DRAFT - SAJIDA Foundation

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DRAFT

Program Evaluation

SAJIDA Foundation

October 2009

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Table of Contents

1 INTRODUCTION .................................................................................................................................... 4

2 BACKGROUND ...................................................................................................................................... 4

2.1 SAJIDA Foundation ....................................................................................................................... 4

2.2 The Micro-Finance Program (MFP) .............................................................................................. 5

2.3 Health Insurance Program ............................................................................................................ 5

2.4 HELP .............................................................................................................................................. 8

3 ASSESSMENT ....................................................................................................................................... 10

3.1 Products ...................................................................................................................................... 10

3.2 Marketing and distribution......................................................................................................... 14

3.3 Management Information Systems (MIS) .................................................................................. 17

3.4 Claims ......................................................................................................................................... 19

3.5 Pricing ......................................................................................................................................... 21

3.6 Financial analysis – Operating results, Reserves, Reinsurance, Performance Indicators .......... 26

4 Projections .......................................................................................................................................... 29

5 Scenarios............................................................................................................................................. 31

6 SWOT Analysis .................................................................................................................................... 33

7 RECOMMENDATIONS ......................................................................................................................... 34

7.1 Product ....................................................................................................................................... 34

7.2 Marketing ................................................................................................................................... 35

7.3 MIS .............................................................................................................................................. 36

7.4 Claims ......................................................................................................................................... 37

7.5 Pricing ......................................................................................................................................... 37

7.6 Financial Statements .................................................................................................................. 37

7.7 Scenarios..................................................................................................................................... 38

7.8 Key Performance Indicators ....................................................................................................... 38

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7.9 Plan for Progress ......................................................................................................................... 38

8 APPENDIX A: DETAILED PRODUCT DESCRIPTION ............................................................................... 39

8.1 Health Insurance (Hospital Discount Program) .......................................................................... 39

8.2 HELP Product .............................................................................................................................. 41

9 APPENDIX B: HELP Experience Analysis and Pricing Tutorial ............................................................ 46

10 APPENDIX C: HELP Reserve Calculation and Tutorial ..................................................................... 62

11 APPENDIX D: MICROINSURANCE KEY PERFORMANCE INDICATORS (KPI) ..................................... 67

12 APPENDIX E: HELP Projections ....................................................................................................... 69

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INTRODUCTION

The SAJIDA Foundation is a unique non-government organization in Bangladesh. SAJIDA has

been working in the development field and implementing microfinance, health, micro insurance,

education and other social development programs targeting the poor and ultra poor people in the

urban and rural areas in six districts of Bangladesh.

The organization’s mission is “To improve the quality of life of the Members of SAJIDA and

those of their immediate families”.

SAJIDA Foundation provides a wide range of services to its members and the general public

including a Micro Finance Program, 2 hospitals with an accompanying Health program and a

micro insurance product called HELP.

SAJIDA has requested a comprehensive review and analysis of the HELP program and the

health insurance program under the hospital.

SAJIDA’s special areas of interest are:

• Long term growth and sustainability of the program

• Making program deliverables more attractive from beneficiary perspectives

• Main risks and weakness of the program and ways to address those risks and weaknesses

• Identifying the key strength areas and opportunities for the expansion and deepening of

the program

An ILO grant for Technical Assistance was provided and a team composed of Donna Swiderek

and Fred Chan undertook a mission to Dhaka, Bangladesh in October 2009. A lot of information

was gathered and presented. Due to time considerations, this report looks at the key issues that

are the highest priority. These main points will lay the groundwork for a further examination.

This report summarizes the findings and recommendations.

1 BACKGROUND

1.1 SAJIDA Foundation

The foundation originated back in 1987 to undertake charitable activities. The focus at that time

was providing education to destitute children. It was started as a private family-funded charity

and to this day it has retained the familial involvement. Pfizer Inc., New York sold and

subsequently donated 51% share of Pfizer Laboratories (Bangladesh) Ltd. to SAJIDA as a

gesture of corporate charity. The company was then renamed Renata Limited. Renata’s main

business is manufacturing and marketing human pharmaceuticals and animal therapeutics. These

funds are utilized for improving the quality of life of its members. More than 80% of programs

are financed by SAJIDA’s own funds - dividend earnings from Renata Limited, service charges

on credit, savings of members and health service fees.

The SAJIDA Foundation provides a diverse range of services to families living in parts of the

Greater Dhaka District. The focus is on the urban/peri-urban poor and ultra poor communities.

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The timeline of services and programs provided by the organization along with inception dates

are:

Micro- Finance Program (MFP) 1993

Health Program 1999

Education Program 1987

Integrating Eye Care Services 2005

Health, Education and Life-security Program (HELP) 2006

Rehabilitation of Non-Motorized Transport pullers

& poor owners 2007

Amrao Manush (we are humans too) 2008

Malaria Control Program 2008

Blue Peter Meal and Deal Project

Strengthening Opportunities for Addressing

Livelihood (SONALI) 2009

SAJIDA has a commitment to transparency and professionalism. For the fiscal year ending June

30, 2007, the foundation’s audited financial reports were judged to be the 2nd best in the NGO

category by the national ICAB and received a merit award from the South Asian federation of

Accounts (SAFA), Delhi.

1.2 The Micro-Finance Program (MFP)

The Micro-Finance Program currently has 62 branches with 100,769 members. There are 6

components to the MFP:

1. Rural/Urban Micro Credit

2. Micro Enterprise

3. Livelihood Restoration Program (Disaster Loan)

4. Seasonal Loan

5. Education Loan

6. Disaster Loan and Rehabilitation of Non Motorized Transport Pullers and

Poor Owners- RNPPO

Total MFP savings is 250 million TK and outstanding loans are 792.2 million TK. The program

focuses on the mother in poor families - Poor rural families with a family income of 5,000Tk and

urban families with a family income of 8000Tk. Loans range from 5,000-30,000TK for Micro

Credit and 30,000-700,000 for Micro Enterprise. A flat 12.5% service charge is applied annually.

1.3 Health Insurance Program

SAJIDA health program started in August 1999 in response to the requests of members of the

micro finance program. The demand of the health care services actually arose from the fact that

there were virtually no health services available to them and their families. The public services

available were inadequate, not easily accessible to them, and plagued with long waiting times,

poor conditions and rife with corrupt practices. They sought health care services that provide

quality care which is geographically convenient and catered for the greater part of their health

needs. Inadequate public health services, demographic makeup of SAJIDA’s target population

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and a desire to break the vicious poverty cycle were the key factors that led to the inception of

SAJIDA Foundation health program.

The objective of the health program is to deliver quality health care services, developed and

administered with the active participation of the community, at a cost which the community can

afford and which will enable the program to sustain itself in the long run.

In 1999, the health program began with 2 distinct aspects:

1) Health insurance for the members of SAJIDA micro finance program. It was

compulsory that for any members to obtain a loan they must pay the premium and

obtain insurance.

2) Health services at a static center, five satellite clinics and a number of community

health workers were offered at a discount to SAJIDA members. Non members could

also obtain health services there but not at the same discounted rate.

The history of the program and the services are shown in the following table. All program

changes were as a result of member demand and utilization.

Health Insurance Program History

Year

Health Insurance

Costs

(compulsory for all

SAJIDA members

obtaining loan)

Insurance benefits

Health Service

(different discounts for

SAJIDA members and non-

member cardholders)

# of

patients

1999 (inception) 150 TK annual

premium

Covers entire family

free immunization

discounted consultation

fees, drugs, pathology

charges and normal

childbirth delivery

Static center

5 satellite clinics

Community health workers

4,478

2000 Interest free loans

were added for

medical treatment

Partnership with a national

laboratory allowed for an

extension of pathological

services

Total of 11 satellite clinics 11,561

2001

(non- members

could now have

the health card)

Satellite centers

transformed to mini-clinics

(static)

More services offered at

clinics (outpatient, lab)

Paramedics now manned

the clinics

CHW sent for paramedic

training

17,005

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2002 Member:

Year 1: Tk100

Year2: Tk120

Year3: Tk150

The rate depends

upon the member

age.

Non-member:

200TK per year.

Annual checkups added

(ages 0-5 and 50+).

1 health center

11 satellite centers

2 mini clinics.

33,427

2003-2004 Opened an Operation

Theater in the static centres

to enable it to do cesarean

deliveries as well.

Linked with specialist

doctors

Upgraded to a Full service

laboratory.

Opened 50 bed hospital.

2003:

37,252

2004:

40,735

2005 Eye Care unit added at

hospital

49,212

2006

Insurance portion for

SAJIDA members

moved to HELP

HELP still subsidizes

hospital programs

Cards are sold to

general public to

obtain discount

services.

Insurance Services moved

to HELP

Hospital upgraded to 70

beds

10 bed hospital opened

All specialists

Vision centre

109,711

2007 Cardholders

800 Tk per year

Cardholders

Receive a discount on

services

2008-2009 Cardholders

600 Tk per year

January 2009: HELP

no longer subsidizes

hospital programs

Cardholders

Receive a discount on

services

Larger hospital to open Dec

1, 2009 to replace 10 bed

hospital.

2008: 6 subcentres left

open

Jan 2009:

all Subcentres and mini

clinics closed

Hospital restructured to

reduce expenses (less staff,

remove mobilizers, change

marketing plan)

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Income came from the insurance premiums and the fees charged for health services. With more

loans being taken, SAJIDA MFI memberships increased. This then also increased the income for

the program. Therefore the insurance premiums were also supporting the health and hospital

services as it was considered one program.

It was also noticed that as the SAJIDA membership increased, so did the number of patients

receiving healthcare services.

A pertinent lesson in SAJIDA’s experience here is that a substantial cost recovery in the form of

premiums and discounted services is conducive to sustainability and at the same time fosters the

community’s ownership of the program.

In 2006, once the insurance portion was moved to HELP, the Health Program was then

composed of just discount services being offered to cardholders who pay 600 Tk per year. For

the fiscal year 2008-2009, there were 681 cardholders.

The health insurance program is not insurance at all, it is a discount program run by the hospital

and completely separate from the MFI’s and HELP. SAJIDA members can use the facilities

through HELP and receive the discounted rates. Overall, the discount is approximately 30% from

the general pricing. From here on in this document the Health Insurance Program will also be

referred to as the Hospital Discount Program as to avoid confusion with the HELP products.

For 2007, 2008 to June 2009, the HELP program continued to subsidize the Health program.

Now, these subsidies no longer exist so the hospital and health program needs to support itself

and reach sustainability. In January 2009, a restructuring occurred. The head manager left and 2

people replaced the position. Since then, hospital performance has increased and expenses

decreased, mostly due to staff layoffs and reduction of marketing expenses.

Details of the current health program are in the Appendix A and elsewhere in the document.

1.4 HELP

In 2006 on the experience drawn from SAJIDA’s health insurance program, it became clear that

SAJIDA’s members and other poor people in the community needed a more comprehensive and

integrated social security approach besides getting the health services in order to alleviate their

poverty.

From 1999-2006, the SAJIDA donation fund sustained loan and life insurance, scholarship and

disaster relief programs. Members paid fees to cover admission and passbook costs. In 2006, it

was decided to offer an integrated sustainable health insurance program funded by a premium

and a one-time admission fee. All these programs were also included in the HELP package.

Basically, this meant removing the health insurance from the health program and packaging it on

its own. This is a compulsory program and members must pay the premium before they can

obtain a loan.

The mission of HELP is to provide social protection and security to SAJIDA member

families through an insurance package in order to cover their life cycle needs and the

various other risks that they face in their lives.

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SAJIDA's HELP program is based on certain core principles:

Mutual Help Between members and organization

Self-Help

Members made responsible for securing her/his own future with SAJIDA’s assistance contributing very low amount of premium towards the coverage offered.

Integrated Services

HELP tries to address most of the common sicknesses, accident, death and disaster including education and legal support as members can overcome the poverty trap.

Sound Insurance Principles

Insurance products are priced with a margin for reserves and contingencies which are also modest and appropriate

Products were developed that met the specific objectives of HELP (Health, Education, Life

Program).

Loan and Life insurance: Provide support to member families, in case of death of an adult in a

family; ease them from burden of loan and provide a death benefit

Health insurance:

• Provide them health support so that it reduces their loss of work, income and assets

• Decrease Infant and Maternal mortality

Scholarship Program: Work with talented children to groom them as future leaders

Manmade Disaster Insurance: Help them recover from disasters (not natural)

Legal Program:

• Reduce violence against women, ensure social protection

• Work for harmony in family and community that they live

The details of each product are explained later in the document.

HELP Premium History

Premium is currently 250 TK per year with a one-time admission fee of 20 Tk. SAJIDA has been

very responsive to the member’s affordability. In 2008, a pricing study was conducted and

premium was reduced to the current level.

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HELP Premium History

Date Premium (in Takas)

July 2006 – June 2007 380 for 50%

350 for 50%

July 2007 – Dec 2007 350

Jan 2008 – June 2008 350 in 47 branches

250 in 15 branches

July 2008 to current 250

For 2007, 2008 to June 2009, the HELP program continued to subsidize the Health program. 250

Tk out of the 350Tk premium went to support the hospitals and 8 subcentres. Up to January

2009, 50 Tk out of the 250 Tk premium was transferred to the hospitals. Now that this

subsidization is complete, the hospital program needs to support itself and maintain

sustainability.

2 ASSESSMENT

2.1 Products

The 2 insurance schemes being examined are HELP and the Health Insurance offered through the hospitals.

Summary of SAJIDA Insurance products

Category

2007-08

premium

income

2008-09

premium

income

% change 2007 paid

claims

2008 paid

claims % change

Health Insurance (Cardholders)

233,330 408,800 175.2% N/A N/A

HELP 25,326,079 24,535,300 *96.9% 5,143,457 **13,752,344 267%

HELP members 87,968 98,141 111.6% *Total premiums for HELP decreased in 2008-09 from 350 Tk to 250 Tk and therefore the total premium for HELP is less in 2009 than 2008 even though there were more total members. **The HELP claims increase is due to an increase in Health and Loan/Life claims. SAJIDA was encouraging claims and educating members more on the product in 2008-09.

A detailed description of the HELP and Health insurance product is in Appendix A. Readers not familiar with the products may prefer to read that section first before proceeding further. Health Insurance (Hospital Discount Program)

In summary, in exchange for an annual premium of 600 Tk, the cardholder is eligible for discounts at the SAJIDA hospital. The average discount is 30% on services (surgical, laboratory, fees etc.) and 10% on medicines. Only the cardholder is eligible for the discounts. It does not cover any other members of the family.

