Post on 22-Jan-2016
transcript
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 AfricaOwn survey, data as of end 2008
0
1'000'000
2'000'000
3'000'000
4'000'000
5'000'000
6'000'000
7'000'000
8'000'000
9'000'000
10'000'000
Credit l ife Other l ife, funeral, PA Health Agriculture Other property0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%outreach (lives covered)
penetration (%)
Informal insurance
Insurable, without access
Uninsurable through market mechanisms
Formal insurance industry
WE
AL
TH
POPULATION
Who is insured by whom?
Characteristics of the insurable poor
• 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 Key characteristics of microinsurancemicroinsurance
1. Accessible: physically, intellectually, financially
2. Simple, easy to understand policy document
3. Make the intangible tangible
4. Broadly inclusive, with few if any exclusions
5. Premiums accommodate irregular cash flows
6. Small sums insured, often for short terms
7. Pre-underwritten, community or group pricing
Key characteristics of Key characteristics of microinsurance (cont.)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
DISSEMINATIONRESEARCHTECHNICALASSISTANCE
INNOVATIONGRANTS
MICROINSURANCE INNOVATION FACILITY
Large number of lowincome people making informed choices
to manage risk
The 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, semi-formal 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)
see Grantee Community on www.ilo.org/microinsurance for details
Africa Latin America/ Caribbean
Asia Other
Institutional models
SCC/CIC/NHIF (Kenya) Old Mutual (South
Africa)
La Positiva (Peru) AMUCCS (Mexico) Seguros Argos (Mexico) Protecta (Peru) Zurich Brazil
PWDS (India) Pioneer Life
(Philippines) Radol (Bangladesh)
Health CIDR/UMSGF (Guinea) Calcutta Kids (India) VimoSEWA (India) Care Foundation (India) SSP (India)
Microfund for Women (Jordan)
Property / Agriculture
Hollard (South Africa) Planet Guarantee (Mali)
People Mutuals (India) DID/SICL (Sri Lanka) IFFCO-Tokio (India) WRMS (India)
Life /Accident UAB (Burkina Faso) AIC (Haiti) Seguros Futuro (El
Salvador)
PICC (China) ICICI Prudential (India) Max New York Life
(India) Prime General
Insurance (Mongolia)
Consumer education
Microfinance Opportunities (Kenya)
CNSEG (Brazil) Fundaseg (Colombia)
Freedom from Hunger
Other CIRM (India) Guy Carpenter
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
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 Distributing life insurance and savings
product for the families of migrant workers through churches and schools
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
• Collaborating with Swedish Cooperative Centre, NHIF, and Folksam Insurance (Sweden)
• 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
• Emphasizing training and consumer education for distribution channels and their members
Product Innovations:Agriculture
PlaNetGuarantee
MALI
Crop insurance programme based on a weather or area-yield index to protect farmers, their assets and their crops
DHANFoundation
INDIA
SanasaSRI LANKA
Livestock insurance experimenting with RFIDs to reduce fraud
Overview of Presentation
1. Microinsurance trends and characteristics
2. Examples of innovation
3. Concluding thoughts
Challenges
1. Developing sustainable products that meet the needs of the market
2. Reducing transaction costs (enhancing affordability)
3. Overcoming the market’s natural resistance and educational barriers
4. Getting products to the market: distribution
5. Adopting a microinsurance approach to premium collections and claims payments
Challenges (cont.)
6. Creating microinsurance experts
7. 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
churchill@ilo.org
Tel +41 22 799 6242
www.ilo.org/microinsurance