Transcript Brokers and Agents in Microinsurance: Opportunities and

Brokers and Agents in Microinsurance:
Opportunities and Challenges
World Federation of Insurance Intermediaries
Washington, DC
10 March 2009
Michael J. McCord
President, MicroInsurance Centre
[email protected]
www.microinsurancecentre.org
Microinsurance Availability
A comprehensive landscape study of low-income people in the world’s 100 poorest countries found
that only 3% (78m) of the low-income population are covered by formal microinsurance.
(data from mid-2006). Estimate 125 million today. Potential market might be 3 Billion.
Belaru s
Ukraine
Kazakh stan
Mong olia
Uzbekistan
North Korea
Turkey
Tun is ia
Morocco
Algeria
Haiti
Guatemala
El Salvador
Panama
Libya
Egyp t
Mauritania
Senegal
Nicaragua
Israel
Mali
Iran
Afghanistan
China
Niger
Chad
Myanmar
Yemen
Lao s
Ghana Camero on
Ecuador
Malaysia
Papu a N ew Gu in ea
Ugand a Kenya
DRC
Tanzan ia
Brazil
Peru
Bolivia
Parag uay
Argentina
Chile
% Poor Insured
Ang ola
No Data
Mozambique
Namibia
.001% - 0.4%
0.4% - 1.6%
So uth Africa
1.6% - 4.2%
4.2% - 7.7%
38%
100 Poorest Countries
Philip pines
Vietnam
Ethiop ia
Sri L an ka
Colombia
Jap an
Taiwan
Thailan d
Su dan
Nigeria
So uth Korea
Pakistan
Saud i A rabia
India
Venezuela
Guy ana
Iraq
Indo nesia
Mauritius
Madagas car
“Microinsurance”
• Risk-pooling products that are designed to be
appropriate for theWHAT
low-income market in
relation to cost, terms, coverage, and delivery
mechanisms
IS
MICROINSURANCE?
Conventional and Micro Insurance
Conventional Insurance
Microinsurance
Sold by licensed agents or brokers to
wealth, middle class, or
companies that typically
understand insurance
Often sold by unlicensed non-traditional
agents to low-income persons,
preferably in groups requiring
significant consumer education
Control
efficiencies
Screening requirements may include
a medical examination, or other
tests
Death certificates confirming event
If there are any screening requirements,
they are very limited to limit costs
Confirmation by local leaders
Premiums
Typically regular annual, quarterly,
monthly. Based on age or other
specific risk characteristics, and
collect regularly
Frequent or irregular premium
payments. Group pricing with links
to other services. Different risk
structures.
Policies
Complex policy document, many
exclusions, usually annual terms
Simple language, few to no exclusions,
terms appropriate to market
Claims
Claims process for large sums
insured may be quite difficult
Claims process for small sums insured is
simple ye still controls fraud
Delivery
Channels
Microinsurance types
Life Insurance
Funeral
Credit Life
Disability
Surgical
Total
Out-patient
Permanent
Temporary
Health
Endowments
Hospitalisation
Partial
Dismemberment
Property
Fire
Livestock
Theft
Prices
Agriculture
Dental
Factors in Microinsurance Purchases
Perceptions of Insurance
Understanding Insurance
Concepts
Requires
Education  Knowledge  Appreciation
Product / Demand Match
Easy Payment Mechanism
Cost of Coverage
Decision
Making
Purchase
Requires
Appropriate product design
Available Income
Cost and Frequency
6
Relationships, in brief
Insurers
Misunderstanding
Delivery
channels
?
?
Sometimes good products, but often
-Products poorly designed for the market
-Inappropriate procedures
-Weak servicing
-Inefficient systems
-Poorly trained staff and clients
-Ineffective marketing
Brokers might improve this situation
MI Covered Lives by Delivery Channel
Delivery Channel Type
Agents: Microinsurance or Other
Brokers: Microinsurance or Other
CBOs and other Groups
Employer Groups
Government and Parastatal
Mutuals
Other Financial Services (e.g. MFIs)
Retailers of Other Service Providers
including Funeral Parlors
Not Specified
Total
Covered Lives
7,569,773
292,947
25,645,596
181,192
11,815,690
13,800,214
17,001,644
1,755,682
436,766
78,499,503
Distribution by Product line
ChannelClassName
Accident &
Disability
Health
Life
Property
& Index
Total
Agents: MI or Other
1,096,418
108,903
4,437,514
2,099,182
7,742,017
18,827
273,904
Brokers: MI or Other
292,730
CBOs and other Groups
15,193,689
10,913,858
Employer Groups
Government and
Parastatal
Mutuals
Other Financial Services
(e.g. MFIs)
Retailers
2,150
178,283
9,738,403
9,563,667
9,539,907
11,090,399
12,357,172
9,438,867
42,426,345
5,228,180
3,116,289
14,343,673
1,682,222
24,370,364
89,760
152,924
1,303,397
289,795
1,835,876
53,543
378,050
Not specified
Total
40,888,508
35,196,692
21,031,064 11,431,763
1,192
58,570,375
150
181,775
9,613,564 11,216,056
40,131,690
431,593
63,739,530 36,158,034 175,982,764
Madison,
Zambia
Insurer type
Tata-AIG, India
AIG Uganda
Commercial
Years
4 (2003)
3 (total to 6/2005)
7 (2004)
Delivery
Partners
Own agents
Partners
Products
Credit life,
funeral
# insured
31,712
Term life and life savings
GPA, Fire, Last
linked to ins expense (family)
10,073
1.6 million
Claims ratio
22%
Expense ratio
N/A
Profit/Surplus
N/A
(91%)
27%
(15%)
USD 150,000
(≈0.5%) USD 122,000
(over three years)
(?%)
USD 790,000
Total annual MI
premiums
191% (break even
anticipated in 5 years)
32%
41%
Tuw Skok, Poland
Insurer type
Years operational
Malawi Union of Savings
and credit Coops
Mutual owned by Credit
Mutual (Malawi)
Unions (Poland)
7 years (2003)
>4 (2003)
Products
Credit life, homeowners,
AD&D
# Clients
924,200
56,000
Claims ratio
56%
40%
Expense ratio
32%
15%
Profit/Surplus
12%
45%
ROE
15%
6.5%
Sources
• Michael J. McCord. AIG Uganda - CGAP
Working Group on Microinsurance, Good and
Bad Practices Case Study No. 9. April 2005.
