UNSGSA Queen Máxima pre-recorded video remarks for the Access to Insurance Initiative (A2ii)-International Association of Insurance Supervisors (IAIS) Public Dialogue: Insurance and the Sustainable Development Goals (SDGs) on 22 April 2021. The Special Advocate highlights the importance of access to insurance for COVID-19 response and recovery, and to achieve the SDGs.
COVID-19 has exposed the devastating impact of uninsured risk on current and future generations. The World Bank estimates that more than 100 million people will be pushed into extreme poverty because of the pandemic. The vulnerable and uninsured are disproportionally affected. Without access to insurance, low-income people have to unfortunately resort to coping mechanisms such as putting children to work, eating less food, and selling productive assets. Drawing from savings reserves is also one of the main coping mechanisms to manage shocks. Recent data from Gallup reveals that 51% of Chileans, 47% of Kenyans, and 61% of adults in Vietnam say their resources would last less than one month. Resilience everywhere is limited.
Financial inclusion and access to insurance have a pivotal role to play in helping people cope with the impact of the pandemic. Many governments have responded to COVID-19 by giving money directly to citizens through digital channels. This has created momentum to accelerate financial inclusion. This, however, is a short-term relief measure. To achieve lasting positive outcomes in the lives of the vulnerable, it is important that we focus on solutions promoting long-term resilience — namely savings and insurance.
Insurance helps society to deal with severe shocks, whether these are health-related, or due to natural catastrophes. For example, insurance played a critical role in managing the devastation from Typhoon Haiyan, which struck the Philippines in 2013 and claimed more than 7,000 lives. A 2019 study found that those with access to financial services, including microinsurance, were able to more easily repair damaged homes and restart their lives. Those without insurance pay-outs resorted to savings, sold assets, or sought help from family and friends.
By increasing resilience, insurance contributes to achieving the Sustainable Development Goals. Insurance usage facilitates risk management and productive investment. It helps smallholder farmers and microentrepreneurs invest more in their business and take on more risk once protected. These outcomes contribute to many of the 17 SDGs, such as inclusive growth, food security, climate action, and health.
More can be done to accelerate insurance solutions for the world’s poor to support both COVID-19 response and long-term resilience. Governments and regulators could swiftly pass enabling laws and regulation to facilitate more widespread insurance solutions. In recent studies, market actors have underscored the importance of clear insurance regulation that is proportional with the risks and nature of activities involved. They have also emphasized the benefits of integrating regulatory technology solutions into oversight approaches. Technology can allow regulators to make more timely decisions and supports transparency. Regulation must be complemented with the appropriate payments and settlement infrastructure, including interoperability between provider types. This helps vulnerable segments access insurance products more easily, with fewer transaction costs, and makes small-ticket insurance products possible. As tech-driven solutions become more common, ensuring that people have a minimum level of digital literacy is important. There is also a need for policymakers to raise awareness and build the capacity to successfully use insurance products, as well as create consumer protection mechanisms to ensure effective recourse.
The pandemic has further highlighted the limits on old-fashioned insurance products, requiring new tech-driven solutions and innovative partnerships to address gaps. For example, Pula, a Kenyan AgriTech, has served 3.5 million African farmers by bundling insurance into agricultural inputs like fertilizer and seeds. Climatic events result in farmers receiving a voucher for replacement seeds — a straightforward product that has scaled very quickly. In Indonesia, Axa and Dana, a mobile wallet company, launched an insurance product in 2018 with premiums of less than two US dollars for life and health coverage. These examples — which are designed with the needs and behaviors of low-income customers in mind and use digital payments technology — offer strong promise to reduce insurance protection gaps in emerging markets.
Before I conclude, I leave you with a challenge. To achieve the SDGs by 2030, it is critical to accelerate insurance as a risk protection mechanism. Empirical research strongly shows the benefit of insurance to promote resilience against shocks in the lives of the underserved. COVID-19 has reinforced the need for these tools. However, to date much of the financial inclusion community has focused on payments and credit-related interventions. It is therefore imperative to scale proven inclusive insurance initiatives and develop models that can be replicated across the world. The A2ii public dialogue provides a crucial platform to facilitate these advancements.
Finally, I wish you fruitful dialogue today and encourage a singular focus on impact and action. I look forward to supporting you on next steps.