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Summary of the Health Program

Fiscal Year No of Member cards

sold

Member card Premium

collected

Total Hospital Income

2007-2008 389 233,330 52,918,157

2008-2009 681 408,800 42,014,014

For health insurance, there were 389 cardholders in 2007-08 and 681 in 2008-09. The premium from cardholders made up 0.5% (in 2008) and 1.0% (in 2009) of the total hospital income. Due to systems limitations, the annual claims or services performed for the cardholders in the health insurance was not available. Membercards are being purchased when people feel they will definitely use the hospital in the next year. People are purchasing the cards when they are sick already or for maternity services and eyecare. These hospital stays can be planned ahead of time so clients feel they are receiving something in return for their 600Tk per year. The motivation behind any insurance program is to cover the possibility of a defined event happening. Numbers aren’t available, but it’s pretty clear that nearly 100% of the cardholders use the service. This is not insurance, it is a hospital discount program. It is a good base for a true insurance program. Aspects to consider with assessing this program are:

• Value to member: Value has to be established in order for the poor to pay an annual premium of 600Tk per person that covers approximately 30% of the cost. There is no guarantee they will use the benefit. Given the price and that the coverage is only for 1 person, it is a low value benefit unless it’s a planned procedure such as maternity. That is what is occurring. People are buying the card when they know services are needed in the near future. This is called anti-selection.

• Affordability: The target population for SAJIDA is the ultra and peri-poor. This target group only has a small amount of disposable income and, in our experience, are usually only willing to pay 600-1200Tk per year for an entire insurance package that covers the entire family and offers other benefits. In our experience, 600Tk is very high for a discount hospital program covering one person.

• Impact to relieving financial stress: Overall, the discount program offers an average discount of 30%. For lower cost operations, this is a significant portion of the bill. However, the total bill is small so without the insurance the health cost would probably not cause financial stress. In looking at the discount list, people could come up with the money for alot of the items, such as stitches. See discounted service prices in Appendix A.

However, for high cost procedures, even with a 30% discount, the remaining bill is still unaffordable for the population. The population makes a decision based on the chances of a health risk event occurring versus the 600Tk card fee. They also would consider if the discount is enough to actually relieve true financial stress in most health crises.

Recommendation:

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a) Premium: The premium needs to be drastically reduced to 50-100Tk to make the card affordable for the population. This way people may buy it with the possibility of a health risk happening as opposed to absolutely knowing a procedure is needed. This reduces anti-selection.

b) Marketing: A new mass marketing campaign needs to be developed to sell more cards to the target population.

c) Program Objective: SAJIDA Foundation’s objective is to help the ultra and peri-poor. This program is not reaching or significantly helping that market. The hospital is mostly used for non-cardholders. SAJIDA needs to examine the impact the program is truly having on the financial stress caused by a health crises to the poor. Does the program provide enough assistance for the high cost procedures or do people still need to borrow money? Due to time considerations, the TA could not perform this analysis.

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HELP

The HELP program is composed of 5 components; Health, Education, Life/Loan, Legal and Manmade Disaster. The annual premium is 250Tk. It is compulsory for all SAJIDA members to pay for the insurance before obtaining a loan. To summarize the coverage:

a) Health insurance: Up to 5 members of the family receive a benefit for designated hospital services. If the member uses the SAJIDA hospital, the discounted rates from the Health insurance program apply. This further reduces the member’s out of pocket expenditure. Panel doctors are available for free consultations at each of the 62 branches for a few hours, 1-3 times a week.

b) Life and Loan: Upon death of the policyholder and in most cases, the spouse, a Tk 4,000 cash death benefit is paid and the remaining balance of the loan is waived (subject to certain conditions).

c) Scholarship Program: One child from each family is eligible for up to 500Tk per month as long as they meet and maintain a set of strict criteria.

d) Manmade Disaster Insurance: Benefits up to 3,000Tk will be paid to cover damage or destruction of the home or work tools due to manmade causes. Examples are fire, terrorist attack, markets destroyed etc. This does not cover natural disasters.

e) Legal Program: A lawyer is available about once a month at each of the 62 branches to provide advice and guidance on legal issues. No financial support is given.

This program is compulsory. SAJIDA tells us only 50% of the members understand that they have insurance and that it is not a service fee. They also say that if HELP was voluntary only 20% of the members would buy it. An overall assessment of each program is as follows. More detail will appear in the claims and financial sections:

a) Health insurance: The program is basically insurance on specific identified items in a hospital stay. The health insurance program provides about 20% savings to the members. Free doctor consultations are also available a few times a week at each of the 62 branches. The free service is underused and it is expensive to have the panel doctors on staff.

b) Life and Loan Insurance: The death benefit of 4,000Tk seems low in our experience. c) Scholarship Program: The objective of the program is to build future leaders.

Bangladesh does experience a high level of “brain drain”- professionals leave for other countries where more income can be made therefore program improvement may be in order to keep the “future leaders” in the country.

d) Manmade Disaster Insurance: Since inception this program has not been tested. The word “disaster” brings connotations of natural disasters. Once a natural disaster does occur we foresee alot of angry people expecting coverage.

e) Legal Program: In discussions with the lawyers, it was found that most people come see them to ask for financial assistance in the legal process (i.e.) court fees, police stations fees, etc. The program does not provide for this. The lawyers find that they do advise the members on settling out of court when there are no grounds for a case. The lawyers also advise members on NGO’s that do offer legal services.

Recommendations:

a) Simplify: One of the keys to micro insurance is keeping the products very simple so the members understand what they are covered for. HELP has many coverages and it is

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probably difficult to understand. At the field visit, members we talked to did know the basics of the program.

b) Focus: HELP is offering alot of coverage, but the quality and value of each product is average. SAJIDA can choose the most important coverage and create a few very good products that make a large impact on the financial stress of these events.

c) Health coverage: The panel doctors are very expensive, however, they are a good marketing tool for the product. Having the free consultations gives the members the feeling that they are receiving something back in return for their premium. Since utilization is low, the number of panel doctors can be decreased by having less days per branch and doctors and visit a few branches.

One idea to encourage the use of the free consultations is to offer a few sample drugs. Members ask for this. SAJIDA is already affiliated with a pharmaceutical company. To prevent blackmarket resale, a sample amount would be all that is given. Eventually, the health coverage needs to be reviewed and improved to more significant levels rather than 30% coverage.

d) Life and Loan insurance: SAJIDA has a loan loss provision fund. The loan portion could be covered by this fund and then the life benefit could be improved.

e) Scholarship Program: A payback in service clause should be evident so those receiving higher level education stay in the country

f) Manmade disaster insurance: Changing the name would clear confusion and potential misunderstandings around the word “Disaster”. “Fire and Other Hazard insurance” is a suggestion.

g) Legal Program: Unless the program can be expanded to offer some financial services to the very poor, the program doesn’t seem to be really making a difference. This may be one program that can be downsized or eliminated. A lawyer is not needed to redirect people to other programs. A legal assistant could provide that service. A fund for court fees could be covered by the donors so some of the costs to the poor are alleviated.

2.2 Marketing and distribution

Health Insurance (Hospital Discount Program)

Prior to 2006, the health insurance and hospital discount program were together, so even though non-SAJIDA members could purchase cards, marketing and distribution was mainly through the compulsory purchase by SAJIDA members. Once the programs separated, a new marketing strategy was needed to sell cards to the public. Initially, there were over 100 mobilizers who worked in the community educating the public and selling memberships cards. This, along with billboard advertising, was the main marketing tools. This was very expensive. In the hospital restructuring, the marketing expenses were reduced by about 1/3, by eliminating the mobilizers, billboards and advertising. A new Public Relations/Marketing team has been developed. They wait outside the schools to talk to the parents as they pick up their children and speak at the school’s Parent’s Days. The team also arranges to speak at societies and unions to inform people of the program. Eyecare Days have proven successful as announcements are made through loudspeakers as to when the specialists will be in the area. Information about the discount program is also given in the form of brochures. Membership cards can be purchased only 3 times a year – July, November and March for 600 Tk per person. There is a 2 month waiting period before a service can be used.

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The realities to consider when marketing the hospital program are:

• Location: Those who would use this program are located within 10-15km of the hospital

• Current decision process of choosing a hospital: a. Trusted Source: Most often, the choice of hospital is upon recommendation of the

first responder. This could be a pharmacist, paramedic or panel doctor. In addition, most people attend the hospital that family or friends recommend. In alot of instances SAJIDA members do not go to the SAJIDA hospital because the other family members did not know of the affiliation.

b. Price: This is not as big of a factor in the decision process as the first responder. SAJIDA does have the experience of patients going to a cheaper facility and then the next time coming back as the quality of care at the cheaper facilities was poor. SAJIDA does offer low prices compared to other facilities.

c. Distance: Potential members are within 10-15km of the hospital and on the same side of the river.

• Competition: a. Within 10-15 km of the Keranigonj Hospital, 2 of the largest government

hospitals are close by. The government hospitals are free of charge, however, bribery for services is commonplace and the hygiene and quality of care at these facilities is known to be poor. There are reports of patients lying on the floor. These are teaching hospitals so all facilities are there along with the only burn units in the country. When the transitional government was in place in Bangladesh, services improved at the government facilities and SAJIDA did see a decrease in usage. Now that the government has changed, care standards are once again reported to be deteriorating at the government hospitals.

b. Other NGO’s also operated healthcare facilities in the area. As stated earlier, the first responders are key in directing those in need to the healthcare facility. Common practice in the area is to offer commissions to key people to direct patients their way. The philosophy of SAJIDA is not to participate in this practice.

• Competitive edge: The SAJIDA hospital advantage is low cost care in a clean, highly maintained and hygienic environment. The infrastructure is well built. For example there is tile on the walls as opposed to just plastic. This is more hygienic and easier to clean.

With all the recent changes and reduction in the marketing budget, a new marketing plan is needed. Recommendations:

a) Marketing Team: Their focus is on promoting the cardholder discount program and educating the public on the value of the program.

b) NGO Partners in the area: Micro Insurance is most effective when marketed through a trusted source. NGO’s in the area already have the attention and trust of the members. NGO’s are also looking at expanding the services to offer their members. A formal partnership with the NGO’s offering a health benefit will give SAJIDA a concentrated audience with large numbers. This will take alot of research and time, but the rewards

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are plentiful. The key is identifying quality NGO partners (unions, societies, MFI’s) whose mission statements are in line with a health insurance concept. They need to be focused on the greater good of their members as opposed to the MFI bottom line. Realistically, loans of a partner NGO may decrease as a health program may be counterproductive to the lending of loans to cover health costs. The TA realizes that this suggestion has been attempted before.

c) Message: It would be useful for SAJIDA to read the Marketing section in “Protecting the Poor: A Micro Insurance Compendium” by Craig Churchill et al. This can be downloaded from the internet. One of the important aspects to successful marketing is to develop a message. SAJIDA not only needs to spread their message of discount rates, quality care, and hygiene, but it also has to talk about “emergencies can and do happen” and decide on a consistent message.

d) Competitors: Even though the government hospitals are deemed free, bribery is commonplace in the government hospitals. Realisticall so people are paying the same amount for SAJIDA or a government provider. The target population needs to see a comparison of all aspects of SAJIDA hospital in comparison with a government hospital. This would include the “real” cost, quality of care, services, etc.

e) Show discount: SAJIDA hospital is cheaper than most healthcare providers, but some cardholders they have received a discount for services. A simple tool to establish value of the service is to show the general price on the invoice, then the discount and then the amount owed by the cardholder.

f) Hospital networks: SAJIDA Hospital can be a formal part of other NGO Hospital networks, not just SAJIDA Foundation. Realistically, micro insurance is becoming popular in Bangladesh and all NGO’s are encountering the problem of finding quality healthcare facilities. Microinsurance schemes may be based elsewhere, but some of their members may be in the area of SAJIDA hospital. This is the same as SAJIDA members who do not get services from the SAJIDA hospital because of distance.

g) Literacy: Brochures and posters are all written. The literacy rate in Bangladesh is 50%, therefore a large part of the target population is not getting the message. NGO partners would be helpful with this aspect as they could answer questions and direct members to the hospital for services. Successful techniques used in other micro insurance schemes are picture flip charts, skits and videos.

h) Awareness for Member’s Family: When someone is sick, a family member is most likely to take them to a healthcare provider. Awareness events cited in (g) will help, but upon purchase of a card, the cardholder should be advised to inform the family and also have something (such as a brochure) to put in the home.

HELP

HELP is marketed and distributed as a compulsory part of the SAJIDA MFI Loans. Before any member can obtain a loan, they have to pay the 250Tk premium for the insurance. The field worker is responsible for answering questions and educating the members about the insurance. Group meetings, door to door calls and promotional social gatherings are ways to discuss the product and distribute information through pamphlets. A program evaluation survey was conducted in April-June 2008. Results indicated that members and the Field Officers’ knowledge level of the insurance was very low. Due to lack of understanding, some felt they were paying premium, but not receiving benefits. At the time, HELP was separate from the MFI program. Because of this separation, HELP was seen as an extra task that took away from their regular MFI duties. As a result, members were less educated, weren’t making as many claims and there was some dissatisfaction with the program.

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SAJIDA immediately leaped into action by integrating HELP with the MFI program. Now, HELP is an enhancement and selling feature for the loan program so Field Officer’s are now motivated to take the time to explain the program to members and help them with their questions. SAJIDA also developed a training centre. New field officers go through 3 days of training, work in the field for a month and then receive another 3 days of training. Thereafter, they receive a 3 day refresher every 6 months. The TA’s experience in the field was quite different than the survey. Members knew about the products, had made claims and seemed quite satisfied with HELP. Field Officers interviewed were also knowledgeable. Even though time management is an issue in fitting HELP in with the regular work schedule, they agreed that they do find the time as HELP is part of the MFI loan program. SAJIDA has also included centre leaders in the claims review process. The idea is that there would be a knowledgeable and trusted person at each centre (which is away from the branch) that could answer the insurance questions. Calendars were also distributed at each centre with all the HELP information. Eventually, SAJIDA would like help to be a voluntary program. Currently, the TA was informed that 20% of the members would purchase HELP voluntarily and 50% of the members weren’t really aware of the insurance. Recommendations:

a) Marketing Team: Their focus would be educating members on the concept of insurance to take some of the workload away from the Field officer’s.

b) Claims payments: One of the best ways to build trust and awareness is by word of mouth. Publicly making the claims payments at centre meetings will generate interest. News of claims being paid will spread like wildfire through the villages.

c) Centre Leader: Continue educating the centre leader/chief on HELP so they are able to answer questions. Solicit feedback from the leader to find out the questions being asked and the perceptions of the insurance.

d) Centre Activity: The grassroots contact at the center is the key to spreading information and developing trust.

e) Literacy: The posters used are very clear, however, because of the 50% literacy rate in Bangladesh, not all of the target population is being reached. Points (a)-(c) will help reach these members.

f) Consistency among branches: In discussions with the doctors, it seemed that not all branches were consistent in showing doctor’s schedules and having signs out showing the doctor was in etc. This will help spread awareness and remind people of the benefits of the program.

