Transcript Mobilizing Microfinance Clients for Sustainable Livelihoods

The Mutual Approach as a Strategic
Option for Sustainable
Microinsurance for the Poor
EPIFANIO A. MANIEBO
Executive Director
Organization for Asia and the Pacific, Inc
Unit 1014 10th Floor, Medical Plaza Ortigas Building
San Miguel Avenue, Ortigas Center, Pasig City, 1605, Philippines
Telefax: (632) 6339327
Email: [email protected]
RIMANSI Organization for Asia and the Pacific, Inc.
1. THE NEED: To provide sustainable micro-insurance
services among the poor microfinance clients
Risk protection needs to be part of any effective strategy for
microfinance services
Traditional means of risk protection (selling assets such as
livestock, land and hoarded precious metals, drawing down on
savings and contingency borrowing) erode the client
household’s net worth
Sustainable micro-insurance can be a better form of risk
protection for the poor
The Mutual Approach as a Strategic Option for Sustainable Microinsurance for the Poor
RIMANSI Organization for Asia and the Pacific, Inc.
2. THE OPPORTUNITY: The enterprising poor clients
are willing and able to participate in microinsurance programs
Many microfinance institutions, co-ops and NGOs in the Philippines
and other developing countries are already running in-house mutual
benefit funds in response to member/client demand (informal and
unregulated operations)
Among 17 biggest in-house providers in Philippines, 12 co-ops, 3
NGOs/MFI, 2 transport associations.
HIGH RISK PROFILE: All with membership base of less than 3,000. 60%
with less than P17 million in assets. Not operated according to sound
actuarial principles.
The Mutual Approach as a Strategic Option for Sustainable Microinsurance for the Poor
RIMANSI Organization for Asia and the Pacific, Inc.
3. THE BUSINESS ADVANTAGE: Existing microfinance
delivery channels can be harnessed for low cost
transactions and education
Existing microfinance distribution channels may translate into
more efficient micro-insurance operations.
Regular interaction with microfinance clients may translate
into:
+ Better knowledge of demand patterns
+ Better design of insurance products
The Mutual Approach as a Strategic Option for Sustainable Microinsurance for the Poor
RIMANSI Organization for Asia and the Pacific, Inc.
Making the strategy happen: Influencing the policy environment
+ licensing and regulation
+ set performance standards for the sector
+ generate awareness and compliance with sector standards
+ provide policy incentives and support for good performance
+ ensure a level playing field for MBAs
The Mutual Approach as a Strategic Option for Sustainable Microinsurance for the Poor
RIMANSI Organization for Asia and the Pacific, Inc.
RIMANSI as business development support provider and policy
advocate
Value Added:
Catalyst to facilitate and support efforts of MFIs/MBAs to provide
better access by the poor to micro-insurance products and
services
Mechanism for risk pooling and cost sharing
Forum for performance based monitoring and evaluation
Advocate for policy reform and development
The Mutual Approach as a Strategic Option for Sustainable Microinsurance for the Poor
RIMANSI Organization for Asia and the Pacific, Inc.
RIMANSI: Provision of Risk Management Support
Services to Microfinance Institutions
RIMANSI as risk management support provider
Objectives
1. Assist the partner-MFIs establish MBAs.
2. Design and formulate appropriate micro insurance products for the
poor.
3. Formulate and promote Performance Standards aligned with
international best practices.
4. Promote mutual assistance and sharing of resources, technology and
information among stakeholder.
5. Build the financial infrastructure for micro-insurance through
research, education and policy advocacy.
The Mutual Approach as a Strategic Option for Sustainable Microinsurance for the Poor
RIMANSI Organization for Asia and the Pacific, Inc.
Regulating Mutual Benefit Associations
and Insurance Cooperatives
Status of Policy Advocacy:
Insurance Commission issued IMC 9-2006, October 25, 2006
• refers to the insurance business activity of providing specific insurance
products that meet the needs of the disadvantaged for risk protection
and relief against distress or misfortune
• premium computed on a daily basis does not exceed ten percent (10%) of
the current daily minimum wage rate for non-agricultural workers in Metro
Manila (P313.00-P350.00 or US$ 8-9); and
The Mutual Approach as a Strategic Option for Sustainable Microinsurance for the Poor
RIMANSI Organization for Asia and the Pacific, Inc.
Regulating Mutual Benefit Associations
and Insurance Cooperatives
Status of Policy Advocacy:
Insurance Commission issued IMC 9-2006, October 25, 2006
• maximum amount of life insurance coverage is not more than five hundred
(500) times the daily minimum wage rate (about US$4,500) for nonagricultural workers in Metro Manila.
• Initial guaranty fund: P5,000,000.00 (US$ 116,280)
• Every year thereafter, all micro-insurance MBA’s must increase their
Guaranty Fund by an amount equivalent to five percent (5%) of their gross
premium collections until the Guaranty Fund shall reach twelve and a half
percent (12.5%) of the required capital for domestic life insurance
companies.
The Mutual Approach as a Strategic Option for Sustainable Microinsurance for the Poor
RIMANSI Organization for Asia and the Pacific, Inc.
