Capacity Development for the Micro-insurance Market

What is the project about?


The Government of Mongolia has approved the MDGs as a national development strategy. The review of the current status of MDG  implementation in Mongolia shows slow progress in general, unsatisfactory performance and weak coordination of policies and measures aimed at implementation of the MDGs. With one third of the population living below the poverty line, it becomes critical to link a poverty reduction strategy with economic growth and macro-economic reform policies rather than rely solely on aid and social safety nets.

The Government of Mongolia has so far placed an emphasis on social welfare policy for the poor and vulnerable people. Although the government spends significant resources on social welfare, it has failed to create efficiency and equity gains. Therefore, strategies to accelerate the process of poverty alleviation need to developed and implemented. Under the UNDP Country Programme Action Plan (CPAP) 2007-2011, the GOM and UNDP agreed with the continued support to facilitate the poor’s access to financial services in order to mitigate their economic and social vulnerability.

One of the possible ways to address the challenge is to create a favorable environment and structure of micro-insurance which is affordable and accessible for the poor and vulnerable people. The project is expected to provide a basis of the further micro-insurance industry development as a means of poverty reduction and to contribute to the government’s efforts in achieving the MDG 1 by 2015.

The project is the first joint attempt of the GOM and international assistance to develop and strengthen the micro-insurance industry in Mongolia. As a result of the project, it will become possible to develop locally adapted micro-insurance product marketable in Mongolia and to support the poor and vulnerable people by provision of risk management options. In addition, it is expected that the ERC and micro-insurance providers built their capacity to handle and be engaged in the micro-insurance market with the technical support from the project.

The project’s focus will be promotion of strategies for pro-poor growth by strengthening micro-insurance system in Mongolia and by increasing an insurance access of the poor and vulnerable people and women.

What are the project goals?

The objective of the “Capacity Development for the Micro-insurance Market’ Project is to enhance risk-management capacity of the poor socially vulnerable people and women by developing a feasible micro-insurance system in Mongolia. The Project consists of the following four major components:

  1. Designing and piloting micro-insurance products specifically targeting the daily risks of the poor and socially vulnerable people and women,
  2. Capacity development of insurance providers to handle the micro-insurance products,
  3. Capacity development of the Financial Regulatory Commission,
  4. Awareness rising of the general public on micro-insurance.

What have we accomplished so far:



This project was the first effort in developing a viable micro insurance market in Mongolia. The project has delivered significant achievements in promoting the benefits of micro insurance to the public and to policy makers, increasing public awareness of insurance and creating a knowledge base on micro insurance.

The key achievements can be summarized as follows:

  • Established foundations for a micro insurance industry to develop in Mongolia. Through market research, capacity building efforts and knowledge dissemination, the project effectively promoted the importance of micro insurance in poverty prevention in Mongolia to regulators, policy makers and insurance industry.
  • Introduced the first micro insurance product in Mongolia. Based on market research and actuarial estimations by an international consultant, a health micro insurance product was launched in various project sites. Despite some issues with product design and marketing, the health insurance product adequately served the needs of the low income people who purchased the product. There were 705 policies sold to beneficiaries and insurance refunds were paid to 177 claimants.
  • A second micro insurance product – “property micro insurance” – was developed by international and national experts after conducting market research on the common risks faced by the poor and calculating estimations on risk factors.
  • An extensive network of community facilitators was created in project sites during the marketing phase of the health insurance product.
  • A significant amount of activity was carried out to promote awareness of insurance amongst the poor and disadvantaged sectors of the community. Advocacy efforts on the ground have been extensive and have reached a wide audience through community facilitators and media broadcasting.
  • Several radio and TV programs on the benefits of the micro insurance were prepared to raise awareness of micro-insurance.
  • The market research that was carried out prior to the launch of the pilot products was informative, in depth and suitable to be used for future activities.
  • Engagement with international consultants was a worthwhile exercise. Their critical appraisal provided suggestions on how to improve the project ranging from pricing, marketing, and partner engagement and suitable distribution channels.
  • A new monitoring system for the FRC to collect and analyze data and reports from insurance companies was developed by the project.
  • Organization of a two day conference on actuary science was a great capacity building exercise for the local insurance industry, with 7 international speakers presenting on a wide range of topics. Awareness and understanding of micro insurance has greatly improved amongst insurance industry professionals.
  • Attendance by select Government and insurance industry representatives at the 7th International Micro Insurance Conference in Rio De Janeiro and staff from the Financial Regulatory Commission at the Regional Seminar on Micro/Macro prudential Insurance Supervision and Crisis Prevention in Kuala Lumpur, Malaysia provided unique networking and capacity building opportunity.
  • One of the main outputs of the project – “improved policy and regulatory frameworks on micro-insurance” – was shifted to the ADB-GIZ project after consultation with the FRC. The resulting project delivered 13 specific recommendations on steps to be taken to facilitate the development of the micro insurance market.

Who finances it?

Year                 Donor Amount contributed
2009-2012 UNDP TRAC and Government of Luxemburg USD$ 1,552,468
2013-2014 UNDP TRAC and Government of Luxemburg USD$ 1,509,632

Delivery in previous fiscal year

Year Total Delivery
2009  
2010  
2011  
2012  
Total  
Overview
Status
Active
Project start date:
May 2009
Project end date:
May 2014
Geographic coverage:
Khan-Uul and Nalaikh districts of Ulaanbaatar, Selenge, Uvs, Khuvsgul and Dornod aimags
Focus area:
Povety Reduction
MDG:
MDG 1: Eradicate extreme poverty and hunger
Implementing partners:
Financial Regulatory Commission, Ministry of Finance and private insurance/microinsurance providers; Ministry of Population Development and Social Protection
Donor:
TRAC, Government of Luxemburg
Budget:
USD 1,509,632
UNDP Mongolia focal point:
Ms. Doljinsuren Jambal, Team leader
Project unit:
 
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