2.3 Management Information Systems (MIS)


A new system was implemented in July 2009, so there is detailed information available from that point on. Once more time has passed and experience has been gathered, it would be useful to analyze the data by patient, services, rates and savings to obtain a true picture of utilization. HELP

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A computer system for HELP is basically non-existent. Every month, each of the 62 branches sends a summary of activity in paper format to head office. The summaries are 12-20 pages long and have handwritten grand totals of premium, types of claim and number and amount of claims by product type. At head office these are all manually inputted into an excel spreadsheet. Recommendation: It is the highest priority that SAJIDA implement a new MIS system that has a centralized database and gathers information from each of the 62 branches. Proper actuarial calculations for claims, reserves and premiums could then be calculated. For proper analysis, it is important the database adhere to the following requirements:

a) Integration with the MFI system b) Information is captured by member and would include a database of policyholder and

claim information. It also will contain information for all active and inactive loans and produce all appropriate reports.

c) An ILO grant may be available to assist with the software and implementation plan. This TA will also help with developing the database, reporting requirements, reconciliations, controls and consistency standards.

d) Fields to include in the database are, but not limited to : a. Branch and Center information b. All member information (active and inactive) c. Spousal and dependent information d. All loan information e. Loan type f. Claim Type – have a code for each type of claim g. Amount of claim h. Date claim incurred i. Date claim reported j. Date claim paid k. Status – Active, inactive l. Claimant – codes for policyholder, spouse, dependent m. Information Change code n. Reason for change – have a standard set of codes o. Number of claims paid in a year – needed as there is a limit p. Termination date

Additional Systems recommendations We recommend that the system be modified to include the following information for performance monitoring, for future studies, and to ensure that there is no adverse selection against SAJIDA:

• Total number of members in society on remittance date • Total number and volume of loans in-force by society on remittance date • Total number and volume of loans excluded due to borrower age • Total number and volume of loans excluded for other reasons

As well, the system should have:

• Aside from data entry checks, the system should incorporate the product business rules and include analytical tools to help the user detect inconsistent data.

• Controls should be developed to make sure that the data is consistent with the accounting information (assuming that these will not be fully integrated).

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• Ensure that data to calculate relevant performance indicators are included in the system, and build utilities to calculate these on demand.

• Build utilities to estimate unearned premium reserves (UPR), incurred but not reported reserve (IBNR), and claims in course of settlement (CICS)

Ideally, SAJIDA should track each member of each society, as well as their loan data. This, however, increases the workload and complexity and defeats the purpose of the product, i.e. simplicity. However, if systems are well designed, the details of members and their families can definitely be tracked.

2.4 Claims


Claims Process

When a cardholder gets sick, they can go to SAJIDA hospital and report to reception. They are then directed to the cardholder booth and given a ticket showing that they are a cardholder. At this point, they are asked if they want to see an Outpatient Doctor (OPD) or a consultancy doctor. An OPD is a medical officer that can fill out prescriptions. No fee would be applied. A consultancy doctor is a senior doctor (specialist). Cardholders pay 50% of the consultancy doctor rate. At this point, the patient is given a prescription, lab tests or admitted all at the discounted rates. Due to lack of data and lack of time, a detailed claims analysis for the cardholders was not available. A new system was implemented in 2009. We do know the following for July-September 2009:

Summary of Health Program (July-September 2009)

Statistics gathered for

July-Sept 2009 Cardholders HELP Cardholders and HELP combined

Avg % savings through discounts 31% 28% 30%

Amt paid per patient 1062 358 655

Amt Saved per patient 486 140 286

Service Usage:

# of Services/Total services 14% 16% 30%

Service Usage:

Amt spent/Total Service Revenue 22% 10% 32%

To summarize, we do know that the average cardholders is spending 1062Tk and saving 486Tk during their hospital stay. It is much lower for the HELP members. Approximately 30% of all services in the hospital are from HELP and Cardholders. Interestingly enough, cardholders are spending more than the HELP members; 22% of total service Takas versus 10% for HELP. Once again, the question arises is “Are these savings and coverage making a significant impact to help the poor?” Most of the claims are for maternity and eyecare services.

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A detailed claim analysis by service type, cost and patients is needed over a longer period of time to establish if the current discount structure is meeting the objectives of SAJIDA’s mission. HELP

Claims Process Upon receiving health services, the member informs the Field Officer at time of weekly loan payment of the possible claim. The Field Officer gives the member a claim form and once it is filled out, the Centre Leader recommends the claim, the Field Officer verifies the claim and it is forwarded to the branch level for scrutinization and approval. It is then forwarded on to the claim committee. The Claims Committee meets bi-weekly and consists of 3 Centre chiefs, Field Officer, Branch Manager and Branch supervisor. Every 3 months a new set of Centre chiefs are rotated in to the committee. In the case of a health claim, a panel doctor verifies the information and makes a recommendation for payment. To track the claim progress, an approval register is filled out. This includes the member’s name, occupation, date claim submitted to committee, date of collection and delivery date. The member gets paid in cash. The standard for Microinsurance organizations for processing claims is 15 days. The Scholarship Program takes longer to process as it needs to be reviewed by the MFI Program Head. The majority of death and health claims are taking longer than 15 days to process.

Time to process a claim

Time Death Health Education Overall

Within 7 days 8% 7% 15% 10%

8-15 days 27% 23% 2% 15%

16-30 days 48% 37% 6% 27%

>30 days 17% 33% 78% 48%

A few flaws in the claims process have arisen:

a) Claims need to be submitted within a month of occurring. Members are not aware of this or are slow to gather the proper documentation. Distance, time for obtaining certificates and cultural customs (i.e.) waiting 40 days also prevent payment of claims. Field officers are keen to get the claims paid as this reduces their loans that are overdue. They are therefore motivated to help the members with the claims process.

b) SAJIDA has been processing claims even without the proper documentation. This was to encourage claims and to show claims will be paid.

c) Unfortunately, some fraud has occurred on the part of some Field officers. False claims were submitted on behalf of members and then the Field Officer pocketed the money themselves.

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Recommendations: a) Simplifying the claims requirements and educating the consumer on the claims process

and requirements are essential to quickening the claims process times. b) Keys in maintaining a quality health insurance claims system are:

a. Developing a quality network of hospitals to direct members for care. b. Monitoring member’s progress while in healthcare facility c. Reviewing the member’s case and giving a second opinion while obtaining

health services. This reduces unnecessary procedures. d. Have a set list of discounted prices throughout the hospital network e. Cashless system (pay insurance to the hospital directly) to minimize member’s

out of pocket expenses Summary of Claims Experience It is difficult to compare actual to expected claims. There is 14 months of claims and exposure data spanning July 2008 –August 2009. This could be compared to the expected claims assumed in the pricing. However, we discovered an error in the calculation of the expected claims so the Actual to Expected ratio would be meaningless except to show how the pricing needs to be adjusted. This is further explained in the Pricing section.

2.5 Pricing


The current premium for 1 person is 600Tk per year. We are suggesting a Cardholder fee of 50-100Tk per person. A premium within this range would be suitable based on SAJIDA’s decisions in each of these categories:

a) Program Objective: Services in the hospital are priced to pay for themselves, even at the discount rate. SAJIDA could just set a low fee to give the poor the privilege of accessing the discounted rates. A low fee will increase usage at the discounted rate.

b) Average Savings per patient: Since the cardholder is paying the discounted rate, the card should be priced to cover the savings per patient. The card fee does not contribute great amounts to income and isn’t meant to cover hospital costs. The savings amount of 486Tk (in the below chart) was calculated using only 3 months data. More data over time may change this amount. A final factor to consider is that if changes are made to the program, actual amounts paid per patient may increase and therefore the savings amounts per patient will also increase.

c) Incidence rate (percentage of cardholders that will use service): This is based on the

HELP experience. Current incidence in this program is probably closer to 100% as people are purchasing the cards when they are sick or planning on using services. As changes are made to the program the incidence will change and hopefully mirror the HELP experience.

d) Expenses: This is based on HELP, not the hospital program as it’s difficult to separate out the Program expenses from the hospital itself.

e) Profit: This margin depends on SAJIDA’s policy regarding profit. Most MI profit margins range from 5-10%.

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TA Pricing calculation for Health Insurance Program

Source Value

Average Amount Cardholder pays for service

Usage chart in claims section 1062Tk

A. Average Savings per Cardholder Usage chart in claims section 486Tk

B. Incidence rate

(ideally, this would mirror HELP, currently it is closer to 100%

for this program)

Table 2C in Pricing calculation

Appendix

4.7%

C. Expenses (based on HELP) Operational: 20%

MFI Overhead: 10%

30%

D. Profit 5%

Calculation AxB

1-(C+D)

35 Tk

Suggested Price

(varies depending on decisions to points cited above)

50 -

100Tk

HELP

The current premium for HELP is 250Tk per year covering a family of 5 for some of the benefits. The experience calculations performed by the TA indicate that the premium should be approximately 300Tk per year. The TA pricing logic is thoroughly explained in the AppendixB. To clarify the following chart:

a) TA Calculation: TA pricing calculation b) SAJIDA Pricing Paper: Values as they appear in “HELP 2008-2009” Pricing paper c) SAJIDA Pricing (no rounding) – Exact calculation from the above paper d) Budget 2009-2010: SAJIDA made some assumption changes in the 2009-2010 budget to

reflect experience. Ideally this would have impacted the pricing.

Breakdown of HELP Pricing

TA Calculation

SAJIDA Pricing Paper

SAJIDA Pricing

(no rounding)

Budget (2009 to

2010)

Life Insurance

Member – Death Benefit 8.93 8 7.50 8.00

Member – Loan related 14.07 12 12.00 16.00

Spouse – Death Benefit 20.50 11 10.80 14.40

Spouse – Loan related 35.00 21 21.60 28.80

Total Life Insurance Benefit 78.50 52 51.90 67.20

Health Insurance

Claims 85.15 76 75.73 84.79

Panel Doctors 42.00 37 37.35 31.23

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Total Health Insurance Benefit 127.15 113 113.08 116.02

Legal Benefit 8.64 1 0.77 9.11

Education Benefit 27.00 31 30.61 30.61

Disaster Benefit 1.50 8 7.65 7.50

Total Risk Components (before expenses)

242.79 205 204.01 230.44

Estimated Expenses Margin (20%) (15% for the budget- see below)

48.56 42 40.8 34.57

Total Gross Premium 291.34 247 244.81 265.01

Price with contingency 300 250

Expenses: As the different documents have expenses grouped differently, the below table summarizes the values used in the pricing.

Expense category in

Budget Budget Value

Pricing document

Category

Pricing document

Expenses

TA

Pricing

Personnel expenses 17% Dr/Lawyer Salary Included In pricing

Other expenses 5% Operational 10%

Contingency 5%

Overhead 5% Overhead 5%

Total Expenses in Budget 27%

Dr's and lawyer salaries

are already included in

above -12%

Amount of expenses used

(as a % of premium) 15% 20% 20%

Corrected expenses

(Overhead should be 10%,

they used 5%) 20% 25% 20%

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Summary of Pricing Differences The following chart tracks the differences between SAJIDA’s pricing and the TA Repricing. The

methodology impact of using the average number of loans throughout June 2008-2009 is a part

of the difference in all the listed categories.

Summary of Pricing Differences

SAJIDA Pricing TA Reprice Difference

Death claims 52 78.50 26.50

Health claims 75 85 10

Doctor salaries 37 42 5

Lawyer salaries 1 8.6 7.6

Education 31 27 -4

Disaster 8 1.5 -6.5

Total Risk component 204 242.6 38.6

Operational Expenses 20 24 4

Contingency 10 9 -1

Overhead

(10% for TA, 5% in current pricing) 12 24 12

Total 247 300 53

To summarize the difference in the pricing: a) SAJIDA pricing methodology: SAJIDA used the total members at the end of the year

rather than the average throughout the year. Due to the tremendous growth from January to June 2009, there is a 20,000 member difference (98,000 vs 78,000) in the values. This greatly impacts the ratios. Claims ratios are calculated using the total claims and average number of members covering the same period of time that the claims occurred. It also needs to be noted that if a member pays off their loan early and then get another loan, they have double insurance coverage during this period. The period is approximately 1-2 mths and affected 8000 out of the 98000 borrowers in 2008-2009.

b) Life insurance experienced higher actual claims than what was expected in the pricing. Average loan size was expected to be 9000-10000 and actual loan size was 13,000. The spousal mortality used in the pricing was low compared to actual. Health program: Health experience and doctor’s salaries were higher than expected.

c) Legal Program needs to reflect the full time lawyer salaries being present in 2008-2009 rather than the per visit fees used in the pricing.

d) Education and Disaster programs experienced less claims than expected e) Overhead from the MFI should be 10% of premium versus 5% used in the pricing

document.

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Recommendations: f) Increase the price to 300Tk per year or change the program structure so it can operate

sustainably at the current 250Tk a) The Life insurance mortality has been compared to Industry tables. The actual Death

experience is slightly lower than the industry tables. b) The Health insurance incidence rate of 4.7% is high. Measures need to be put in place to

monitor claims and usage more closely. See Claims section. c) Manmade Disaster program experience minimal claims. A fund should be set aside to

support this program when an event does happen. d) Actual MFI Overhead that is attributed to HELP is 10% of premium. SAJIDA has been

using 5%. e) Measures need to be put in place to ensure consistency is maintained across all

statements (i.e.) Budget, Income Statement, Pricing logic

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2.6 Financial analysis – Operating results, Reserves, Reinsurance,

Performance Indicators


Ideally, to get a true idea of the financial status of the Hospital Discount Program, the financial statements need to be split between the General Hospital Program, the Discount Program and utilization by HELP. Time did not permit the TA to explore this further. With the new MIS system, the service revenues can be allocated and expenses can be ratioed based on usage.

