Transcript The emergence of microinsurance

The
emergence of
microinsurance
Craig Churchill
Microinsurance Innovation Facility
International Labour Organization
Overview of Presentation
1. Microinsurance characteristics and trends
2. Examples of innovation
3. Concluding thoughts
Would you insure these
houses?
Would you insure these
farmers?
Would you insure these
assets?
Or these?
Would you insure these
lives?
Microinsurance trends
• Some insurance companies are interested in reaching
new markets, including low-income households
• Microinsurance is emerging out of the shadow of
microfinance
• Greater variety of distribution channels are being used
• Experimentation with consumer education tools and
methodologies is beginning
• Policymakers, regulators are showing a greater
interest
• Product innovations are taking place to provide better
coverage to more low-income people
Survey results
Microinsurance in Africa
Own survey, data as of end 2008
10'000'000
outreach (lives covered)
9'000'000
10.0%
penetration (%)
8'000'000
12.0%
7'000'000
8.0%
6'000'000
5'000'000
6.0%
4'000'000
4.0%
3'000'000
2'000'000
2.0%
1'000'000
0
0.0%
Credit life
Other life, funeral, PA
Health
Agriculture
Other property
Who is insured by
whom?
Formal insurance industry
Informal insurance
WEALTH
Insurable, without access
Uninsurable through market mechanisms
POPULATION
Characteristics of the
insurable poor
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Often work in the informal economy
Irregular cash flows
Often “un-banked”
Manage risks through myriad of informal means,
including social networks
Possibly illiterate
Limited familiarity with formal insurance
May not trust insurance companies
Vulnerable to risks
Key characteristics of
microinsurance
1.
2.
3.
4.
5.
6.
7.
Accessible: physically, intellectually, financially
Simple, easy to understand policy document
Make the intangible tangible
Broadly inclusive, with few if any exclusions
Premiums accommodate irregular cash flows
Small sums insured, often for short terms
Pre-underwritten, community or group pricing
Key characteristics of
microinsurance (cont.)
8. Distributed through alternative channels: aggregators
9. “Agent” aggregators may manage the entire customer
relationship, premium collection, claims payment
10.Often integrated with another financial transaction
11.Designed to minimize claims rejections
12.Bottom of the pyramid business model: small margins,
large volumes
Main Message:
Microinsurance is not just a scaled down version of
regular insurance…the product and processes need
to be completely reengineered to meet the
characteristics and preferences of the low-income
market.
Overview of Presentation
1. Microinsurance trends and characteristics
2. Examples of innovation
3. Concluding thoughts
The Microinsurance Innovation Facility
Large number of low
income people making informed choices
to manage risk
INNOVATION
GRANTS
TECHNICAL
ASSISTANCE
RESEARCH
DISSEMINATION
MICROINSURANCE INNOVATION FACILITY
Innovation Grants
• Grants: ranging from $25,000 to $600,000 for projects
between 1 to 3 years
• Purpose: Action research on product design, institutional
models, and consumer education
• Eligible organizations: Insurance companies, semiformal insurers, labour unions, cooperatives, NGOs & other
distribution channels, insurance associations
• Results after 3 rounds: > 400 applications from over
40 countries; 35 grantees have been selected
Overview of the
Facility’s Grantees (11/09)
Africa
Institutional
models
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SCC/CIC/NHIF (Kenya)
Old Mutual (South
Africa)
Health
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CIDR/UMSGF (Guinea)
Property /
Agriculture
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Hollard (South Africa)
Planet Guarantee (Mali)
Life /Accident
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UAB (Burkina Faso)
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Latin America/
Caribbean
La Positiva (Peru)
AMUCCS (Mexico)
Seguros Argos (Mexico)
Protecta (Peru)
Zurich Brazil
AIC (Haiti)
Seguros Futuro (El
Salvador)
Asia
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Consumer
education
Other
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Microfinance
Opportunities (Kenya)
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PWDS (India)
Pioneer Life
(Philippines)
Radol (Bangladesh)
Calcutta Kids (India)
VimoSEWA (India)
Care Foundation (India)
SSP (India)
People Mutuals (India)
DID/SICL (Sri Lanka)
IFFCO-Tokio (India)
WRMS (India)
PICC (China)
ICICI Prudential (India)
Max New York Life
(India)
Prime General
Insurance (Mongolia)
CNSEG (Brazil)
Fundaseg (Colombia)

