ACCESS TO FINANCE
DEVELOPING THE MICROINSURANCE MARKET IN MONGOLIA
Access to Insurance Initiative
Kelly Rendek and Martina Wiedmaier-Pfister
© 2014 Asian Development Bank
All rights reserved. Published in 2014.
Printed in the Philippines.
ISBN 978-92-9254-482-9 (Print) 978-92-9254-483-6 (PDF)
Publication Stock No. RPT135950-2
Cataloging-in-Publication Data.
Asian Development Bank.
Access to finance: Developing the microinsurance market in Mongolia. Mandaluyong City, Philippines: Asian Development Bank, 2014.
1. Mongolia. 2. Microinsurance. 3. Finance. I. Asian Development Bank.
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Foreword
Mongolia has made significant progress in developing and strengthening its financial services and regulation in the last 2 decades, particularly as it transitioned to a democratic, free market economy and in the aftermath of several banking crises in the 1990s. However, the challenge of providing adequate and equitable financial services to its population of just under 3 million remains, especially those who are most vulnerable to financial risks and economic shocks.
To mitigate these risks, there needs to be a sound portfolio of affordable insurance products and services made easily available to the public. Access to microinsurance can help vulnerable households maintain a sense of financial confidence in the face of illnesses, injuries, or even death of family members, loss of property or natural catastrophes. The effect of these risks on their limited financial resources could prove to be fatal.
Mongolia’s microinsurance industry is still in its nascent stage, with pilot projects initiated only in recent years. To assess the opportunities and challenges for microinsurance, Mongolia’s Financial Regulatory Commission collaborated with the Asian Development Bank (ADB), the Access to Insurance Initiative of the International Association of Insurance Supervisors, and the German International Cooperation to undertake a diagnostic analysis of the insurance industry in general, and microinsurance, in particular. The aim is to stimulate local stakeholder process to adopt strategies to further develop and expand the microinsurance market in Mongolia. Simply put, the intent is to provide people with better access to insurance products and services, especially those who are poor and underserved.
This study builds on prior initiatives of various donor organizations that contributed research, capacity building, awareness and lessons learned from pilot projects in Mongolia. Key impediments to the development of the microinsurance industry were identified, i.e., from the lack of widespread, cost-effective distribution channels to the inadequate technical capacity of the financial regulator and policy makers of the insurance industry as a whole. This report also presents recommended strategies to address these constraints.
It is ADB’s sincere hope that the publication of this report will help regulators, policy makers, and other industry stakeholders better understand and effectively respond to the challenges in the development of microinsurance in Mongolia, and in other developing member countries at a similar development stage. For its part, the ADB stands ready to continue supporting the Government of Mongolia in its efforts to provide an enabling environment for its financial sector to thrive, and to make available various affordable financial products and services to its people.
Ayumi Konishi
Director General
East Asia Department
Asian Development Bank
Acknowledgments
This knowledge product was developed by Xiaofei Jiang, operations coordination specialist (task leader), Public Management, Financial Sector and Regional Cooperation Division, East Asia Department, based on a regional technical assistance report for Mongolia commissioned to Kelly Rendek and Martina Wiedmaier-Pfister for the Access to Insurance Initiative (A2II).
The Asian Development Bank (ADB) would like to thank Sodom Ganbold of the Financial Regulatory Commission (FRC) and the staff of the insurance department, for their valuable contributions to this review. We also thank the staff of the German International Cooperation (GIZ); the ADB Mongolia Resident Mission; and to the A2II secretariat for their assistance and logistic support during the in-country visits.
Special thanks go to Arup Chatterjee, senior financial sector specialist, Office of Regional Economic Integration, who served as peer reviewer. This publication also benefited from the overall guidance of Ying Qian, director, Public Management, Financial Sector and Regional Cooperation Division, East Asia Department, and from the editorial and production assistance of Pilar Sahilan, Arvin Diaz, Tuesday Soriano, Edith Joan Nacpil, and Carlos Llorin Jr. The cover design was based on a photo taken by Naomi Chakwin.
About the Access to Insurance Initiative
The Access to Insurance Initiative (www.access-to-insurance.org) is a global partnership of insurance supervisors and development agencies. It is designed to increase voluntary usage of suitable insurance products by contributing to sound policies, regulation, and supervision; through best practice, guidance, and standards. Under the primacy of the International Association of Insurance Supervisors (IAIS), the initiative generates knowledge and contributes to the IAIS standard setting and capacity development measures for supervisors.
The initiative was founded in October 2009 as a partnership among (i) the IAIS, (ii) the German Federal Ministry for Economic Cooperation and Development (BMZ) together with the German Technical Cooperation, (iii) the Consultative Group to Assist the Poor, (iv) the International Labour Organization (ILO), and (v) the South Africa-based FinMark Trust. The United Nations Capital