SAJIDA Hospital Income Statements for 2007-2008 and 2008-2009 Description 2007-2008 2008-2009 % increase

Revenue:

Health card fee from MF Program 11,619,900 -100%

Health card fee from Outside Members 233,300 408,800 175%

Donation 21,570,059 19,056,843 -12%

Financial 384,681 333,751 -13%

Miscellaneous 1,863,933 2,025,472 9%

Room/Gen. Admission 1,335,749 1,809,012 35%

Retail 884,877 1,165,775 32%

Treatment 15,025,628 17,214,361 15%

Total 52,918,157 42,014,014 -21%

Expenses

Financial 4,699,220 6,578,517 40%

Admin 1,059,727 732,893 -31%

Fixed Expenses 1,693,100 1,386,400 -18%

Maintenance 3,268,425 3,365,736 3%

Marketing 3,528,894 906,772 -74%

Renovation 502,180 - -100%

Salary 26,723,557 24,581,846 -8%

Treatment 4,763,706 4,477,387 -6%

Total 46,238,809 42,029,551 -9%

Net Income 6,679,348 (15,537) -100%

Prior to 2009, the HELP program was funding the Hospital to help it reach sustainability. That ceased as of January 2009. Management took a proactive role and drastically cut expenses. Approximately 25% of the hospital staff was laid off and the subcentres were closed. The Marketing budget was reduced by approximately 25% by removing the mobilizers, billboards and expensive marketing tools. The TA produced a simplified income statement for the hospital. The detailed items allocated to categories were not verified by SAJIDA. Without the extra 11 million from the MF card fees, net income only decreased by 6 million. This is encouraging and shows that the hospital can be sustainable. Good news, especially with

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a new hospital opening in December 2009. Time did not permit the TA to review the projections in detail.

HELP

Income Statement

To get a true picture of the different parts of HELP, we were able to create an income statement split by product. Most of the items were allocated based on the premium breakdowns from the SAJIDA’s Pricing Document as seen in the Pricing section of this report. Claims are actual claims by product. Salaries do not use this pricing breakdown as Lawyer’s salaries are assigned 100% to the Legal Program and Doctors salaries are assigned 100% to the Health program. The balance of the salary expense is allocated to all 5 lines by pricing premium ratios. The balance of the salaries represents 10% of the Branch managers and Account manager salaries. This was the first year these salaries were allocated to HELP. None of the head office expenses are allocated to HELP.

HELP Income Statement for 2008-2009

Description Life Health Disaster Education Legal Total

Income

HELP Card Fee Received 6,223,588 13,524,336 957,475 3,710,216 119,684 24,535,300

Health Treatment Fee 3,980 3,980

Help Interest Reserve from FDR 286,153 621,833 44,024 170,591 5,503 1,128,105

Total Income 6,509,742

14,150,149 1,001,499 3,880,808 125,187 25,667,385

Expenditure -

a . Health Fee Transfer To Hos: - - - - - -

a . Health Fee Refund to Member 18,547 40,304 2,853 11,057 357 73,117

b . Establishment Cost 1,369,756 2,976,585 210,732 816,585 26,341 5,400,000

Sub Total Transfers to Hospital 1,388,303 3,016,889 213,585 827,642 26,698 5,473,117

c . HELP Operational Cost : - - - - - -

Salary & Benefits 110,022 3,319,505 16,926 65,590 565,267 4,077,310

Printing and Composing 50,381 109,482 7,751 30,035 969 198,618

Photo Copy 3,231 7,021 497 1,926 62 12,738

Postage Fax & Email - - - - - -

Repair & Maintainance 1,441 3,132 222 859 28 5,682

Office Stationery 315 685 48 188 6

1,242

Travelling & Conveyance 38,284 83,195 5,890 22,823 736 150,929

Marketing 2,626 5,707 404 1,566 51 10,353

Entertainment 6,726 14,617 1,035 4,010 129 26,517

Mobile Bill A/C 8,612 18,714 1,325 5,134 166 33,950

Help Evaluation (254) (551) (39) (151) (5) (1,000)

Training 128,651 279,569 19,792 76,696 2,474 507,182

Medical Acc 2,251 4,892 346 1,342 43 8,874

Sub Total ( Operational Cost ) 352,287

3,845,967 54,198 210,017 569,926 5,032,395

d . Claim Payment : -

Health Claim for H.M 5,504,976 5,504,976

Death Claim for H.M 6,153,980 6,153,980

Disaster Claim for H.M 124,588 124,588

Scholarship 1,968,800 1,968,800

Sub Total ( Claim Payment) 6,153,980

5,504,976 124,588 1,968,800 - 13,752,344

Total Expenditure 7,894,570

12,367,832 392,371 3,006,459 596,624 24,257,856

Excess of Income over Exp (1,384,828)

1,782,318 609,128 874,348 (471,437)

1,409,528.53

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Observations from the income statement: a) Life Insurance and Legal Program are in deficit b) Overhead expenses from head office are not included. We expect this to be about 10% of

premium. This will be explained later in the document. c) There are no reserves set up on the Balance Sheet or Change in Reserves on the Income

Statement d) Total transfers to Hospital of 5,473,117 are the last of the revenue sharing with the

Hospital Discount Program and will not continue in the future. Reserves

In reviewing the financial statements, we notice that SAJIDA has not set up an Actuarial Reserve on the Balance Sheet and therefore does not have a change in the actuarial reserve on the income statement. We suggest that SAJIDA calculate a Unearned Premium Reserve for the 2010 Fiscal year. Based on our calculations, the reserve at June 30, 2009 should have been 9,903,063 Tk. Every year the change in reserve will be recorded on the income statement. A detailed tutorial on the reserve calculation and assumptions are in Appendix C. An Excel file with the formulas is also available. SAJIDA capital and solvency

There are no liabilities on the HELP Balance Sheet. It is 100% capital. Once an actuarial reserve is set up, a negative capital amount will be held. SAJIDA has transferred large sums of money to help support the hospitals in the past years and this is forcing the negative capital situation. Reinsurance

Reinsurance is a very important risk management tool but it has to be used properly if it is to be effective. Too much and improperly designed reinsurance will unnecessarily drain SAJIDA’s profits. There are three main reasons to purchase reinsurance: a) To manage the risk that has been taken on by the SAJIDA; b) To reduce capital requirements; and c) To access information and technical assistance. To reduce the possibility of a sudden and severe financial impact resulting from rare and asymptotic events such as a cyclones, SAJIDA should investigate catastrophe coverage (cat-cover). Although cat-cover is not always easy to find and may be a bit expensive, it is very important as it could save the company. The Manmade Disaster coverage is also highly sensitive to external events. This product has experienced few claims to date. The reserves and pricing are based on actual experience. Because of the sensitivity unusual events, additional coverage or an additional fund is needed.

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Performance Indicators

In 2007 the CGAP Working Group, ADA, GTZ, and BRS published a handbook on microinsurance performance indicators wherein ten key indicators are suggested for performance assessment. These indicators, briefly described in Appendix D, should be used by SAJIDA for constant monitoring of the company’s performance. We calculated four of the key indicators from the above income statement- the net income ratio (NIR), incurred expense ratio (IER), incurred claims ratio (ICR) and Growth Rate (GR). In combination, these three describe the overall product value that SAJIDA HELP brings to its member-customers. Generally, a high claims ratio in combination with a low expense ratio and low profit indicates good value since most of the members’ premium is returned to them in the form of benefits. On the other hand, both high expenses and/or excessive profitability force the company into a low claims ratio which results in poor value.

SAJIDA HELP product value performance indicators

Key Performance Indicator Calculation 2007 to 2008

2008-2009 (from above inc stmt

Range to target if aiming to provide good value

Net Income Ratio (NIR) Net income / income -20% 6% Not more than 10%

Incurred expense ratio (IER) Operational exp / income 5% 21% Less than 25%

Incurred claims ratio (ICR) Claims / income 20% 56% 65% or higher

Growth Ratio (GR) # of pol(t) / # of pol (t-1) 112%

The hospital revenue sharing was excluded from this analysis. Also recall that overhead is not included in the 2009 income statement. For 2007-2008, claims were very low and SAJIDA was still sorting out the allocation of expenses. The program started in 2006, so these are typical growing pains. As evidenced by the 2008-2009 ratios, expenses have increased (mostly due to 10% of branch manager and Account manager salaries now being allocated to HELP) and claims have increased due to the training program set out for the field officers and the clients. A philosophy of encouraging claims also prevailed in SAJIDA. For 2008-2009, the indicators show that SAJIDA provides fairly good overall value since the NIR and IER are within the designated ranges. ICR is low so members are not receiving back a portion of their premium in the form of benefit. Performance Indicators calculated by product are quite revealing. For example, the claims ratio for Life insurance is 98% while for Health it is 41%. As shown earlier, the incidence for Health claims is high and requires monitoring, while the amount of the claim is actually low.

3 Projections

Assuming SAJIDA continues operations as is, our projections for the next 4 years does indicate a positive bottom line. These projections are assuming the premium remains at 250Tk which we have deemed as too low. The Actuarial Reserve has been inputted into 2009 to show the impact

Page 30

to the future years and the balance sheet. The projected Balance Sheet highlights the negative capital situation that arises because of the actuarial reserve would be created. Assumptions used in the projections are shown in Appendix E.

HELP Income Statement Projections

Year June 2009 June 2010 June 2011 June 2012 June 2013

Premium 24,535,300 28,215,595 32,447,934 37,315,124 42,912,393

Investment income 1,128,105 1,114,776 1,475,198 1,916,504 2,453,508

Total 25,663,405 29,330,371 33,923,132 39,231,628 45,365,901

Claims

Health 5,504,976 7,624,500 8,768,175 10,083,401 11,595,911

Death 6,153,980 7,624,500 8,768,175 10,083,401 11,595,911

Disaster 124,588 134,550 154,733 177,942 204,634

Scholarship 1,968,800 2,421,900 2,785,185 3,202,963 3,683,407

Change in Actuarial Reserves 9,903,063 1,010,662 1,179,613 2,214,245 1,774,164

Total claims 23,655,407 18,816,112 21,655,880 25,761,952 28,854,028

Hosp transfer costs 5,473,117

Distribution 10,353 14,108 16,224 18,658 21,456

Staff Development 507,182 500,000 500,000 500,000 500,000

**Operations 4,514,860 5,643,119 6,489,587 7,463,025 8,582,479

Total expense 10,505,512 6,157,227 7,005,811 7,981,682 9,103,935

Overhead 2,821,560 3,244,793 3,731,512 4,291,239

Net Income -8,497,514 1,535,472 2,016,648 1,756,481 3,116,699

Number insured (eoy) 98,141 112,862 129,792 149,260 171,650

Growth Rate 112% 115% 115% 115% 115%

*Avg claims exposure in middle of year 78,000 89,700 103,155 118,628 136,422

** Operations expense includes Doctor/lawyer/branch mgr/acct salaries. These increase with the number of branches, not with the amount of premium. So this projection is overstated.

HELP Balance Sheet Projections

June 2009 June 2010 June 2011 June 2012 June 2013

Assets

Cash 4,093,860

FDR 6,639,995 9,836,255 13,806,980 18,697,843

TOTAL Assets 4,093,860 6,639,995 9,836,255 13,806,980 18,697,843

Liabilities

Capital -5,809,203 -4,273,731 -2,257,083 -500,603 2,616,096

Actuarial reserve 9,903,063 10,913,725 12,093,338 14,307,583 16,081,746

Total Liabilities 4,093,860 6,639,994 9,836,254 13,806,980 18,697,843

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Assuming SAJIDA continued on as is, the projections are more revealing when separated into the different products. The Life insurance and Legal Program continue to generate losses which are amplified once the Overhead expense is factored in. The 2011 projections are very similar.

2010 Projected SAJIDA Profit/Losses

Life Health Disaster Education Legal Total

Net Income

(716,543)

3,123,629 928,213

1,696,305

(646,572)

4,385,032

Overhead Expense

715,713

1,555,299 110,110

426,675

13,764 2,821,560

Revised Net Income

(1,432,255)

1,568,331

818,103

1,269,630

(660,336) 1,563,473

4 Scenarios SAJIDA can increase the premium to 300Tk or make program changes to operate within the 250Tk current premium.

a) As indicated earlier in the report, the Legal program does not seem to be offering the services that clients expect. This program can be redesigned and funded by donors as opposed to being supported by HELP premium. As demonstrated in the Pricing section, this releases 8.64 Takas out of the 300 Tk premium

b) SAJIDA management has indicated that there is a loan provision fund that can be used to cover the waived portion of the loan upon death. From the pricing section, this releases an additional 49 Takas out of the 300 Tk premium.

The following table shows the new projected 2010 income statement with the above changes. The 2011 projection is very similar.

2010 Projected Income Statement with Legal and Loans removed Income Life Health Disaster Education Legal Total

HELP Fee Received 4,486,627 19,384,120 228,676 4,116,172 - 28,215,595

Help Interest Resurve from FDR 177,263 765,851 9,035 162,627 - 1,114,776

Total Income 4,663,890 20,149,971 237,711 4,278,798 - 29,330,371

Expenditure -

Operations:

Distribution 2,243 9,692 114 2,058 - 14,108

Staff Development 79,506 343,500 4,052 72,941 - 500,000

Operations 219,393 5,211,265 11,182 201,278 - 5,643,119

-

Sub Total ( Operations) 301,143 5,564,457 15,349 276,278 - 6,157,227

Claim Payment : -

Health Claim for H.M 7,624,500 7,624,500

Death Claim for H.M 2,859,188 2,859,188

Disaster Claim for H.M 134,550 134,550

Scholarship 2,421,900 2,421,900

Increase in Actuarial reserve 156,255 675,089 7,964 143,354 - 982,662

Sub Total (Claims ) 3,015,443 8,299,589 142,514 2,565,254 - 14,022,799

Total Expenditure 3,316,586 13,864,046 157,863 2,841,531 - 20,180,026

Net Income 1,347,305 6,285,925 79,848 1,437,267 - 9,150,345

Overhead exp 448,663 1,938,412 22,868 411,617 - 2,821,560

Revised Net Income 898,642 4,347,513 56,981 1,025,650 - 6,328,785

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Please note:

a) With these two changes, the ideal premium is now 242.36 Tk. The 250 Tk is still being charged, so naturally profits are generated. The difference (250-242.36) = 7.64 can be used to cover additional expenses such as marketing. The excess is currently spread proportionately over the products in the same ratio as the premiums. In a future repricing the expense would be allocated based on use.

b) The projection assumes premiums and expense levels are still at the same Taka amount as prior to the pre-scenario projection minus the Legal salaries. With the Legal and Loan portions removed, the allocations amongst the remaining products change. The Health line now receives about 70% of the total premium, but has only 60% of total claims.

c) The projections use the repricing product premiums for product allocations as that is the new “best guess” for the future.

