The INSURTECH Book

Increasing Access to Insurance in Developing Countries

By Susan Holliday

Principal Insurance Specialist, IFC

The Role of Insurance in Economic Development

Insurance, pensions, and savings support sustainable development in a number of ways:

• Allowing enterprises to take on more risk and create new businesses and jobs.
• Providing a safety net for individuals, families, and communities.
• Acting as an economic multiplier. Insurers can deploy assets into the local economy and support infrastructure and housing.
• Supporting the development of capital markets as insurers can invest their own funds and their customers’ savings.
• Protecting against natural disasters and promoting food security.

Penetration of Insurance is Lower in Developing Countries

The penetration of insurance in developing countries measured by premiums to GDP is on average just 2.9% compared with over 7% in the US and higher in some European countries. Ironically this means that the most vulnerable people are often the least protected. To give just one example, more than one third of the world’s poor live in low-income countries, which represent 70% of the most natural disaster-prone countries. The average direct loss from such “nat cats” is 2.9% of GDP, and can be as high as 12% as we saw in the Thai floods in 2011, whereas in industrialized countries the average loss is only 0.8% of GDP. The life insurance protection gap is estimated (SIGMA – World insurance 2015) at US$7 trillion in Latin America and US$32 trillion ...