Transcript Improving Access to Microinsurance: Key Considerations May 2007

Improving Access to Microinsurance:
Key Considerations
Access to Insurance for the Poor
May 2007
Rio de Janeiro, Brazil
Michael J. McCord
The MicroInsurance Centre
Microinsurance Availability
A comprehensive landscape study of low-income people in the world’s 100 poorest countries
conducted by the MicroInsurance Centre found that only 3% (78m) of the low-income
population are covered by formal microinsurance. Without the largest 5 microinsurers, this value
falls to 15.4 million.
B ela ru s
Ukr a ine
Ka za kh stan
M ong olia
Uz be kista n
Nor th Kor e a
Tur ke y
Tun is ia
M or oc co
Alge r ia
Ha iti
Gua te m ala
El Sa lva dor
P ana m a
Libya
Ira q
M a li
C hina
C ha d
Nige r
Ye m e n
Ta iwa n
Gha na C am e ro on
P hilip pine s
Vie tna m
Ethiop ia
M a la ysia
Sr i L an ka
C olom bia
P apu a N ew Gu
Uga nd a Ke nya
Ec ua dor
DR C
Ta nz an ia
Indo ne sia
B ra zil
P er u
Ang ola
B olivia
M oz a m bique
P ar ag ua y
M a uritius
Na m ibia
M a da gas ca r
So uth Af ric a
Ar ge ntina
Percentage accessing each insurance product
C hile
80%
0%
Li f e
Heal t h
A D&D
Property
20%
AD&D
40%
Health
60%
Life
% Poor Insured
No Data
.001% - 0 .4%
0.4% - 1.6 %
1.6% - 4.2 %
4.2% - 7.7 %
38%
Jap an
Lao s
Tha ilan d
Su da n
Nige r ia
So uth Kor e a
M ya nm a r
Sa ud i A ra bia
India
Ve ne z uela
Guy ana
Ira n
P akista n
Egyp t
M a urita nia
Se ne ga l
Nic ar a gua
Isra e l
Af gha nista n
P r oper t y
Microinsurance Coverage - Americas
Cuba
Me xic o
Do min ica n Re p. (525 )
Ja ma ic a
Belize
Ho ndura s
Gu ate ma la
( 105,600 )
El Sa lva dor
(85 ,989)
Costa Ric a
Ha iti
Do min ica
St. Luc ia
Nica ragu a
(2 9,035)
Ve ne zue la
(38,3 75)
Pana ma
(62,000)
St. V ince nt &
the G rena dine s
Gu yana
Colom bia
(2,559,0 00)
Ec uador
(551,422 )
Number of Lives Covered
Pe ru
(4,091,2 92)
Braz il
Bolivia
(250,000 )
% o f Po or Peo ple w ith M icro in su ran ce
38%
6 - 10%
2 - 6%
< 2%
Lim ited to no data o n policyh olders
Parag uay
(42,00 0)
Chile
Ar gentina
Policies
Credit life
Funeral
Term life
Long term life
Health
Property
Policyholders
Total
4,725,202
2,627,330
283,525
22,000
300,876
600
7,928,238
What is Success in Microinsurance?