Performance indicators for the above projection

Key Performance Indicator Calculation 2010 Scenario Projection Range to target if aiming to

provide good value

Net Income Ratio (NIR) Net income / income 21.6% Not more than 10%

Incurred expense ratio (IER) Operational exp / income 30.6% Less than 25%

Incurred claims ratio (ICR) Claims / income 47.8% 65% or higher

Growth Ratio (GR) # of pol(t) / # of pol (t-1) 115%

Performance indicators for the projection show that:

a) Expense Ratio: SAJIDA does need to pay attention to expenses. With the additional overhead included, even with the lawyer salaries removed and the additional unallocated premium, the expense ratio is high. Part of this is due to the high doctor salaries that are included in the pricing allocations and health expenses.

b) Claims ratio: In calculating the claims ratio by product, the Health line has low claims ratio (Claims/Premium = 43%) based on the premium allocated. As indicated earlier, incidence is high, but the amount of claimed seems low. This may be an indicator of a product redesign being necessary.

c) Net income Ratio is high due to: a. Assumed premium is 250 Tk where the ideal premium is 242.36. This gives an

extra profit margin in the projection. b. Low health claims.

Ideally these performance indicators should be calculated by product. This now gives SAJIDA room to redesign their products so they can offer more benefits to the members. Ultimately, with a good value products, good customer education and distribution, HELP can move from being compulsory to voluntary.

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5 SWOT Analysis Strengths

• SAJIDA has a large market through its branches • Very strong informed management that is quick to respond and address issues as they

arise. • Has a very large donor fund and is a shareholder in Renata Inc. • Very professional and transparent organization • Overall, these are profitable programs.

Weakness • The Price of HELP is too low for the product offered and the Hospital Discount

membership cards are unaffordable for the target population. • Very few Hospital Discount memberships are sold and if HELP was voluntary only 20%

of the SAJIDA members would purchase it. • HELP members close to SAJIDA hospitals are not using them very much • Management information and databases are virtually non-existent • With such a large array of products, none of them may be truly meeting the goal of

relieving the major financial stresses of the poor. Some products provide more value than others.

• Weak internal controls. Some fraud has occurred. Opportunities

• With focus on priorities, HELP products can be streamlined and improved to better meet SAJIDA’s objective of providing meaningful financial assistance to the poor.

• A new SAJIDA hospital is opening. • SAJIDA is continuing to expand the number of branches. • SAJIDA management wants to explore partnering with an insurance company as they

have the insurance knowledge base.

Threats • The MFI industry is very competitive. HELP is seen to some as a fee rather than a service

and this could deter future clients if it is not explained properly. • The Healthcare provider is also very competitive. The current hospital client base is not

the target population. The reputation and brand of SAJIDA may be changing if the target population is not reached.

• To encourage HELP claims, the claims process has been lax and abused. This could cause future financial losses if not controlled.

In our review of SAJIDA we note that Management is aware of most issues that we raised and for some, they have already taken action. For example,

(1) Premium rates have been examined on numerous occasions, (2) Upon learning the results of the HELP survey, a new training program was

implemented with positive results (3) The Hospital was restructured and massive cost cutting measures were undertaken to

make the hospital sustainable (4) They are already planning a new computer system (5) Marketing plans are being redeveloped.

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Rather than discussing specific problems and issues, we prefer to bring these up in the next section where we make recommendations.

6 RECOMMENDATIONS

Based on our review, we feel the SAJIDA has done an excellent job in providing insurance and discounted health coverage to the poor. To further help alleviate the financial stress caused by unexpected events, we believe that the following recommendations should be given priority.

6.1 Product

Health Insurance Recommendations:

1) Name: Change the name to Hospital Discount Program. Health and HELP sound too much alike and creates a great deal of confusion. In addition, the new name makes it clear as to what the program offers as it really is not insurance.

2) Premium: The premium needs to be drastically reduced to 50-100Tk to make the card affordable for the population. This way people may buy it with the possibility a health risk happening as opposed to absolutely knowing a procedure is needed. This reduces anti-selection.

3) Marketing: A new mass marketing campaign needs to be developed to sell more cards to the target population.

4) Program Objective: SAJIDA Foundation’s objective is to help the ultra and peri-poor. This program is not reaching or significantly helping that market. The hospital is mostly used for non-cardholders. SAJIDA needs to examine the impact the program is truly having on the financial stress caused by a health crises to the poor. Does the program provide enough assistance for the high cost procedures or do people still need to borrow money? Due to time considerations, the TA could not perform this analysis.

HELP Recommendations:

a) Simplify: One of the keys to micro insurance is keeping the products very simple so the members understand what they are covered for. HELP has many coverages and it is probably difficult to understand. At the field visit, members we talked to did know the basics of the program.

b) Focus: HELP is offering alot of coverage, but the quality and value of each product is average. SAJIDA can choose the most important coverage and create a few very good products that make a large impact on the financial stress of these events.

c) Health coverage: The panel doctors are very expensive, however, they are a good marketing tool for the product. Having the free consultations gives the members the feeling that they are receiving something back in return for their premium. Since utilization is low, the number of panel doctors can be decreased by having less days per branch and doctors and visit a few branches. One idea to encourage use of the free consultations is to offer a few sample drugs. Members ask for this. SAJIDA is already affiliated with a pharmaceutical company. To prevent blackmarket resale, a sample amount would be all that is given. Eventually, the health coverage needs to be reviewed and improved to more significant levels.

d) Life and Loan insurance: SAJIDA has a loan loss provision fund. The loan portion could be covered by this fund and then the life benefit could be improved.

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e) Scholarship Program: A payback in service clause should be evident so those receiving higher level education stay in the country

f) Manmade disaster insurance: Changing the name would clear confusion and potential misunderstandings around the word “Disaster”. “Fire and Other Hazard insurance” is a suggestion.

g) Legal Program: Unless the program can be expanded to offer some financial services to the very poor, the program doesn’t seem to be really making a difference. This may be one program that can be downsized or eliminated. A lawyer is not needed to redirect people to other programs, a legal assistant could provide that service. A fund for court fees could be covered by the donors so some of the costs to the poor are alleviated.

6.2 Marketing

Health Insurance Recommendations:

a) Marketing Team: Their focus is on promoting the cardholder discount program and educating the public on the value of the program.

b) NGO Partners in the area: Micro Insurance is most effective when marketed through a trusted source. NGO’s in the area already have the attention and trust of the members. NGO’s are also looking at expanding the services to offer their members. A formal partnership with the NGO’s offering a health benefit will give SAJIDA a concentrated audience with large numbers. This will take alot of research and time, but the rewards are plentiful. The key is identifying quality NGO partners (unions, societies, MFI’s) whose mission statements are in line with a health insurance concept. They need to be focused on the greater good of their members as opposed to the MFI bottom line. Realistically, loans of a partner NGO may decrease as a health program may be counterproductive to the lending of loans to cover health costs. The TA realizes that this suggestion has been attempted before.

c) Message: It would be useful for SAJIDA to read the Marketing section in “Protecting the Poor: A Micro Insurance Compendium” by Craig Churchill et al. This can be downloaded from the internet. One of the important aspects to successful marketing is to develop a message. SAJIDA not only needs to spread their message of discount rates, quality care, and hygiene, but it also has to talk about “emergencies can and do happen” and decide on a consistent message.

d) Competitors: Even though the government hospitals are deemed free, bribery is commonplace in the government hospitals, so people are realistically paying the same amount. The target population needs to see a comparison of all aspects of SAJIDA hospital in comparison with a government hospital. This would include the “real” cost, quality of care, services, etc.

e) Show discount: SAJIDA hospital is cheaper than most healthcare providers, but some cardholders they have received a discount for services. A simple tool to establish value of the service is to show the general price on the invoice, then the discount and then the amount owed by the cardholder.

f) Hospital networks: SAJIDA Hospital can be formal part of other NGO Hospital networks, not just SAJIDA Foundation. Realistically, micro insurance is becoming popular in Bangladesh and all NGO’s are encountering the problem of finding quality healthcare facilities. Microinsurance schemes may be based elsewhere, but some of their members may be in the area of SAJIDA hospital. This is the same as SAJIDA members who do not get services from the SAJIDA hospital because of distance.

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g) Literacy: Brochures and posters are all written. The literacy rate in Bangladesh is 50%, therefore a large part of the target population is not getting the message. NGO partners would be helpful with this aspect as they could answer questions and direct members to the hospital for services. Successful techniques used in other micro insurance schemes are picture flip charts, skits and videos.

h) Awareness for Member’s Family: When someone is sick, a family member is most likely to take them to a healthcare provider. Awareness events cited in (g) will help, but upon purchase of a card, the cardholder should be advised to inform the family and also have something (such as a brochure) to put in the home.

HELP Recommendations:

a) Marketing Team: Their focus would be educating members on the concept of insurance to take some of the workload away from the Field officer’s.

b) Claims payments: One of the best ways to build trust and awareness is by word of mouth. Publicly making the claims payments at centre meetings will generate interest. News of claims being paid will spread like wildfire through the villages.

c) Centre Leader: Continue educating the centre leader/chief on HELP so they are able to answer questions. Solicit feedback from the leader to find out the questions being asked and the perceptions of the insurance.

d) Centre Activity: The grassroots contact at the center is the key to spreading information and developing trust.

e) Literacy: The posters used are very clear, however, because of the 50% literacy rate in Bangladesh, not all of the target population is being reached. Points (a)-(c) will help reach these members.

f) Consistency among branches: In discussions with the doctors, it seemed that not all branches were consistent in showing doctor’s schedules and having signs out showing the doctor was in etc. This will help spread awareness and remind people of the benefits of the program.

6.3 MIS

Health Insurance Recommendations

A new system was implemented in July 2009, so there is detailed information available from that point on. Once more time has passed and experience has been gathered, it would be useful to analyze the data by patient, services, rates and savings to obtain a true picture of utilization.

HELP Recommendations

It is the highest priority that SAJIDA implement a new MIS system that has a centralized database and gathers information from each of the 62 branches. Proper actuarial calculations for claims, reserves and premiums could then be calculated. For proper analysis, it is important the database adhere to the following requirements:

• Integration with the MFI system

• Information is captured by member and would include a database of policyholder and claim information. It also will contain information for all active and inactive loans and produce all appropriate reports.

• An ILO grant may be available to assist with the software and implementation plan. This TA will also help with developing the database, reporting requirements, reconciliations, controls and consistency standards.

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6.4 Claims

Health Insurance

A detailed claim analysis by service type, cost and patients is needed over a longer period of time to establish if the current discount structure is meeting the objectives of SAJIDA’s mission. HELP Recommendations:

a) Simplifying the claims requirements and educating the consumer on the claims process and requirements are essential to quickening the claims process times.

b) Keys in maintaining a quality health insurance claims system are: a. Developing a quality network of hospitals to direct members for care. b. Monitoring member’s progress while in healthcare facility c. Reviewing the member’s case and giving a second opinion while obtaining

health services. This reduces unnecessary procedures. d. Have a set list of discounted prices throughout the hospital network e. Cashless system (pay insurance to the hospital directly) to minimize member’s

out of pocket expenses

6.5 Pricing


We are suggesting decreasing the Cardholder fee to 50-100Tk per person. HELP Recommendations:

1. Increase the price to 300Tk per year or change the program structure so it can operate sustainably at the current 250Tk

2. The Life insurance mortality has been compared to Industry tables. The actual Death experience is slightly lower than the industry tables. This needs to be monitored closely.

3. The Health insurance incidence rate of 4.7% is high. Measures need to be put in place to monitor claims and usage more closely. See Claims section. Please note that even though the incidence is high, the amount of the health claims is actually low. This shows a possible opportunity for a product enhancement.

4. Manmade Disaster program experience minimal claims. A fund should be set aside to support this program when an event does happen.

5. Actual MFI Overhead that is attributed to HELP is 10% of premium. SAJIDA has been using 5%.

6. Measures need to be put in place to ensure consistency is maintained across all statements (i.e.) Budget, Income Statement, Pricing logic

7. Double Insurance Coverage: If a member pays off their loan early and then gets another loan, they have double insurance coverage during this period. The period is approximately 1-2 mths and affected 8000 out of the 98000 borrowers in 2008-2009. This situation should be rectified.

6.6 Financial Statements


To get a true idea of the financial status of the Hospital Discount Program, the financial statements need to be split between the General Hospital Program, the Discount Program and utilization by HELP. Time

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HELP Recommendations

a) Split income statement by product line. b) Overhead expenses from head office are not included. We expect this to be about 10% of

premium. c) Calculate Unearned Premium reserves.

6.7 Scenarios

It is recommended to:

a) Remove the Legal Program from HELP and fund it by other means.

b) Pay the Loan waiver portion of the Life insurance from the Loan provision fund

6.8 Key Performance Indicators

We also urge SAJIDA to adopt the Key Performance Indicators (KPI) discussed in Appendix C since these are an excellent management and monitoring tool. To calculate all of the indicators SAJIDA will affect design of the various databases (see above). Since the indicators are much more useful if calculated separately for each product, it will require separation of data and accounting.

6.9 Plan for Progress

Finally, SAJIDA would ultimately like to offer HELP as a voluntary product. This is a longer term plan. Steps necessary to reach this goal include:

a) Ensure a proper MIS system is in place b) Once the MIS system is in place, then indepth claims analysis, reserving and pricing can

occur. c) Products can then be redesigned to add more benefits and value for the customer.

