Joan Schmit, University of Wisconsin-Madison
Six years ago, many participants of the Berlin IIS annual seminar experienced their first substantive introduction to the topic of microinsurance with an inspiring presentation from Nelson Kuria, Managing Director of the Cooperative Insurance Company in Kenya. Fast forward to Seoul in 2013, and microinsurance is a general topic of the conference discussion groups; the topic’s influence having risen rapidly. Discussion session participants offered a wide variety of perspectives and backgrounds, with lively conversation. One topic in particular seemed to garner attention, that of the potential to develop harmonized microinsurance regulatory standards across the globe.
Long before our modern insurance industry was formed, society used fundamental concepts of risk pooling and risk spreading to harness economic activity for the good of society. More than 3000 years ago, merchants understood that by splitting their goods across several caravans, their loss exposure per event declined substantially, and when loss did occur, it was borne by a group of merchants rather than any single trader. They could predict, bear, and plan for losses far more easily. Babylonians developed an even more elaborate system whereby merchants would pay lenders an additional fee to guarantee cancelation of the loans when shipments were stolen. Throughout the ages, societies have used collective contributions to support individuals who experienced loss.
Insurers have a clear vision of how enterprise risk management (ERM) will add value to their organizations but face business challenges in progressing toward that goal, according to Towers Watson's Seventh Biennial Global ERM Survey, released in November.more articles