Actuarial Services in Microinsurance:
Joint IAA-IAIS Project
Nigel Bowman, IAA, and Jules Gribble, IAIS
IAA President’s Forum, Cape Town
21 November 2016
Financial Services
Infrastructure
Banking
Insurance
Investment
Retirement
Financial
Inclusion
Standard
Traditional
Mass
Insurance
Micro
Insurance
Social
Insurance
Financial inclusion - terminology
► Financial inclusion contexts Development of insurance markets - in developing countries
Development of micro-insurance for low income – more broadly
Prior IAA IRC material
► Develop an International Actuarial Guidance Note on Microinsurance
► Include microinsurance in existing IAA education and awareness initiatives and develop a medium term strategy for training
► Expand actuarial education efforts in microinsuranceto include non-actuaries, particularly in countries where local actuarial associations do not exist
► Provide additional application guidance to national insurance regulators with respect to proportionate actuarial services in inclusive insurance markets
Some key recommendations from “Issues Paper: Addressing the Gap in Actuarial Services in Inclusive Insurance Markets” IAA Task Force on Microinsurance, February 2014
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Objective
The IAIS, in cooperation with the IAA, will identify
and develop approaches to establish and apply
actuarial expertise in inclusive insurance markets
based on an understanding of a proportionate
application of prudential requirements in inclusive
insurance markets.
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Deliverables
► IAA Paper: “Approaches to Actuarial Services in Inclusive Insurance Markets” Focus on actuarial matters
► IAIS Application Paper: “Proportionate Prudential Requirements in Inclusive Insurance Markets” Focus on supervisory matters
► Both scheduled for the Consultation later in 2017 and finalisation by the end for 2017
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Context
► Three key players Actuarial profession
Product providers
Supervisors
► Progress limited by the least capacity Need to progress together and co-operatively
► A key outcome will be to provide a common ‘language’ to facilitate discussion and improve understanding between and within these key players
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Criteria for success
► Short term Actuarial contributions in the financially inclusive
context are accepted as being valid and are adopted by all the key players
► Longer term Actuarial contributions seen to contribute to better
outcomes of financial inclusion services by all the key players
► Challenges: Address ‘proportionality’ in meaningful way
Flexibility to cater for changing environments
Recognise key differences between inclusive and traditional insurance
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Actuarial guiding principles
► Barriers: Not intentionally create them for Financially
Inclusive Insurance, and permit innovation
► Simplicity: Of use of outcomes for end users (not the
same as of underlying process
► Differences: Manage key differences (risks and needs)
between FII and Conventional insurance
► Assessments: Objective and quantifiable to give language
to start conversations (recognising need for professional
judgement
► Interactions: Parallel development of the three key players
► Sustainability: Long term in local environment
► Consumers: Solution support their needs and protect their
interests
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Actuarial skill levels needed► Need to recognise realities
Very few qualified actuaries in many countries
Development of insurance products is taking place regardless of this
► Some preliminary thoughts for discussion:
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Low Qualified actuarial technician
Low-Med Qualified actuarial technician
+ Initial Review by Fully Qualified Actuary
Medium Qualified actuarial technician
+ Periodic Review by Fully Qualified Actuary
High Qualified Actuary
Expert Qualified Actuary
+ Topic Experienced
Approach
► Develop a ‘scorecard’ approach, which takes into account criteria to assess: Riskiness of proposed product designs
Capacity of a provider to deliver the product
Readiness of the (financial inclusive) insurance market
Supervisory capacity
► This will provided a process and ‘language’ to support discussions starting and then outcomes emerging using professional judgement
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Business risk assessment (indicative)
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Colours:
► Focus of IAA paper
► The outcome is input to Supervisory risk assessment
► Need for actuarial skills increases as outcome assessments move from Low to
High risk
Residual risks of product
Low xx Medium xx High
Insurer
capacity
Low
xx
Medium
xx
High
Low outcome (residual) risk High outcome (residual) risk
Some key challenges
► What are, and who may provide, ‘Actuarial
services’
And who ensures criteria are met
► How to:
Enhance the value, role and reputation of actuarial
services amongst users
Develop and retain actuarial skills and expertise to
deliver (various) actuarial services
Support supervisors carry out their actuarial (and risk
management) responsibilities effectively
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Moving forward
► These are challenging issues
► In theory and in practice ‘on the ground’
► New concepts to apply in evolving and non-
traditional environments
► The glass is half full!
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Thank you …
Actuarial Services in Microinsurance:
Joint IAA-IAIS Project
Nigel Bowman
Jules Gribble
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