Redesign possibilities include a higher death benefit and a higher amount of coverage under healthcare.

d) Members need then to be educated on the value of the enhanced products. e) At this point, surveys can be done to see the feasibility of offering the product

voluntarily. f) A pilot program can be launch before a full product launch

This plan will take time and technical support. The TA strongly urges SAJIDA to apply for TA Grants or the new Consulting and Capacity Building Program through the ILO to ensure adequate technical support is given this process. SAJIDA is also interested in partnering with an insurance company as they are the experts in this field. This is not an easy task to undertake and assistance will be needed in order to ensure the correct insurance company is chosen and products are offered. This is a project all in itself. SAJIDA has asked the TA to review a pilot program they had in place in regards to Marriage insurance. This was discussed with SAJIDA regarding the lack of financial viability in the program. The program offered a 4000Tk benefit to cover marriage costs along with life and health insurance. The premium was 250Tk per year. Given that in Bangladesh marriage is an

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almost 100% likely event, it takes 16 years of payments to cover the benefit which is not feasible. This program has been stopped. Once again, as another TA, assistance can be given in developing a program that meets the needs of the very rural population. The Hospital program needs a full analysis. The TA just ran out of time and wasn’t able to examine statements split by program or look at projections. An in depth analysis needs to be performed that will uncover usage, costs and savings so appropriate plans can be put in place. Once again, TA support through this process can assist SAJIDA in developing the Hospital Discount Program.

7 APPENDIX A: DETAILED PRODUCT DESCRIPTION

7.1 Health Insurance (Hospital Discount Program)

An annual premium of 600 Takas enables the cardholder to receive a discount on services at the SAJIDA Hospitals. This includes a 10% discount on medicine and an overall discount of approximately 30%.

Table A-1: Main features of Hospital Discount Program

Feature Description

Premium • 600 Tk per year

Premium Collection Membership drives occur 3 times per year and cards can only be purchased at these times. There is a waiting period before eligilble for the discount.

Target market Main focus is on the poor within 10-15 km of the hospital.

Distribution and marketing • Speak at Societies, Unions and School Parent’s Day • Talk to parents outside of schools • Bring Eyecare Day to the Area – announced through loudspeakers

Commission Nil

Table A-2: Service Prices of Hospital Discount Program

Service General Public Cardholder

(discounted price) Sheet rent (ward) 200 100

Cabin (double) 700 500

Cabin (A/C) 1000 1000

Service Charge (Per Day) 100 50

Outdoor Services


(discounted price)

General Health Service (Medicinal Officer) 50 Free

Pregnant mother(Medicinal Officer) 50 Free

Option: 1 Normal Dressing 50 35

Option: 2 Normal Dressing with one stitch 100 70

Option: 3 Normal Dressing with one -five stitch 250 175

Option: 4 Normal Dressing with more than 5 stitch 300 210

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(discounted price)

Option: 5 Follow up Dressing after Operation 50 35

Option: 6 Oxygen delivery below one hour 50 35

Blood sugar test (Gluco miter) 70 50

Nabulization 50 35

Eye care (Medicinal Officer) 50 Free

Specialist Doctor Fees 200 100

Follow up (Specialist Doctor) 100 50

Specialist Doctor ( Junior ) 100 50

Follow up (Specialist Doctor- Junior ) 50 25

Observation Charge 100 70

Operations (Without after & before operational medicines)


(discounted price) Admission fees ( Indoor) 50 25

Hysterectomy 10000 8000

Appendicectomy 5000 4000

S.M.R+S.M.D (E.N.T) 8000 6000

Hernia ( Unilateral) 5000 4000

Hernia ( Bi-Unilateral) 7000 5000

Actopig Pregnancy 10000 8000

Cholecystectomy 10000 8000

Circumcision 3500 2500

Circumcision ( Medical Surgeon) 1000 500

Homoroydectomy 8500 7000

Cholecystectomy 10000 8000

Hydrocil 5000 4000

Nafrolithotomy 14000 8000

Protesttectomy 12000 8000

Repair of perforation 10000 8000

Polypectomy Biliteral 8500 6000

Toncilectomy 7500 6000

Thyroidactomy 12000 8500

Fistula 7000 6000

Axicun of cist 15000--6000 1000-5000

Abses 15000--6000 1000-5000

Tubectomy 5000 4000

Caesarean Section Operation 7500 5000

Caesarean Section Operation ( Out side Surgeon ) 9000 7000

D & C 4000 3000

Normal Delivery 1500 1000

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Eye Care Section


(discounted price) General Health Service (Medicinal Officer) 50 Free

Specialist Doctor Fees 150 75

Follow up (Specialist Doctor) 75 50

Cataract Operation.( I.O.L Left Eye) 2000 1500

Cataract Operation.( I.O.L Right Eye) 2000 1500

Autorefrafction 50 25

I.O P Test with Blood Presser 30 Free

Tarigiam Operation 800 500

D.C.R Operation 4500 3500

F.V Remove Charge 100 50

Dressing (Eye) 100 50

D.C.T Operation 1000 500

Biometry Test (Left-Right) 100 50

Admission Fees 50 25

Evisurson Operation 1000 500

Conjunctival Huding 1000 500

Shac Test 50 25

Package -1 Cataract Operation(American Lenses ) 7000 6000

Package -2 Cataract Operation(England Lenses) 6000 5000

7.2 HELP Product

The HELP Product is made up of 5 distinct aspects: Health insurance, Loan waiver and Life insurance, Scholarship program, Legal Program and Manmade disaster insurance. Table A-5: Summary description of HELP

Feature Description

Premium rate

• SAJIDA members fee: Tk.250 each year (No other deduction for loan processing like passbook fee, admission fee etc.)

• Premiums are set annually and collected in advance. Premiums are monitored and revised annually to ensure viability.

• For families with more than 5 members, an additional Tk. 50 per additional member will be charged.

Premium paid by member before they can obtain a loan

Remittance Annual

Commission None

Marketing Compulsory for all SAJIDA members that wish to obtain a loan. Field workers explain coverage to the members at the group meetings.

Persons covered

• Premiums are based on a family of five, children being defined as unmarried. (Husband, wife, 3 children), extended family cannot be included.

• An additional fee will be charged for additional family members. • In case of members who are unmarried/divorced/widowed she or he can enlist her/

his parents and two other dependents.

Coverage amount Discussed in detail below for each product

Events covered Discussed in detail below for each product

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Feature Description

Underwriting restrictions • To enrol membership age must be between 18 to 55 years and services will be

provided from the date of enrolment .

Eligibility and Common Rules

• Life insurance coverage terminates at age 65. • The other coverage will continues till the age of 70 years • The annual insurance scheme is only for a period of one year. • After the loss is suffered members have to inform SAJIDA about the incident and

have to forward claim application • Along with the claim application necessary documents has to be provided within a

stipulated period of time (3 months). • Maximum three claims could be provided for a family in a year (two health claims in

and one more claim in any other category). •

Life Insurance

Benefits: a) Outstanding balance of the Loan is waived in the case of death of Member or Husband.

� Micro Credit Loan: Entire Loan outstanding is covered. Loan max is Tk 30,000. � Micro-enterprise Loan: These loans are greater than Tk 30,000. People who take these

loans are in a different risk category (not as poor). Covers minimum of: � Service Charge � Loan outstanding � Tk 30,000

b) Death Benefit:

• Micro Credit Loan: o Tk. 4,000 (paid in cash on death of member or husband)

• Micro Enterprise Loan: For these loans, if the male is the breadwinner and the policyholder, he probably would have income and would not be financially stressed if the spouse died.

o Female is the policyholder, then the spouse is covered o Male is the policyholder, then spouse is not covered.

Conditions:

� Death claim will not be applicable in case of death outside Bangladesh and Suicidal death is not covered

� Outstanding Savings will be refunded with interest; no adjustment with loan � At time of enrolment, no family member can be older than 65. � Death certificate or alternative documentation submission is mandatory

Health Insurance

Coverage is available at whichever health provider the member chooses. However, if they choose the SAJIDA hospital, the member receives the discounted rates. Therefore, with the insurance, less money is paid. Panel doctors are available for consultations at each of the 62 branches free of charge. Physicians are there 1-3 times per week for a few hours in the afternoon.

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Benefits

A. For Surgical Operation:

• General Surgery – Appendicectomy Tk. 2000 – Cholecystectomy Tk. 3000 – Abdominal Perforations Tk. 2000 – Hernia Operation Tk. 1200 – Hydrocele Operation Tk. 1000

• Obstetrical Surgery – Caesarean Section Tk. 2000 – Gynaecological Surgery – Hysterectomy Tk. 3000 – Ophthalmic Surgery

• Cataract Operation Tk. 1000 • DCR Tk. 1500

B. Road Traffic Accident

– Head Injury with hospitalization Tk. 2500 – Simple, Compound fractures and

Dislocation Tk. 1500 – Compound fractures and

Dislocation Tk. 3000 – Chest Injury with Pneumothorax/

Haemothorax Tk. 2000 – Vertebral dislocation/ Prolapsed Tk. 2000

• Multiple Cut Injury and lacerations Tk. 800 C. Hospitalization:

– Hospitalization over 72 hours (in general) Tk. 2000 D. ANC Support for pregnant women with danger signs

– Bleeding (Moderate to profuse) Tk. 500 – High blood pressure with severe headache

and blurred vision Tk. 500 – Oedema/ Positive urine albumin Tk. 500 – Convulsion Tk. 500 – High temperature (104 degree centigrade) Tk. 500

E. Acute respiratory tract Infection :

– Severe Pneumonia Tk. 500 – Very severe diseases Tk. 1000

F. Neonatal Emergencies

– Respiratory distress/ Pneumonia Tk. 500 – Neonatal infection (Septicaemia) Tk. 1000 – Neonatal Jaundice Tk. 500 – Pre-maturity with incubator facility Tk. 2000

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G. Normal Vaginal Delivery (If Hospitalized) Tk. 1000 H. Asthma Adult: Tk 1500

• Only for status Asthmatics which is a severe form of Asthma • Severe shortness of breath • Palpitation • Chest Pain • In year 2 times, maximum of Tk. 750 in one episode

I.Burn - Tk 1,500 - Claims will be provided for burn cases with hospital admission - Children - More then 10% burn needs admission in a hospital - Adult 15-20% of burn needs admission - Burn in special areas (face, perineum and genitalia) also needs admission. J. Free Doctor Consultations:

• MBBS doctor consultation from SAJIDA panel doctors at the branch offices and hospitals

Conditions:

• Where multiple conditions are present and involve more than one claim; the higher claim amount will prevail. Only one claim will be given.

• In one year one family can avail maximum of two health claims, exception in case of ANC and Asthma

• Proper medical documentation is a must for claim disposal, false documentation can lead to cancellation of membership and punishment up to TK. 500

• Claim for hospitalization other than operative reasons will require more than 72 hrs. of admission; 72 hr. provision will not be applicable for burn cases

• All health claims must be certified by SAJIDA’s listed doctors

Manmade Disaster Insurance

Benefits

• This will include damage or destruction of home or work tools

• up to TK. 3000 Conditions:

• Man-made disasters which effects more than 25 people in an single event. Example are fire, Market wiped out, terrorist attack etc.

• In case of natural disasters, depending on organization’s capabilities material support,

health services, interest free or low interest loans will be offered • Members have to inform SAJIDA about losses suffered at the earliest. Claim application

should be submitted at the earliest, after the loss is suffered, and at the latest within two-weeks of the date of loss

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Scholarship Program

Benefits • Scholarship for outstanding Students (at least one third of their total expenses), approx.

TK. 500 Tk. a month • Education loan (rules & regulation as per micro-credit program); service charge 8% flat

Conditions:

• From Grade VI and above • Students whose standing in the class are among top three or A+ ( For Grade VI to X) • In case of students who have received merit scholarship Class V will also be applicable • For SSC & HSC GPA 4.5 and above • For University level, criteria for selection will be based on specific institutions bench

marks • Scholarship will be disbursed quarterly • Every six months students performance will be evaluated, in case of non-maintenance of

grade average, scholarship may be discontinued. • Proper institutional certificate, transcripts, record of grades must be submitted and are

subject to physical verification. Legal Aid Program

Three lawyers spend time at each of the branches to provide legal advice and guidance to the members.

Benefits

• Legal education through different means like classes, focus groups, theatres etc • legal services through legal clinics • Referrals

Conditions:

• No financial support will be given, only networking; referral and counseling support will be covered.

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8 APPENDIX B: HELP Experience Analysis and Pricing Tutorial

Executive Summary

We have compared the premium rates of the Health, Education and Life-security Program (HELP)

between:

• Estimate: based on the experience of the program between July 2008 and August 2009

• Pricing: based on the document titled "HELP 2008-2009 Projection April, 2008 (3).doc"

• Budget (2009 to 2010): based on the assumptions in the budget of HELP for 2009 to 2010

Further analysis can be found in the sections following the Executive Summary.

The following table compare the cost of each benefit item on a per policy basis between Estimate,

Pricing and Budget:

Estimate Pricing Budget (2009 to 2010)

Life Insurance

Member – SA related 8.93 7.50 8.00

Member – Loan related 14.07 12.00 16.00

Spouse – SA related 20.50 10.80 14.40

Spouse – Loan related 35.00 21.60 28.80

Health Insurance

Claims 85.15 75.73 84.79

Panel Doctors 42.00 37.35 31.23

Legal Benefit 8.64 0.77 9.11

Education Benefit 27.00 30.61 30.61

Disaster Benefit 1.50 7.65 7.50

Total Risk Components (before expenses)

242.79 204.01 230.44

Estimated Expenses Margin

48.56 40.8 46.09

Total Gross Premium 291.34 244.81 276.53

Table A: Summary of Cost Components of HELP Premium

Notes:

• The "Estimate" results are based on 14 months of claims and exposure data between July 2008 to August 2009

• We have not taken into account of members who have paid for HELP fee more than once within a year.

• Figures from the "Estimate" columns may have included margins by taking into accounts of sample size and

trends.

