sigma 4/2017: Insurance: adding value to development in emerging markets

The standard measure to gauge the development of a country's insurance market is the insurance penetration rate. But premiums expressed as percent of a country's GDP do not help elucidate how, in terms of real-life experience, insurance ownership can help improve the quality of peoples' lives.

For example, according to the World Health Organisation,1 every year 100 million people around the world fall into poverty because they themselves have to pay for medical treatment using their – in the emerging market context  – often very meagre financial resources. Insurance can help mitigate such large catastrophic out-of-pocket spending. Specific empirical-based case studies demonstrate that when people in emerging markets have insurance, they spend less out-of-pocket on and also make better use of healthcare services: a double-benefit impact.

Empirical-based research

The latest sigma reviews more such recent evidence-based research, which offers more granular insights about the contribution of insurance across a broad range of development metrics. The sigma also addresses local demand and supply-side barriers, such as lack of awareness, institutional factors and behavioural biases that can hinder extension of the reach of insurance to cover more people.

For instance, affordability is a main demand-side barrier in many countries. Yet, studies in Nicaragua and India find that even when heavily subsidized, people do not buy cover. Here it is thought trust in insurance is of equal or more importance to consumers than cost of cover, suggesting that insurers need to do more to build stronger relationships and loyalty with their customers.

Insurers are finding new ways to deal with the realities of different countries/regions. In Sub-Saharan Africa (SSA), while poverty has fallen in relative and absolute terms in the last 15 years, three quarters of the population still live on less than USD 1.9 per day or belong to the floating class (USD 1.9-4). For the latter, insurance can play a key role in avoiding fall-back into poverty due to death, illness or other events. With this understanding, in recent years, community-based mutual schemes, and some private-sector insurers, have promoted microinsurance with simple and flexible product design.

Technology in insurance

Mobile technology has played a major role in extending the reach of risk protection solutions in SSA. The rise of mobile payment platforms in particular has enabled people with low incomes to quickly access affordable microinsurance. By 2016 more than 1 million farmers in Kenya, Tanzania and Rwanda had bought parametric insurance based on data from weather stations to insure their crops and livestock.2

Elsewhere, collaboration between the public and private sectors continues to support insurance expansion. For example, in 2007 the Chinese government implemented an agricultural insurance subsidy policy resulting in the growth of the insurance market by compound annual growth rate of 43% in 10 years, making China now the second largest agricultural insurance market in the world.3

sigma 4/2017 "Insurance: adding value to development in the emerging markets", reviews many other examples of evidence-based research which show that insurance facilitates higher income-generating activity by households and small business, and can improve quality of life.


1 Universal health coverage (UHC), fact sheet, World Health Organization, 2016

2 Harnessing Technology to Narrow the Insurance Protection Gap, The Geneva Association, 2016,, and “ABOUT ACRE AFRICA”,, 2017

3 sigma database, Swiss Re Institute

Facts & Figures



sigma Insurance: adding value to development in emerging markets

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