ discussed some of those challenges and two examples of how insurers are addressing them successfully.
Meeting the insurance needs of MSMEs requires a focused approach. Banks and traditional insurers often consider them too small in comparison to other businesses they serve. They are not able to provide MSMEs with customised products and services offered to larger entities. Microfinance institutions too are normally not able to address the diversity and complexity of MSMEs’ operations, leaving them with no appropriate insurance coverage. In fact, MSMEs are not a homogeneous group. They are commonly disaggregated based on their number of employees: roughly 1 to 9 for microbusinesses, 10 to 49 for small businesses and 50 to 250 for mediumsized enterprises. This wide range of classification fits a variety of operations, in many industry segments, with completely different value chains. An insurer seeking to navigate this complexity has to gather enough information about one segment and specialise to be able to develop a sustainable business model.
69 — Left to right: Gregor Sahler, Advisor, GIZ , Germany; Maroba Maduma, Communications Executive, SA Taxi, South Africa; David C. Muchiri, Associate Director, Equity Insurance Agency, Kenya 70 — Jeremy Gray, Engagement Manager, Cenfri, South Africa 69
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From red to green: minivan taxis cross the insurance hurdle In South Africa, for a long time, the minivan taxis serving most of the workforce in large cities such as Johannesburg were kept on the margins of the insurance industry. Mostly run as one-man businesses, they had their risk assessed as individuals who often have no formal qualification to run a business, no formal job or no credit history. For a traditional insurer, these businesses would be considered almost uninsurable. This was keeping them out of the credit market as well. For insurance aggregator SA Taxi, this presented an opportunity. In partnership with the minivan taxi industry association and an insurer, SA Taxi was able to dive deep into the business to develop a viable insurance product to cover the industry. Using GPS tracking devices, SA Taxi mapped all the different routes and measured their profitability, allowing for the risk to be assessed and monitored individually, which resulted in more affordable premiums.