Other
CIRM (India)
see Grantee Community on www.ilo.org/microinsurance for details
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Microfund for
Women (Jordan)

Freedom from
Hunger
Guy Carpenter
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Distribution Channels
 Collaborating with national consumers’
association for rural water rights to
develop life, health, personal accident
and funeral insurance products for
farming families, with premium
payments collected with water bills
 Distributing life insurance and savings
product for the families of migrant
workers through churches and schools
 Launching a property insurance
product sold through retailers and
suppliers of cell phone airtime
 Distributing life insurance and savings
through “mom and pop” retail stores
with handheld terminals
ICICI Prudential Ins. Co, India
• Project: Term life insurance & savings for tea workers in Assam
• Innovation:
– Partnership with tea estates
– Software to reduce transaction costs and increase customer
services
– Product simplification & transparency
– Education via NGO partner
• Learning:
– Outreach potential
– Ability to create savings & insurance culture
– Build trust
Cooperative Insurance
Company, Kenya
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Collaborating with Swedish Cooperative Centre, NHIF, and Folksam
Insurance (Sweden)
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Developing Bima ya Jamii: “Basket” product covering life, disability and
the National Health Insurance Fund (NHIF) coverage
Family (up to 7 members) coverage: In-patient health, AD&D, loss of
income due to accident, funeral expenses
No age limits, no exclusions, covers pre-existing conditions
Selling through MFIs, SACCOs and other cooperatives
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Emphasizing training and consumer education for distribution channels
and their members
Product Innovations:
Agriculture
 Crop insurance programme based on a
weather or area-yield index to protect
farmers, their assets and their crops
Sanasa
SRI LANKA
DHAN
Foundation
INDIA
 Livestock insurance experimenting with
RFIDs to reduce fraud
PlaNet
Guarantee
MALI
Overview of Presentation
1. Microinsurance trends and characteristics
2. Examples of innovation
3. Concluding thoughts
Challenges
1.
2.
3.
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Developing sustainable products that
meet the needs of the market
Reducing transaction costs (enhancing
affordability)
Overcoming the market’s natural
resistance and educational barriers
Getting products to the market:
distribution
Adopting a microinsurance approach to
premium collections and claims
payments
Challenges (cont.)
6.
7.
Creating microinsurance experts
Promoting an enabling environment
for microinsurance
8. Having better data to price products
9. Developing a database of product
and institutional performance
benchmarks
10. Assessing the impact: do the poor
really benefit from insurance, and if
so, under what circumstances
Back to the future
When the early Victorian insurance companies were first approached with
suggestions that they should offer (insurance) to the poor, the short answer
generally given was, in effect, that security was a luxury for which the poor
could not afford to pay.
The suggestions, however, were pressed. It was observed that for many
centuries the poor had somehow contrived, by their own co-operative thrift, to
provide some sort of financial security for themselves; and with some
misgivings experiments were launched to see whether such security could be
sold to them on commercial terms which would both give them at least as
good a return as they were deriving through their spontaneous organizations,
and enable the sellers to live on the proceeds of the trade. This is the origin of
industrial assurance, which is simply life assurance adapted to the needs of
weekly wage-earners.
Industrial assurance began timidly and on a small scale; but it met a felt need,
and consequently developed at a pace for which its founders were
unprepared. While it was most rapidly expanding it was already being
extensively reconstructed, as the mistakes of the experimental stage were
discovered and retrieved.
Dermot Morrah, A History of Industrial Life Assurance, Routledge (1955)
Thank you!
Craig Churchill
[email protected]
Tel +41 22 799 6242
www.ilo.org/microinsurance