‘A large sector of the economy of poor and developing countries is largely uninsured. In the last 25 years, economic losses due to climate were 4.85 trillion, of which only 25% were insured (insurance protection gap). Of the uninsured, the far majority resides in developing and emerging countries. Given a climate event, the loss of crops and lives, these men and women and families have no other alternative than to re-build from scratch their wealth and their community. They rely significantly on government subsidies and charity. Inclusive insurance is about putting business disciplines around creating insurance with a social impact.’
Joan Lamm-Tennant- Chief Executive Officer and Founder Blue Marble
What is Inclusive Insurance, and why does it matter? Which role does inclusive insurance play for social, economic, and financial resilience in poor and climate-vulnerable countries?
Inclusive insurance is a more precise definition of what was known as microinsurance. Inclusive insurance meets the needs of the underserved and has a social impact. Itmatters because the poor generally have very few safety nets and do not have enough savings. When a catastrophe occurs, poor people fallfurther down the economic pyramid. Inclusive insurance can provide them with safety nets, allowing them to build their economic well-being.
Could you share with us the experiences that Blue Marble has had in the area of inclusive insurance, especially with your focus in agriculture?
One of the areas we focus on is agriculture, primarily because the world’s poor are predominately farmers. These families lose their crops, access to food, and livelihoods in the event of a climate related disaster. In 2018, we partnered with Nespresso and began to provide insurance protection against drought and excess rain for smallholder coffee growers.
In the first phase, we tracked the project and carried out a proof of concept. Usually, our first year is a proof of concept year, and sometimes it takes us two years, such as for a program we did in Zimbabwe. We did a proof of concept for two years because we did not get enough of the validation that we needed in the first year. So we designed the first-year program to be large enough but not too large. We created the program so that it would have many small payments, not just a few large ones. In the end, we were very pleased. as roughly 50% of the farmers received some payments. What we learned was dropping down and paying many smallholder farmers is important because it starts to validate insurance in the minds of the farmers. However, at some point, the payments can be too low. We made some adaptations to our index so that we could keep up the frequency, but we had to correct from minimal, insignificant payments.
I am pleased to share with you, that in 2019, 100% of the cooperatives that we insured renewed their policies and that we will be able to expand coverage this year. We have now been given access to government subsidies, which are going to help us extend this protection beyond the current insured population. It is a success story, in that we began this with the partnership and that we were able to get the advocacy of the public and the governments. We could not do this alone; We need partnerships.
Blue Marble prides itself on having an innovative, collaborative model, which brings with it a lot of advantages. How does this works, and how has this contributed to the implementation of various inclusive insurance projects on the ground?
Blue Marble was built on two principles; collaboration, and shared value creation. Blue Marble is owned by eight multinational insurance entities that compete in the traditional market and bear or share the risks in our programs. These companies have pooled their assets – financial and intellectual- to work collectively on social problems. As such, Blue Marble has access to diverse expertise. Blue Marble is anorganization that develops and implements the solutions.
The shared value creation aspect is the application of business disciplines to social problems, such as poverty, and world hunger, among others. Blue Marble is an established corporation with a Board of Directors and financial and impact benchmarks for evaluation. We employ all business disciplines, both financial and operational, in management just like other corporations, but our mission is unique. Our mission is around social impact, addressing global issues.
Blue Marble is expanding the Weather Index Insurance Program for Smallholder Coffee Farmers in Colombia. What led to the scale up this of program? Are there any other regions globally that you are looking to scale up, in which area focus and why?
We are in regular communication with the farmers and involve them in the design of the solution. We track the program and ask them what is working and how to improve it. What led us to scale it up was their positive feedback along with the government’s willingness to back us. The growth is demand-based.
In Colombia, we are into our second year in the program, and we had 100% of the cooperatives renew. Through this program, we are covering 3,275 (x 4 farming family metrics) farmers, and we are aiming at increasing significantly every year.
In Colombia alone, there are 500,000 smallholder coffee farmers, so our first focus is to scale within Colombia. However, we have a program that is in the acceleration phase for coffee growers in Kenya. Furthermore, we are beginning to develop mechanisms for protecting smallholder farmers of other cash crops, such as cocoa.