• James Roth and Vijay Athreye. Tata – AIG Life
Insurance Company Ltd. - CGAP Working
Group on Microinsurance, Good and Bad
Practices Case Study No. 14. September 2005
• Lemmy Manje. Madison Insurance ZambiaCGAP Working Group on Microinsurance, Good
and Bad Practices Case Study No. 10. May
2005
• Sven Enarsson and Kjell Wiren. MUSCCO:
Malawi Union of Savings and Credit
Cooperatives: Good and Bad Practices Case
Study No. 8 . March 2005
• Craig Churchill and Terry Pepler. Tuw Skok,
Poland: Good and Bad Practices Case Study
No. 2. May 2004
Microinsurance Brokers – examples1
• Micro Insurance Agency (MicroEnsure)
–
–
–
–
–
Traditional brokerage activity focused on low income
Primarily work through MFIs
Uganda, Tanzania, Ghana, India, and the Philippines
“Break even in <1 year”
http://www.microinsuranceagency.com/index.html
• Planet Guarantee
– Numerous francophone countries
– Technical assistance provision and brokerage
– http://www.planetfinancegroup.org/EN/pop_planet_garantee.
php
Brokers in microinsurance - examples
• SANTAM (South Africa) broker with runners
– Recent variation on broker model
– Sell new low income household structure and
content insurance
– Brokers employ “runners” who sell the product
but not registered to provide advice
– Advice provided by broker or supervisor.
Supervisor for every 5 runners.
– Premiums collected by debit order. No option to
pay premium in cash.
– Free “Call me” for SMS used for call centre access
• Mexico
– Insurers generally use brokers for all business
SABTAM source: Jeremy Leach, Hollard Insurance
Reinsurance Brokers
• Guy Carpenter –
– Reinsurance intermediary for microinsurance
– ILO Microinsurance Innovation Facility
Agents in microinsurance
• Traditional agents
– Gemini Life Insurance (Ghana)
– AIG Uganda (as intermediary)
• Micro-agents
– Delta Life (Bangladesh)
– Tata-AIG (India)
• Unlicensed agents
– SurAmericana (Colombia)
– Allianz (Indonesia)
Regulations - examples
• India (2005)
– In addition to an insurance agent or corporate agent
or broker licensed under the Act, … as the case may
be, micro-insurance products may be distributed to
the micro-insurance agents
• Peru (2007)
– “The commercialization of microinsurance can be
undertaken by direct sale to the insured, through the
intermediation of insurance brokers or through the
signing of commercialization contracts
• Bolivia (2009?)
– “Bans” brokers in microinsurance (draft regulations)
Issues in Regulation and Supervision of Microinsurance (IAIS)
• Alternative delivery channels: Traditional
brokers/ agents typically do not want to sell
microinsurance with its relatively small premiums
(and thus small commissions). Thus, many microinsurance
delivery channels are unlicensed and unregulated agents. Often the regulator
allows the insurer to take on the risk of agents so may not need to be directly
regulated.
• Intermediaries such as agents and brokers are
also important actors at the micro level. These entities
need to be strong, capable and responsive to the particular needs of lowincome households and their service providers in order to contribute effectively
to building an inclusive financial system.
Strategies for Brokers in Microinsurance
• Assess potential role and profitability
– Is this really a priority for brokers
• Develop (buy) low-income market expertise
– Someone from MFIs or other type distributor
• Identify demand
– Risk managements gaps
• Identify potential market conduits
– MFIs ( easier to start)
– Others – retailers, utilities, cell phone operators,
churches
Opportunities
• Microinsurance Innovation Facility
– Innovation grants
– Technical assistance
– Research
• Micro Insurance Network
– Leaders forum
– Sub groups
– Newsletter
• 5TH International Microinsurance Conference
– Dakar, Senegal – 3-5 November 2009
The MicroInsurance Centre
“Developing partnerships to insure the world’s poor”
www.MicroInsuranceCentre.org
[email protected]
21
“Insurance”
“Covers an individual / company /
household for some or all of a
financial loss that is linked to an
unpredictable event or risk, via risk
pooling and the payment of a
premium”
Models of Microinsurance Delivery
• Community-Based Model (ILO STEP)
– Owned and Managed by Members
• Mutual Model (TYM and their planned MBA)
– Owned by members, professional management
• Partnership Model (ABIC and VBARD)
– Very limited risk to MFI, administrative burden
limited
• Also: full service insurer, provider, social
security models, new microinsurance
brokerage model
KEY ISSUE
= PLACING
RISK
WHERE IT
IS BEST
MANAGED
Knowledge Gap
Insurers
Haze of misunderstanding
Brokers
Financial institutions
(especially MFIs)
Other delivery
channels