September 12, 2016
From Dateline Pacific
A new study in Papua New Guinea is looking at the viability of offering insurance to people in settlements and villages.
PNG has one of the lowest insurance penetration rates globally according to a 2015 Oxford Business Group study.
The study estimates coverage at under 2 percent of Gross Domestic Product which is significantly lower than the rest of the region.
Capital Insurance is carrying out the study which is partly funded by a $US70,000 grant from the Pacific Financial Inclusion Programme
Regional inclusive insurance specialist Michael Carr spoke with Koroi Hawkins about its aims and objectives.
MICHAEL CARR: Well basically this study is regarding some research carried out in specific markets in Papua New Guinea and it is really looking at two types of property insurance products that capital insurance want to investigate. Now the study really involves firstly looking at the housing of the low income segment to see if it is insurable to understand what people’s attitude to insurance is and really to get out there into the settlements and the villages to get a much better understanding of the types of property that is there. Its condition its value and really to see what sort of risks it presents from an insurance perspective. The other part of the study involves communal assays, communal property assays. So here we are talking about churches medical clinics, schools water pumps and infrastructure like that. Property that the community relies on and if it was damaged or it obviously would be impacted by that negatively. And in each case if it is a loss from fire or flood or storm. In each case it is going to affect them financially. Either personally because it is their own property. Or from a need to contribute to rebuild that damaged or lost property. So it is very important because, these, these people. Their property is currently uninsured and they are exposed to these types of risks. So it is important from that point of view.
KOROI HAWKINS: What are the constraints to insurance in PNG? Like why is it that penetration is so low in terms of insurance in PNG?
MC: Well there is a number of reasons for that. I mean there are some reasons that are not particularly relevant to PNG they are typical to a number of markets in the region. So one of them would be low levels of financial literacy. And I think also the low quality of construction of some of the properties but there are some things that particularly apply to PNG. We all know about the type of terrain there the mountainous terrain and the limited networks and infrastructure so that is a barrier to selling insurance. We can talk about the diversity and the culture in PNG it is a massive country hundreds of languages, different cultures and customs. So it is difficult to have a uniform approach to that.
KH: Do you think there is a likelihood that the survey will come with a negative result?
MC: Well the quick answer is I don’t know, nobody knows until we have actually completed the research and looked at the findings and see what insight we get from that. I mean irrespective of the actual outcome on the insurability or otherwise. The research will be valuable because it will give us an insight into a part of the market that we do not know anything about now. So it is a very interesting project from that point of view and as I say we are going to get we are expecting results out to be out in late September and that will give us a guide as to where we go from here.
The Pacific Financial Inclusion Programme is a Pacific-wide programme helping low-income households gain access to financial services and financial education. It is jointly administered by the UN Capital Development Fund (UNCDF) and the United Nations Development Programme (UNDP) and receives funding from the Australian Government, the European Union and the New Zealand Government.
Source: Radio NZ