Blue Marble is in this for the long run. We have an attractive set of roughly 25 opportunities that we consider high prospects. They all fall into two categories. One category that we focus on is advancing our agriculture solutions throughout the world . The other category that we focus on invol;ves broader financial inclusion programs.
How do you convey benefits of insurance to small-scale farmers? Has that been a problem on your side?
That is a big challenge and the way we are addressing it by taking the value chain of the poor that we are trying to serve and breaking it apart. We are orchestrating end-to-end insurance value chains from identifying problems to implementing solutions. We evaluate every step of the value chain including the suppliers of inputs, the financiers of small loans, off-takers and educators of farming techniques. We then decide with whom do we partner on the value chain in Colombia, we collaborated with a group called Café xport. Café xport does farming services; they do educational services for the farmers. We worked through the coffee cooperatives that Café xport serves. That is how we were able to embed the necessary education about insurance. The key is to understand who is serving the value chain today and do not duplicate but collaborate.
Blue Marble is part of the Executive steering committee of the Insurance Development Forum (IDF) working group. What opportunities would you say present themselves through this group to scale up implementation of inclusive insurance?
The IDF is a very impactful idea, it is a convening organization for public and private institutions. It is set up in a variety of workstreams, one of which is microinsurance. I co-lead that workstream along with Astrid Zwick of the InsuResilience Secretariat. The workstream convenes various players in the microinsurance space. To date, there have been shared learnings with the hope that in time, the IDF becomes a catalyst for partnerships.
We’re not going to scale without partnerships. There could be private – private or public-private partnerships. Moving beyond a convening organization to one that is a catalyst for partnerships is critical for scaling. Blue Marble’s earlry efforts in agriculture would not have been possible without partnerships. Organizations like Blue Marble can originate the idea, develop a solution, secure the risk capital and, clear regulatory processes that are required in this ground of microinsurance, but we need the advocacy of an organization like the InsuResilience Global Partnership.
What way forward would you like to see in this area of Inclusive Insurance? Do you see a growth in the inclusive insurance space and how could other players be motivated to engage here?
I think the best way forward is through public-private partnerships. Additionally, I think that for businesses such as the insurance companies, to step in, inclusive insurance has to be framed as making business sense. In other words, it’s not only a corporate social responsibility effort. Only then will you get the long-term commitment that is needed for inclusive insurance to be successful. I think it is going to be very difficult for corporations to see the business rationale of impact insurance if they embed it in their traditional operations and their traditional mindsets. They have to put a value on social impact, and they have to track it over a long period.
Joan Lamm-Tennant
Chief Executive Officer and Founder
Joan Lamm-Tennant is the CEO and Founder of Blue Marble Microinsurance.
Previously, Joan was the Global Chief Economist and Risk Strategist of Guy Carpenter & Company, LLC, the reinsurance and risk advisory operating company of Marsh & McLennan Companies. Prior to joining Guy Carpenter in 2007, Joan was the founding President of General Reinsurance Capital Consultants (GRCC).
Before joining industry, Joan was a tenured Professor of Finance at Villanova University where she held the Thomas Labrecque Chair in Business. Upon joining industry, Joan was an Adjunct Professor at the Wharton School, University of Pennsylvania where she held the Laurence and Susan Hirsch Chair in International Business.
Joan serves on the Boards of Hamilton Insurance Group, Element Financial Corporation and Ambac Financial Group. Joan is the recipient of the 2017 Insurance Industry Charitable Foundation Lifetime Achievement Award, the 2016 Wharton MBA Excellence in Teaching Award, the 2013 APIW Insurance Woman of the Year, and the 2012 International Insurance Society Kenneth Black Award for service and commitment to the advancement of the global industry.
She holds a Ph.D. in Finance and Investments from the University of Texas, Austin; an M.B.A. in Finance from St. Mary’s University, San Antonio, Texas and a B.B.A. with Honors in Accounting from St. Mary’s University, San Antonio, Texas.
This interview was conducted by InsuResilience Secretariat