Regulating Mutual Benefit Associations
and Insurance Cooperatives
Insurance Memorandum Circular # 11-2006 dated December 8, 2006
requiring the adoption of RISK-BASED CAPITAL FRAMEWORK
requiring amounts of members' equity to be maintained in relation to
their investment and insurance risks
Circular No. 31-2005, dated September 26, 2005 on CORPORATE
GOVERNANCE PRINCIPLES AND LEADING PRACTICES
The Mutual Approach as a Strategic Option for Sustainable Microinsurance for the Poor
RIMANSI Organization for Asia and the Pacific, Inc.
Regulating Mutual Benefit Associations
and Insurance Cooperatives
Circular Letter No. 12-2004 dated June 7, 2004 on COURSE ON
CORPORATE GOVERNANCE
Circular Letter No. 35-2006 dated October 23, 2006 on the
SUBMISSION OF
THE MINUTES OF MEETINGS, BIOGRAPHICAL DATA (BIODATA)
OF MEMBERS OF THE BOARD OF DIRECTORS/TRUSTEES AND
LIST OF OFFICERS
The Mutual Approach as a Strategic Option for Sustainable Microinsurance for the Poor
RIMANSI Organization for Asia and the Pacific, Inc.
Regulating Mutual Benefit Associations
and Insurance Cooperatives
Future Challenges
Regulation needs to stay on top of changes in industry conditions and
business strategies change. An institutional partnership between mutual
associations and insurance cooperatives with the Insurance Commission
and Department of Finance is necessary to keep regulation relevant and
effective.
New and multiple products
MBA Partner Agent
Coverage of savers
Group Insurance
Investment in MFIs
Changing socio-economic profile of members
The Mutual Approach as a Strategic Option for Sustainable Microinsurance for the Poor
RIMANSI Organization for Asia and the Pacific, Inc.
Micro-Insurance: A Strategic Option for
Sustainable Livelihoods
Making the strategy happen:
Mobilization
Capacity Building
Policy Advocacy Around Standards of Performance
The Mutual Approach as a Strategic Option for Sustainable Microinsurance for the Poor
RIMANSI Organization for Asia and the Pacific, Inc.
Micro-Insurance: A Strategic Option for
Sustainable Livelihoods
Making the strategy happen: Mobilization
Needs assessment
Interim staffing
Market research
Actuarial analysis
Business planning
Operations training
Systems installation
PMES/MES
Staff selection and training
Board election and training
Completion of registration and licensing process
The Mutual Approach as a Strategic Option for Sustainable Microinsurance for the Poor
RIMANSI Organization for Asia and the Pacific, Inc.
Making the MBA Strategy Happen: Capacity Building
Member
Mob
What to Plan
GOVERNANCE
Collection
Claims
Financial
Mgmt.
MIS
MANAGEMENT
Policies and
Procedures for
Implementation
How to Monitor
and
Evaluate
Performance
The Mutual Approach as a Strategic Option for Sustainable Microinsurance for the Poor
RIMANSI Organization for Asia and the Pacific, Inc.
“In line with CARD’s member empowerment goal, the
mutual benefit association (MBA) structure is the
most suitable organizational structure for microinsurance”
CARD MBA showed how the MBA approach structure can take
advantage of;
•
micro-finance social networks;
•
payment flows; and
•
financial and information;
•
management systems;
to reach a critical mass of members, reserves and capital.
As of Dec. 31, 2007 - 469,457 active members
- Php 671.5 m assets (US$ 16.5 m)
- Php 45.1 m claims ytd (US$ 1.1 m)
The Mutual Approach as a Strategic Option for Sustainable Microinsurance for the Poor
CARD Mutual Benefit Association, Inc.
CARD EXPERIENCE……
YEAR
RIMANSI Organization for Asia and the Pacific, Inc.
MILESTONE
1994
 Members Mutual Fund (MMF) was established by CARD for the loan
redemption in case of death of member-borrowers.
 CARD also offered basic life insurance program.
1997
 CARD offered a monthly pension of Php 300 - 600.00 for life after
member’s 65th birthday for only Php 2.50 weekly contribution.
These in-house microinsurance services were not adequately
assessed by CARD and its impact to the institution
When the assessment was done, CARD realized that a member would
contribute for two years just to cover one month of pension benefit.
1998
1999
CARD also realized that the institution was at risk because CARD was
responsible for pension payment. And fulfilling its obligation to members
would ‘decapitalize’ CARD and may lead to potential bankruptcy.
On September 9, 1999, CARD Mutual Benefit Association was born to
manage the Members Mutual Fund (MMF).
It is registered as non-stock, non-profit legal entity owned and partially
managed by the members.
The Mutual Approach as a Strategic Option for Sustainable Microinsurance for the Poor
CARD EXPERIENCE……
CARD Mutual Benefit Association, Inc.
KEY MOTIVATING FACTORS
RIMANSI Organization for Asia and the Pacific, Inc.
ADDED VALUE / STRATEGY
 154,261 household-members as of 02-28-06
1. LARGE
MEMBERSHIP BASE
(CARD Rural Bank’s savers not included)
 Compulsory life insurance and retirement
coverage to prevent adverse selection.
