Barry Whiteside: Development of micro-insurance in Fiji
Opening speech by Mr Barry Whiteside, Acting Governor of the Reserve Bank of Fiji, at the
Launch of LICI's Micro Life Product, Suva, 20 April 2011.
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His Excellency the High Commissioner of India, Mr Vinod Kumar,
General Manager, Life Insurance Corporation of India Fiji Operations, Mr Krishnan Narasimhan,
Mr. Tillman Bruett, Project Manager, Pacific Financial Inclusion Programme
Fiji Management & Staff of LICI,
Distinguished guests,
Ladies and Gentlemen.
Good evening and bula vinaka to you all.
It is an honour and pleasure to be here with you today to help launch Life Insurance
Corporation of India's (LICI) first individual micro-insurance product.
I wish to thank Mr. Narasimhan for the invitation and I congratulate LICI for this exciting
initiative.
I would like to mention, right up front, that Mr. Narasimhan is a pioneer member of our
National Financial Inclusion Taskforce and the current Chairman of the Financial Literacy
Working Group of that Taskforce. During his time in Fiji he has clearly demonstrated his
passion as an advocate of financial inclusion and has been at the forefront driving and
promoting this cause which we hold dear to our hearts. Last year he was influential in the
Green Ribbon Campaign that raised awareness on the importance of financial literacy.
I understand Mr. Narasimhan will be leaving our shores in the not too distant future. We are
of course saddened by this, given his tremendous contribution to our financial inclusion
cause. We of course recognize that this is a necessary career path move and we wish him
only the very best in his future endeavours.
Introduction - Micro-insurance
Ladies and gentlemen, micro-insurance exists in Fiji on a very small scale. However, as
some of you know, micro-insurance is now the fastest growing microfinance product in the
world, providing benefits to millions of mothers, farmers and small business owners.
insurance provided for low income
By definition, micro-insurance is simply ...affordable
people to protect themselves from financial shocks imposed on them through unpredictable
events.
While the risks faced by the poor are no different from those encountered by others, this
group of people are more vulnerable to such risks due to their very limited resource base.
Therefore, they face a greater financial burden when hit by an unexpected event, such as the
untimely death of a family member, deadly illness or injury, or loss of assets from natural
disasters.
The reality is that when low income households are faced with such difficulties, harsh
choices are made to endure such ordeals and just to get by. Their subsequent actions may
deplete their quality of life, thus their standard of living declines and more people fall deeper
into the poverty trap.
In Fiji, the poor are the most exposed to such risks and at the same time, are the least
protected against the consequences. Micro-insurance can play an integral role in diminishing
the risks associated with catastrophic events.
Micro-insurance is new to Fiji, with just two products, a funeral and a life policy introduced to
the market in 2010. I would like to be able to tell you how successful these products have
been in terms of their take-up, but I do not have the figures yet. A new product for protection
against crop damage is also currently being explored.
Clearly there is scope for micro-insurance to develop in Fiji given the existing demand for
protection against health, life, education, financial and disaster risks. Tonight's product
launch by LICI is testament to that.
As an institution whose vision is to lead Fiji to economic success, the Reserve Bank of Fiji
believes that promoting micro-insurance is an investment for the future, but this needs a
collaborative approach by all. LICI has risen to that challenge and I applaud them for that.
Developments in financial inclusion and microfinance
Ladies and gentlemen, as you may be aware, in 2009 a National Microfinance Workshop
was organized by the Reserve Bank and supported by the Pacific Financial Inclusion
Programme (PFIP). A key outcome at this workshop was the commitment by participants to a
common vision of
"...reaching at least 150,000 unbanked citizens through a coordinated
national effort by the year 2014".
To promote this vision, the National Financial Inclusion Taskforce was established and given
the job to monitor and drive strategies in achieving financial inclusion goals. To support the
work of the Taskforce, three working groups were also established to focus on financial
literacy, statistics and microfinance.
A follow up workshop was held in March this year where stakeholders took stock of what had
been achieved to date. More importantly, forward plans were reviewed with the 2014 target
in mind.
In addition to this, the RBF has continued its outreach and awareness by way of
microfinance expositions. In 2010, together with our many stakeholders, we held three expos
in Ba, Labasa and Suva. This year we plan to hold another three in different locations. In
fact, the first one was just concluded at the end of March. It was the first ever microfinance
exposition held in the maritime zone, covering Savusavu, Taveuni, Koro, Gau and Levuka.