• Insurers
– Profitability
– Expansion of risk pool and market
• Delivery channels
– Additional income stream
– Competitive advantages
– More stable clients / members
• Low-income market
– Affordable, accessible, responsive products that
help reduce risk
Microinsurance Supply Chain
Regulated insurers
Delivery
channels
What they do
Un-regulated
insurers
•Can cover partial
risk of an insurer
•Not usually
involved in MI
except health and
index
•Manage insurance
risk
•Pay claims
•Final say on pricing
•Regulatory
compliance
•Manage controls
•Direct contact with
policyholders
•Sell insurance
•May aid clients with,
or settle claims
•Collect premiums
Who they are in MI
Reinsurers
Examples
•Interpolis Re Mutuals
•AXA Re - Ethiopia
index
•Swiss Re – India
weather index
•Munich Re
•Partner Re
•Multi-national and
domestic commercial
insurers
•Mutuals
(professionally run)
•CBOs
•NGOs
•Funeral parlors
•Informal groups
•MFIs and banks
•CBOs
•NGOs
•Specialty agents
•Employers
•Governments
•Retailers
•Churches
Policyholders
•Pay premiums
•Make claims
•Buy group cover
for all members,
clients,
employees, and
others
•Individuals
•Groups (for
clients, members,
employees, and
others)
REGULATIONS and SUPERVISION – The foundation of sound consumer protection
DONORS – Strengthening the weak spots
Supervision
• Issues
– Understanding MI requirements
• Simple processes, documents, procedures
– Addressing unlicensed “insurers”
– General supervision capacity
– Regulation as life, general, or health insurance
often different and under different supervision
– Balancing consumer protection with innovation and
flexibility
• Thoughts
– IAIS - Issues paper and discussions
– Peru and India – with microinsurance legislation
Re-Insurers
• Munich Re in Colombia
• Limited role with basic products
• Providing some
pricing and product
development
assistance
• Large role with
index-based
“insurance”
Photo: Munich Re Group
Insurers
•
•
•
•
•
•
Many are profitable
Limited market information
Limited to life, general, or health insurance
Not yet moving significantly from basic products
Demand and supply mismatches
Need greater innovation in
–
–
–
–
Product design - SIMPLICITY
Rollout
Processes
Controls
Systems
Pilot
• Must focus on simplicity
• New technologies
Understand
demand and
supply
Prototype
development
and testing
Consumers
Competition
Institution
Partner
selection and
preparation
testing and
analysis
Product and
process
design
Covered Lives by Product and Insurer
Millions of covered lives
30
25
20
15
10
5
Commercial
CBOs and Mutuals
Life
Health
AD&D
NGOs and Others
Property
Delivery Channels
• They can make create efficient and effective
access to the low-income market
• However:
– “Agents” versus “Brokers” (1st vs. 2nd tier objectives)
– Poor training of front line staff
– Poor marketing efforts
– Limited understanding of the market
– Voluntary versus mandatory
• MFI, though structurally perfect for MI delivery,
generally have not been satisfactory
• Better incentives needed
Policyholders (the market)
•
•
•
•
Will respond to “good” products
Lack understanding of MI
Bad attitude towards MI
Market education leading to appreciation is
needed
• Identify effective groups with low income people
What people demand:
• Hospitalization
• Family support on
death of a breadwinner
• Property
≠
What people get:
• Credit life (23m)
• AD&D (12m)
• Primary health
care (3.5m)
Factors in Microinsurance Purchases,
or, How to get people to buy microinsurance
Perceptions of Insurance
Understanding Insurance
Concepts
Requires
Education  Knowledge  Appreciation
Product / Demand Match
(balancing premium and coverage)
Easy Access
(service, payments, claims)
Cost of Coverage
Available Income
Cost and Frequency
Decision
Making
Purchase
Requires
Appropriate product design
Donors
• Donor’s role is in research and
development
• Donor’s should not replace or
compete against commercial
investment with new insurers
• Until now, the donor role has
been relatively limited
– Insurers themselves have made
investments to make
microinsurance work for them
• Investors have had limited
opportunities
SIDA
Gates Foundation
CGAP
AsDB
Munich Re Foundation
IADB
DfID
CIDR
USAID
IDRC
IFAD
Support Structures (Meso Level)
• Weak meso level structures:
– Actuaries
– Risk data
• Insurance market education
• Insurance associations and institutes providing
MI trainings and programming
• Quality health care facilities
– “Free” health care typically does not work
Conclusion
• Microinsurance can be a WIN – WIN – WIN
proposition
• We are still in the early days of research and
experimentation
• Addressing issues at each level of the supply
chain will bring the best results
The MicroInsurance Centre
“Developing partnerships to insure the world’s poor”
www.MicroInsuranceCentre.org
[email protected]