• The expense margin is estimated to be 20% of the Total Risk Components, i.e. Estimated Expenses Margin =

20% x Total Risk Components

Page 47

Information Received

We have based our analysis on the following information received:

• SAJIDA Annual Report 2008

• Monthly MIS Report

• Total claims figure since inception of HELP by the end of June 2008

• Figures for each month (from July 2008 to August 2009)

▪ Total claims figure since July 2008 by the end of previous month

▪ Incidence and claims figures for current month

▪ Total claims figure since July 2008 by the end of current month

• Active borrowers at the end of each month and number of new borrowers entering the program in

that month

• Budget of HELP 2008-09 and 2009-10

• Pricing document of HELP titled “HELP 2008-2009 Projection April, 2008 (3).doc”

Data

We have encountered the following data issues:

• Although we have received total claims figure from the inception of HELP until June 2008, we have

not used these data in our estimation in this document. The main reason is that in order to estimate

the monthly incidence rate for each benefit such as Life Insurance and Health Insurance, we need to

match the number of claims incidence in each month against the corresponding exposure (in this

case the number of active borrowers) in each month. The number of active borrowers figures

before July 2008 was not available on a monthly basis.

• We have only used the total claim figures from July 2008 to August 2009 provided by the monthly

MIS report. The individual monthly claim figures are then derived from the differences between

subsequent months claim figures (i.e. the individual monthly claims figure for April 2009 is the

difference of the total claims figure since July 2008 between end of May 2009 and end of April

2009).

For example, in the following table we have highlighted the inconsistency in two MIS report April

2009 and May 2009 for the same total end of month figure since July 2008:

Page 48

Life Insurance Claims from July 2008 to April 2009

From MIS April 2009 Report From MIS May 2009 Report

No. Amount No. Amount

Spouse 129

472,950

132

493,000

884,732 910,082

Member 312

1,205,800

308

1,180,900

2,187,897 2,167,397

Total 441 4,751,379 441 4,751,379

We were informed there are subsequent changes such as back dating or clarification of claims in the

subsequent MIS reports.

• There was also a one-off correction to the claims figure of Disaster Benefit during the month of April

2009. We were informed this particular adjustment were made due to invalid claims recorded

previously:

Disaster Benefit

From MIS April 2009 From MIS March 2009

July 2008 to April 2009 July 2008 to March 2009

No. Amount No. Amount

Fire 41 90,770 38 123,770

Displacement 0 0 0 0

Others 18 19,076 44 27,984

Total 59 109,846 82 151,754

The “Others” Disaster Benefit figures was adjusted downwards in between March 2009 and April 2009

Page 49

• We were provided with the following exposure information and we compared this against the MIS

reports we have received:

(A) (B) (C) = (C)T-1

+

(B)T

(D) (E) = (C) - (D)

Month Active Borrowers

(End of Month)

Number of New Loans Granted

Total number of New Loans

Granted since July 2008

Total number of new HELP fees since July 2008

Difference

200806 69,878 8,126

200807 71,494 7,554 7,554 7,554 0

200808 72,069 6,020 13,574 13,576 -2

200809 73,029 6,719 20,293 20,073 220

200810 72,870 4,202 24,495 25,314 -819

200811 74,568 9,694 34,189 35,227 -1,038

200812 74,408 4,638 38,827 39,950 -1,123

200901 75,903 8,758 47,585 52,137 -4,552

200902 78,086 9,743 57,328 59,531 -2,203

200903 82,335 12,328 69,656 71,288 -1,632

200904 85,050 10,715 80,371 82,664 -2,293

200905 87,031 9,292 89,663 91,583 -1,920

200906 89,546 8,410 98,073 99,989 -1,916

200907 89,615 7,898 105,971 107,887 -1,916

200908 90,646 8,536 114,507 116,423 -1,916

We have used the figures in columns (A) and (B) as the exposure figures and new business

figures respectively. The inconsistency between the data provided and the data from the MIS

report (column (D)) is less than 2% (i.e. 1,916 / 98,073 = 1.95%).

• We have not performed further checks on the integrity of the data employed in this analysis.

Life Insurance

We estimated the expected cost of life insurance by calculating the probability of death (for both

member and spouse) and average cost of death separately.

We have estimated the probability of death through the following steps:

Steps Reasons

1. Find out the number of deaths in each

month by Member and Spouse

separately

Both members and spouses have demonstrated very

different mortality pattern, we need the number of

deaths to be recorded separately. We also need the

figures to be arranged by the month the death has

occurred.

2. Find out the number of policies in-

force

This can be estimated by the number of borrowers

active at the end of each month. The important point is

Page 50

that we need to match the number of active borrowers

with the number of deaths occur in each month.

3. Divide the number of deaths by the

average number of policies in-force for

the monthly mortality rate.

This is important as we are dividing number of deaths

with the corresponding exposure of that particular

month.

4. Adding the 12 consecutive months of

monthly mortality rate to estimate the

annual mortality rate

Converting the monthly mortality rate to annual

mortality rate

Details of the calculation as follows:

Year 2009 2009 2009 2009 2009 2009 2009 2009 2008 2008 2008 2008 2008 2008

Month 8 7 6 5 4 3 2 1 12 11 10 9 8 7

Total Number of Death Claims since July 2008

(1) Member 182 174 162 148 129 112 100 82 63 61 54 21 16 6

(2) Spouse 449 417 394 344 312 275 238 209 168 148 111 95 62 13

Monthly Death Claims

(3) Member 8 12 14 19 17 12 18 19 2 7 33 5 10 6

(4) Spouse 32 23 50 32 37 37 29 41 20 37 16 33 49 13

Number of active borrowers

(5) Beginning 90,646 89,615 89,546 87,031 85,050 82,335 78,086 75,903 74,408 74,568 72,870 73,029 72,069 71,494

(6) End 89,615 89,546 87,031 85,050 82,335 78,086 75,903 74,408 74,568 72,870 73,029 72,069 71,494 69,878

Average number of active borrowers (7) = [(5) + (6)] / 2

(7) Average 90,131 89,581 88,289 86,041 83,693 80,211 76,995 75,156 74,488 73,719 72,950 72,549 71,782 70,686

Monthly Mortality Rate (3) / (7) or (4) / (7)

(8) Member 0.009% 0.013% 0.016% 0.022% 0.020% 0.015% 0.023% 0.025% 0.003% 0.009% 0.045% 0.007% 0.014% 0.008%

(9) Spouse 0.036% 0.026% 0.057% 0.037% 0.044% 0.046% 0.038% 0.055% 0.027% 0.050% 0.022% 0.045% 0.068% 0.018%

Annual Mortality Rate (10 = Sum of (8) ; (11) = Sum of (9))

September 08 to August 09

August 08 to July 09

July 08 to June 09

(10) Member 0.208% 0.214% 0.209%

(11) Spouse 0.482% 0.515% 0.507%

Table 1A: Life Insurance Incidence Calculation

We have compared this against this against the budget of 2008 to 2009 and 2009 to 2010.

Mortality rate

Estimate Experience Budget*



July 08 to June 09

2008 to 2009 2009 to 2010

Member 0.21% 0.208% 0.214% 0.209% 0.15% 0.20%

Spouse 0.50% 0.482% 0.515% 0.507% 0.27% 0.36%

Table 1B: Life Insurance Incidence Calculation Summary

* The 2 budgets (as well as the original Pricing) assumed number of spouse to be 90% of the member.

As we are calculating the mortality rate as percentageof total number of policies, we have not included

this assumption in our calculation. For example, although the budget of 2009 to 2010 assumes the

Page 51

mortality rate of Spouse to be 0.4%, it is based on the assumption that for every 10 members there will

be 9 spouses.

We have also investigated into the average claims cost of death. Based on the experience since July

2008, the average death cost size for both members and spouses are as follows:

Average Claim Size

Experience Budget

July 08 to August 09

July 08 to July 09

July 08 to June 09

Pricing 2008 to 2009 / 2009 to 2010

Member

Sum Assured 4,245 4,219 4,211 5,000 4,000

Loan Waived 6,564 6,670 6,761 8,000 8,000

Total 10,809 10,889 10,971 13,000 12,000

Spouse

Sum Assured 4,117 4,057 4,050 4,000 4,000

Loan Waived 7,001 6,956 7,059 8,000 8,000

Total 11,119 11,013 11,108 12,000 12,000

Table 1C: Life Insurance Claims Size Summary

Using the information from Table 1B and Table 1C, we derive the cost of death per policy as follow

Experience Pricing Budget

Probability of Death

(1) Member 0.21% 0.15% 0.20%

(2) Spouse 0.50% 0.27% 0.36%

Average Cost per Claim

Member

(3) Sum Assured 4,250 5,000 4,000

(4) Loan Waived 6,700 8,000 8,000

Spouse

(5) Sum Assured 4,100 4,000 4,000

(6) Loan Waived 7,000 8,000 8,000

Average Cost Per Policy

Member

(7) = (1) x (3) Cost related to Sum Assured

8.93 7.50 8.00

(8) = (1) x (4) Cost related to Loan Waived

14.07 12.00 16.00

Spouse

(9) = (2) x (5) Cost related to Sum Assured

20.50 10.80 14.40

(10) = (2) x (6) Cost related to Loan Waived

35.00 21.60 28.80

Page 52

Total

(11) = (7) + (8) Member 23.00 19.50 24.00

(12) = (9) + (10) Spouse 55.50 32.40 43.20

(13) = (11) + (12) Total 78.50 51.90 67.20

Table 1D: Expected Cost of Death Per Policy

Page 53

Health Insurance

We have estimated the probability of health claims incidence through the following steps:

Steps Reasons

1. Find out the number of health claims by

month by different treatment types (i.e.

Hospitalization over 72 hours, Road Traffic

Accident, Normal Delivery, etc)

Both treatments have very different cost and

benefits.

2. Find out the number of policies in-force This can be estimated by the number of

borrowers active at the end of each month. The

important point is that we need to match the

number of active borrowers with the number of

deaths occur in each month.

3. Divide the number of claims by treatment by

the average number of policies in-force to

calculate the monthly health claims incidence

rate for each type of treatment.

This is important as we are dividing number of

health claims with the corresponding exposure

of that particular month.

4. Adding the 12 consecutive months of

monthly health claims incidence rate to

estimate the annual health claims incidence rate

Converting the monthly health claims incidence

rate to annual health claims incidence rate

Further detail of the calculations is provided in the following tables.

Year 2009 2009 2009 2009 2009 2009 2009 2009 2008 2008 2008 2008 2008 2008

Month 8 7 6 5 4 3 2 1 12 11 10 9 8 7

Total Number of Health Claims since July 2008

(1) T1 505 457 405 329 299 253 209 195 159 136 79 93 60 29

(2) T2 1,034 967 873 729 682 611 529 457 361 307 216 161 84 31

(3) T3 181 157 142 110 104 89 68 60 52 38 26 23 17 10

(4) T4 462 413 374 285 258 218 189 167 148 124 90 65 40 17

(5) T5 786 709 631 520 475 416 352 291 238 205 135 103 59 23

(6) T6 37 36 32 32 31 30 26 21 23 19 28 12 7 1

(7) T7 79 66 62 57 54 48 43 37 26 21 18 8 6 1

(8) T8 72 71 67 53 51 42 32 30 21 17 15 10 3 0

(9) T9 313 291 256 222 201 184 154 120 89 69 40 35 19 4

(10) T10 71 67 63 49 45 40 33 28 22 20 14 11 3 1

(11) T11 23 23 21 20 19 17 13 10 5 4 4 5 3 1

(12) T12 269 236 202 149 152 114 89 79 63 55 44 35 32 6

(13) Total 3,832 3,493 3,128 2,555 2,371 2,062 1,737 1,495 1,207 1,015 717 561 333 124

Table 2A: Health Insurance Incidence Calculation

Page 54

Treatment Description T1 General surgery T2 Obstractical Surgery T3 Ophthalmic Surgery T4 Road Traffic Accident T5 Hospitalisation over 72 hours(in general) T6 ANC Support T7 Acute Respiratory tract infection T8 Neonatal emergencies T9 Normal Delivery

T10 Asthma adult T11 Burn T12 Others

Table 2B: Description of Treatments

Page 55

The figures in Table 2A are then used to derive the monthly claims information:

Year 2009 2009 2009 2009 2009 2009 2009 2009 2008 2008 2008 2008 2008 2008

Month 8 7 6 5 4 3 2 1 12 11 10 9 8 7

Monthly Health Claims since July 2008

(1) T1 48 52 76 30 46 44 14 36 23 57 -14 33 31 29

(2) T2 67 94 144 47 71 82 72 96 54 91 55 77 53 31

(3) T3 24 15 32 6 15 21 8 8 14 12 3 6 7 10

(4) T4 49 39 89 27 40 29 22 19 24 34 25 25 23 17

(5) T5 77 78 111 45 59 64 61 53 33 70 32 44 36 23

(6) T6 1 4 0 1 1 4 5 -2 4 -9 16 5 6 1

(7) T7 13 4 5 3 6 5 6 11 5 3 10 2 5 1

(8) T8 1 4 14 2 9 10 2 9 4 2 5 7 3 0

(9) T9 22 35 34 21 17 30 34 31 20 29 5 16 15 4

(10) T10 4 4 14 4 5 7 5 6 2 6 3 8 2 1

(11) T11 0 2 1 1 2 4 3 5 1 0 -1 2 2 1

(12) T12 33 34 53 -3 38 25 10 16 8 11 9 3 26 6

(13) Total 339 365 573 184 309 325 242 288 192 298 156 228 209 124


(14) Start 90,646 89,615 89,546 87,031 85,050 82,335 78,086 75,903 74,408 74,568 72,870 73,029 72,069 71,494

(15) End 89,615 89,546 87,031 85,050 82,335 78,086 75,903 74,408 74,568 72,870 73,029 72,069 71,494 69,878


(16) Average 90,131 89,581 88,289 86,041 83,693 80,211 76,995 75,156 74,488 73,719 72,950 72,549 71,782 70,686

Monthly Health Insurance Incidence Rate, e.g. (17) = (1) / (16) or (25) = (9) / (16)

(17) T1 0.053% 0.058% 0.086% 0.035% 0.055% 0.055% 0.018% 0.048% 0.031% 0.077% -0.019%

0.045% 0.043% 0.041%

(18) T2 0.074% 0.105% 0.163% 0.055% 0.085% 0.102% 0.094% 0.128% 0.072% 0.123% 0.075% 0.106% 0.074% 0.044%

(19) T3 0.027% 0.017% 0.036% 0.007% 0.018% 0.026% 0.010% 0.011% 0.019% 0.016% 0.004% 0.008% 0.010% 0.014%

(20) T4 0.054% 0.044% 0.101% 0.031% 0.048% 0.036% 0.029% 0.025% 0.032% 0.046% 0.034% 0.034% 0.032% 0.024%

(21) T5 0.085% 0.087% 0.126% 0.052% 0.070% 0.080% 0.079% 0.071% 0.044% 0.095% 0.044% 0.061% 0.050% 0.033%

(22) T6 0.001% 0.004% 0.000% 0.001% 0.001% 0.005% 0.006% -0.003%

0.005% -0.012%

0.022% 0.007% 0.008% 0.001%

(23) T7 0.014% 0.004% 0.006% 0.003% 0.007% 0.006% 0.008% 0.015% 0.007% 0.004% 0.014% 0.003% 0.007% 0.001%

(24) T8 0.001% 0.004% 0.016% 0.002% 0.011% 0.012% 0.003% 0.012% 0.005% 0.003% 0.007% 0.010% 0.004% 0.000%

(25) T9 0.024% 0.039% 0.039% 0.024% 0.020% 0.037% 0.044% 0.041% 0.027% 0.039% 0.007% 0.022% 0.021% 0.006%

(26) T10 0.004% 0.004% 0.016% 0.005% 0.006% 0.009% 0.006% 0.008% 0.003% 0.008% 0.004% 0.011% 0.003% 0.001%

(27) T11 0.000% 0.002% 0.001% 0.001% 0.002% 0.005% 0.004% 0.007% 0.001% 0.000% -0.001%

0.003% 0.003% 0.001%

(28) T12 0.037% 0.038% 0.060% -0.003%

0.045% 0.031% 0.013% 0.021% 0.011% 0.015% 0.012% 0.004% 0.036% 0.008%

(29) Total 0.376% 0.407% 0.649% 0.214% 0.369% 0.405% 0.314% 0.383% 0.258% 0.404% 0.214% 0.314% 0.291% 0.175%

Table 2C: Monthly Health Claims Incidence Calculation

Page 56

We have estimated the annual health incidence rate by different types of treatments.