2. LEVEL
CONTRIBUTIONS
LEVEL BENEFITS
 Can give equal benefits to members being
members- owned association
 Members can easily understand their benefits
out of their weekly contributions
3. AFFORDABLE
CONTRIBUTION
 Compulsory Weekly contributions of Php 5.00
for Life Insurance and Php 5.00 for Retirement
 Voluntary Php 25.00 weekly for health insurance
 1.5% per annum of the loan amount for all loans
insurance package
4. EFFECTIVE
COLLECTION
MECHANISM
 Collection of member’s contribution is through
the network of CARD branches and CARD MBA
Provincial Offices. (As of 02-28-06, CARD has 157
branches and CARD MBA has 5 Prov’l Offices nationwide)
The Mutual Approach as a Strategic Option for Sustainable Microinsurance for the Poor
CARD Mutual Benefit Association, Inc.
CARD EXPERIENCE……
KEY MOTIVATING FACTORS
RIMANSI Organization for Asia and the Pacific, Inc.
ADDED VALUE / STRATEGY
 2% of gross contribution is paid to the branches as
5. LOW ADMIN COST
collection expense
 20% of the gross contribution are allotted to GAF but the
actual usage ranges from 12 – 18% only.
6. SEPARATE
INSTITUTION TO
HANDLE
MICROINSURANCE
OPERATION




7. EFFECTIVE
 I.E.C. is through CARD MBA Provincial Offices with the
assistance coming from CARD branches.
 MBA Coordinators, who are members elected by their
co-members, assist in the I.E.C.
Information, Education
Campaign (I.E.C.)
STRATEGIES
8. EARLY SETTLEMENT
OF CLAIMS
Prevent co-variant risk
Able to observe proper product costing
Able to develop insurance culture
Business-like/ professional relationship among
different institutions of CARD MRI
 Claims settlement is on the CARD branch/Prov’l Office
level with the assistance of the Center’s Officers and
MBA Coordinators.
 1-3-5-day target for claim’s settlement
The Mutual Approach as a Strategic Option for Sustainable Microinsurance for the Poor
CARD EXPERIENCE……
CARD Mutual Benefit Association, Inc.
KEY MOTIVATING FACTORS
RIMANSI Organization for Asia and the Pacific, Inc.
ADDED VALUE / STRATEGY
9. PROFESSIONALLY
MANAGED
 For the development of products and services
 For proper implementation of the rules and regulations
of the association
10. SENSE OF
OWNERSHIP
 Assist the management in safeguarding the funds of the
association
MBA Coordinators are the go-between the members
and the association and vital force in:
11. DEDICATED MBA
COORDINATORS
 enforcing the policies in terms of claims settlement
 the information and education campaign (IEC)
12. SOURCE OF
INCOME
 Members must have source of income to pay their
contributions consistently
13. FRIENDLY
GOVERNMENT
REGULATIONS (SEC
& OIC)
 As our continuing guide in running CARD MBA
 Sense of protection of member’s individual interest
in the association.
 Full protection of the funds because CARD MBA is
required to submit annual reports to SEC and regularly
being audited by the Office of the Insurance
Commission.
The Mutual Approach as a Strategic Option for Sustainable Microinsurance for the Poor
CARD Mutual Benefit Association, Inc.
CARD EXPERIENCE……
RIMANSI Organization for Asia and the Pacific, Inc.
With the assistance of an Actuary, CARD MBA repackaged existing
product lines, developed new ones and offered non-financial services…
1. Life Insurance Program – a Whole Life Plan with Total & Permanent
Disability cover plus Accidental Death rider
2. Retirement Fund - Endowment 65
3. All Loans Insurance Package – a Group Yearly Renewable Term
(GYRT) Insurance. It pays the total amount of loan including interest.
4. Health Insurance in partnership with Philippine Health Insurance
Corporation (PhilHealth).
5. Refund of Contribution – Cash surrender value of the Certificate of
Membership after 3 continuous years of membership.
6. Non-financial services which include Out-of-School Youth Program
(Iskolar ng CARD MBA) and Mass Wedding.
7. Credit Bureau – tracking down member’s history thru our Microinsurance
Underwriting and Claims Evaluation Tool (MUnCET)
The Mutual Approach as a Strategic Option for Sustainable Microinsurance for the Poor
RIMANSI Organization for Asia and the Pacific, Inc.
In Summary,
Total Outreach - RIMANSI
No of HH
Persons
Covered
Philippines
533, 831
2,669,155
Cambodia
15,524
77,620
Country
The Mutual Approach as a Strategic Option for Sustainable Microinsurance for the Poor
RIMANSI Organization for Asia and the Pacific, Inc.
In Summary,
Potential Outreach - RIMANSI
No of HH
Persons
Covered
Philippines
1,086,124
5,430,620
Cambodia
59,626
298,130
Indonesia*
20,000
100,000
Vietnam*
46,000
230,000
Country
*At various level of intervention
The Mutual Approach as a Strategic Option for Sustainable Microinsurance for the Poor