The primary focus of such expositions is to raise awareness and promote greater financial
inclusion in Fiji. The expos feature different organizations from the private and public sectors
(including the banks and mobile phone companies), donors, civil society groups and relevant
government ministries. We are indeed really thankful for the tremendous on-going support of
all these organisations.
Micro-insurance to support these developments
In May 2010, the Asian Development Bank released a comprehensive report titled
"Microfinance in Fiji - Challenges and Opportunities". The report highlighted that when
certain key risks are pooled or transferred in a cost efficient manner, the likelihood of falling
further into poverty due to external shocks is reduced. It also identified a huge market for
micro-insurance, with at least 250,000-300,000 citizens still untapped by insurance in our
country.
On the 15th July 2010, the Reserve Bank together with the Pacific Financial Inclusion
Program organized an "Information Exchange on Micro-insurance in Fiji" with relevant
stakeholders. The event saw stakeholders deliberate and discuss the extension of insurance
to low income households in Fiji and enabled them to learn more about its potential for both
low income households and insurance companies.
The development of the micro-insurance industry will ensure that low income households can
live life with dignity especially in times of adversity. Improved access to financial services for
low income residents is definitely needed.
The Reserve Bank is working on developing a sound regulatory framework, with low barriers
and more awareness and consumer protection, to ensure the viability of the micro-insurance
industry in Fiji.
There are a number of obstacles that hinder the growth of micro-insurance. Perhaps the
greatest obstacle, apart from affordability, would be the limited public awareness on the
benefits of insurance among those who have never had access to financial services.
Financial literacy is seen as the answer to overcome this hurdle.
Micro-insurance has become a global phenomenon and the number of successful stories
and case studies in other developing countries has pointed the way for the introduction of
such products in Fiji.
I have already mentioned the very few micro-insurance products currently available in our
market. This is therefore a call for insurance companies to do what LICI is doing here today
and come up with more innovative products in this field.
The initial undertaking towards expanding access to insurance for the poor is diversifying the
products. In their current form, insurance policies are too technical and complicated to be
understood by the ordinary man on the street. Given the structure of Fiji's economy, it is not
just about extending any product to the poor, but providing products that are of value to them
and which produce a reasonable return.
Micro Life by LICI
Ladies and gentlemen, today, I am extremely pleased to help launch a new micro-insurance
product into our economy, called Micro Life, courtesy of the Life Insurance Corporation of
India.
Micro Life is an endowment-type micro-insurance product providing death, disability, accident
and funeral expense benefits, besides substantial savings and returns on maturity. This is
the first ever individual and comprehensive micro-insurance product for Fiji.
The initiative is welcomed by the RBF as we believe in innovative financial products in the
economy and such introduction is the stepping stone for financial inclusion at large. Perhaps
the first of its kind in Pacific, the product aims to provide low cost life insurance solutions to
the segments of society who have up to this point in time, been under served. The product
clearly fits our picture of promoting greater financial inclusion.
Ladies and gentlemen it would be remiss of me not to say anything about the provider.
Life Insurance Corporation of India (LICI) is no small operation. It is a global Life Insurance
company with headquarters in Mumbai, India and is fully owned by the Government of India.
LICI, Fiji is a branch of the parent company and has been operating in Fiji for more than
54 years. The Fiji operations of LICI are guided by the Insurance Laws in Fiji (Insurance Act,
1998) and are governed by the Reserve Bank of Fiji.
Today, LICI in Fiji is a prominent player in the financial sector of the country, operating
through a network of branch offices in Suva, Lautoka and Labasa, besides agency offices in
nine other centers. The Vision of LICI Fiji is to become the preferred insurer of choice for the
people of Fiji. We thank the Company for moving further on its vision in the case of its new
Micro Life product.
Conclusion
In concluding, I would just wish to say that micro-insurance is a vital tool for the country's low
income people to protect themselves from adversity. If low income individuals decide to
purchase the micro-insurance product, it will certainly moderate the risks and provide the
comfort or backing to be more optimistic in whatever they may be doing to pull themselves
out of poverty. Micro-insurance is designed to help the low income individual cope with
financial emergencies.
The onus, ladies and gentlemen, is to try to make everyone aware of this excellent
opportunity and utilize it to better their livelihoods.
Launch
Once again, I thank Mr. Narasimhan for his kind invitation. I wish him and his team at LICI
every success with the Micro Life product. I also thank LICI for continuing to contribute to the
development of our financial sector and economy.
I now have much pleasure in launching the LICI Micro-insurance product - Micro Life.
Vinaka vakalevu and Dhanyavaard.