Annual Health Claim Incidence Rate

Type of Treatments Estimate Experience Pricing Budget (2008 to 2009



July 08 to June 09

(1) General surgery 0.60% 0.543% 0.533% 0.516% 0.71% 0.61%

(2) Obstractical Surgery 1.20% 1.183% 1.182% 1.121% 0.61% 0.61%

(3) Ophthalmic Surgery 0.20% 0.199% 0.182% 0.180% 0.61% 0.61%

(4) Road Traffic Accident 0.50% 0.515% 0.493% 0.473% 0.61% 0.61%

(5) Hospitalisation over 72 hours (in general)

1.00% 0.894% 0.859% 0.805% 0.23% 0.61%

(6) ANC Support 0.05% 0.039% 0.046% 0.043% 1.40% 0.61%

(7) Acute Respiratory tract infection

0.10% 0.091% 0.084% 0.081% 1.72% 0.61%

(8) Neonatal emergencies 0.10% 0.086% 0.089% 0.085% 0.10% 0.61%

(9) Normal Delivery 0.50% 0.365% 0.361% 0.328% 0.51% 0.61%

(10) Asthma adult 0.10% 0.085% 0.083% 0.080% 0.15% 0.61%

(11) Burn 0.05% 0.025% 0.028% 0.027%

(12) Others 0.30% 0.284% 0.284% 0.254%

(13) Total 4.70% 4.308% 4.223% 3.991% 6.65% 6.10%

Table 2D: Annual Health Claims Incidence Calculation

In should be noted that in the budget a Health Claims Incidence Rate of 0.61% is applied to every

treatments.

We have also estimated the expected cost of each treatment

Treatments Estimate Experience Budget


July 08 to July 09

July 08 to June 09

2008 to 2009 / 2009 to 2010

General surgery 2,000 1,917 1,916 1,911 3000

Obstractical Surgery

2,000 2,054 2,049 2,036 2000

Ophthalmic Surgery 1,500 1,280 1,284 1,283 1000

Road Traffic Accident

1,500 1,310 1,277 1,228 1500

Hospitalisation over 72 hours (in general)

2,000 1,821 1,809 1,799 2000

ANC Support 1,000 881 892 894 500

Acute Respiratory tract infection

1,200 1,132 1,124 1,087 400

Neonatal emergencies

1,000 1,005 1,012 1,020 1500

Normal Delivery 1,000 991 991 991 1000

Asthma adult 1,200 1,142 1,139 1,116 1000

Burn 1,500 1,396 1,396 1,386

Others 3,000 3,000 3,052 3,263

Table 2E: Health Claims Cost by Treatments

Page 57

The "Others" category makes up a large percentage of the total incidence as well as the total overall cost

of Health Insurance. We were informed that the Claims Committee provided theses claims on a

discretionary basis and these claims include gall bladder operation and tonsil operation.

The following table summarizes the expected incidence rate as well as the expected claim cost:

Estimate from Experience

Pricing Budget

Treatments Incidence Rate

Average Claim Cost

Incidence Rate

Average Claim Cost

Incidence Rate

Average Claim Cost

General surgery 0.60% 2,000 0.71% 3000 0.61% 3000

Obstractical Surgery 1.20% 2,000 0.61% 2000 0.61% 2000

Ophthalmic Surgery 0.20% 1,500 0.61% 1000 0.61% 1000

Road Traffic Accident 0.50% 1,500 0.61% 1500 0.61% 1500

Hospitalisation over 72 hours (in general)

1.00% 2,000 0.23% 2000 0.61% 2000

ANC Support 0.05% 1,000 1.40% 500 0.61% 500

Acute Respiratory tract infection

0.10% 1,200 1.72% 400 0.61% 400

Neonatal emergencies 0.10% 1,000 0.10% 1500 0.61% 1500

Normal Delivery 0.50% 1,000 0.51% 1000 0.61% 1000

Asthma adult 0.10% 1,200 0.15% 1000 0.61% 1000

Burn 0.05% 1,500

Others 0.30% 3,000

Cost Per Policy 85.15 75.33 84.79

Table 2F: Health Insurance Cost Per Policy

In addition to the cost related to the incidence of the health claims (i.e. delivery, hospitalization over 72

hours, etc). There are additional costs in placing doctors in the branches to look after the members.

Experience Pricing Budget

Number of branches 70 56 72

Cost per doctor per month 5,000 5000 4,000

Cost per doctor per year 60,000 60,000 48,000

Expected number of HELP members 100,000 98,000 110,669

Average Cost Per Policy 42.00 39.80 31.23

Table 2G: Panel Doctor Costs

Page 58

Legal Benefit

(A) Estimate

(B) Pricing

(C) Budget

(1) Number of Lawyers 4 4

(2) Cost Per Lawyer Per Month 18,000 21,000

(3) Number of times of Lawyers' Visit

150

(4) Cost per Visit 500

(5) Expected number of HELP members

100,000 98,000 110,669

(A) and (C): (6) = [(1) + (2)] / (5) (B): (6) = [(3) + (4)] / (5)

Average Cost Per Policy 8.64 1.00 9.11

Table 3A: Legal Service Cost

In the pricing document, only the cost per visit and number of visit assumptions were made. We estimate the cost

of providing Legal Benefit by using information in Budget 2008 to 2009 and assume the cost of each lawyer to be

Tk18,000 per month and SAJIDA will employ 4 lawyers to support this program.

We also understand that these lawyers, although are employed on a full time basis, do not dedicate 100% of their

time on HELP but would also provide services to other legal matters of SAJIDA. We recommend that an estimate

should be made on the proportion of time these lawyers actually spend on HELP and multiple the total cost of

employing these lawyers by this proportion to provide a more accurate estimate of the Legal Service Cost of HELP.

For example, if these lawyers spent only 30% of their time on HELP, then the estimate cost of Legal Service should

be 30% x 8.64 = 2.59.

Page 59

Disaster Benefit

We are not able to use the total amount figures since July 2008 as there is discontinuance during the

month of April 2009 (as discussed in the Data Section) of the Disaster Benefit claim figures. We have,

however, estimated the incidence rate and average claim size using the figures from June 2009 to

August 2009.

Year 2009 2009 2009 2009 2009 2009 2009 2009 2008 2008 2008 2008 2008 2008

Month 8 7 6 5 4 3 2 1 12 11 10 9 8 7

Total Disaster Benefit Amount since July 2008

(1) Fire 108,512108,512105,512 93,512 90,770123,770 94,536 70,094 63,294 37,416 17,000 13,000 4,000 2,000

(2) Displacement 0 0 0 0 0 0 0 0 0 0 0 0 0 0

(3) Others 19,076 19,076 19,076 19,076 19,076 27,984 29,768 20,100 17,920 5,420 12,120 11,670 11,670 1,520

(4) Total 127,588127,588124,588 112,588109,846151,754124,304 90,194 81,214 42,836 29,120 24,670 15,670 3,520

Total Number of Disaster Benefit since July 2008

(5) Fire 48 48 47 43 41 38 40 26 23 13 6 5 2 1

(6) Displacement 0 0 0 0 0 0 0 0 0 0 0 0 0 0

(7) Others 18 18 18 18 18 44 39 11 10 10 12 10 10 4

(8) Total 66 66 65 61 59 82 79 37 33 23 18 15 12 5

Active number of borrowers

(9) Start 90,646 89,615 89,546 87,031 85,050 82,335 78,086 75,903 74,408 74,568 72,870 73,029 72,069 71,494

(10) End 89,615 89,546 87,031 85,050 82,335 78,086 75,903 74,408 74,568 72,870 73,029 72,069 71,494 69,878


(11) Average 90,131 89,581 88,289 86,041 83,693 80,211 76,995 75,156 74,488 73,719 72,950 72,549 71,782 70,686

Average Claim Amount: (12) = (4) / (8)

(12) 1,933 1,933 1,917

Estimated Incidence Rate (13) = (8) / (11)

(13) 0.073% 0.074% 0.074%

Table 4A: Disaster Claim Calculation

We estimate the cost of providing Disaster Benefit as follows:

Estimate Pricing Budget

(1) Disaster Claim Incidence Rate 0.075% 0.26% 0.25%

(2) Average Disaster Claim 2,000 3,000 3,000

(3) = (1) x (2) Average Disaster Benefit Cost Per Policy 1.50 7.80 7.50

Table 4B: Disaster Benefit per Policy

Page 60

Education Benefit

The cost of the Education Benefit is derived using similar methodology of Life Insurance and Health

Insurance.

We first find out the total education claims amount during the investigation period and then derive the

monthly education claims and the respective monthly incidence rate. The annual incidence rate is the

sum of monthly incidence rate.

Year 2009 2009 2009 2009 2009 2009 2009 2009 2008 2008 2008 2008 2008 2008

Month 8 7 6 5 4 3 2 1 12 11 10 9 8 7

Total Education Claims since July 2008

(1) Class 6 80 73 68 55 54 56 49 51 48 39 31 16 12 11

(2) Class 7 146 132 126 101 94 81 63 66 61 50 43 21 18 14

(3) Class 8 178 167 153 111 94 66 47 47 41 35 16 4 2 3

(4) Class 9 168 154 143 99 86 68 47 47 43 41 28 12 9 8

(5) Class 10 106 100 89 68 53 37 13 8 5 6 2 11 3 2

(6) SSC 66 56 56 51 46 35 25 29 29 28 13 43 21 20

(7) HSC 513 487 473 339 331 281 249 230 202 159 102 16 2 1

(8) Honours 93 93 92 62 62 60 53 53 46 38 26 2 0 0

(9) Masters 6 4 4 4 4 4 6 6 6 4 2 0 7 6

(10) Higher Education

54 54 48 38 34 32 29 21 16 13 16 5 4 1

(11) Total 1410 1320 1252 928 858 720 581 558 497 413 279 130 78 66

Monthly Education Claims since July 2008

(12) Class 6 7 5 13 1 -2 7 -2 3 9 8 15 4 1 11

(13) Class 7 14 6 25 7 13 18 -3 5 11 7 22 3 4 14

(14) Class 8 11 14 42 17 28 19 0 6 6 19 12 2 -1 3

(15) Class 9 14 11 44 13 18 21 0 4 2 13 16 3 1 8

(16) Class 10 6 11 21 15 16 24 5 3 -1 4 -9 8 1 2

(17) SSC 10 0 5 5 11 10 -4 0 1 15 -30 22 1 20

(18) HSC 26 14 134 8 50 32 19 28 43 57 86 14 1 1

(19) Honours 0 1 30 0 2 7 0 7 8 12 24 2 0 0

(20) Masters 2 0 0 0 0 -2 0 0 2 2 2 -7 1 6

(21) Higher Education

0 6 10 4 2 3 8 5 3 -3 11 1 3 1

(22) Total 90 68 324 70 138 139 23 61 84 134 149 52 12 66


(23) Start 90,646 89,615 89,546 87,031 85,050 82,335 78,086 75,903 74,408 74,568 72,870 73,029 72,069 71,494

(24) End 89,615 89,546 87,031 85,050 82,335 78,086 75,903 74,408 74,568 72,870 73,029 72,069 71,494 69,878


(25) Average 90,131 89,581 88,289 86,041 83,693 80,211 76,995 75,156 74,488 73,719 72,950 72,549 71,782 70,686

Monthly Education Claim Incidence rate (26) = (22) / (25)

(26) Total 0.10% 0.08% 0.37% 0.08% 0.16% 0.17% 0.03% 0.08% 0.11% 0.18% 0.20% 0.07% 0.02% 0.09%

Annual Education Claims Incidence Rate (27) = Sum of (26)



July 08 to June 09

(27) Total 1.64% 1.56% 1.58%

Table 5A: Education Claims Incidence Analysis

Page 61

Experience


July 08 to July 09

July 08 to June 09

(1) Total Education Claim Amount during the period

2,191,200 2,066,300 1,968,800

(2) Total Number of Education Claim during the period

1,410 1,320 1,252

(3) = (1) / (2) Average Education Claims

1,554 1,565 1,573

Table 5B：：：：Education Benefit Claims

The average education benefit claims is around 1,500. This is consistence with the way education

benefit is actually paid out. Each quarter, claimants submit their claims to the Claims Committee and

the payment would be related to the claim amount of that particular quarter only, which is maximum

Tk500 per month or Tk1,500 per quarter.

Estimate Pricing Budget

(1) Education Claim Incidence Rate 1.8% 0.51% 0.51%

(2) Average Education Claim 1,500 6,000 6,000

(3) = (1) x (2) Average Education Benefit Cost Per Policy 27.00 30.60 30.60

Table 5C: Education Benefit Costs

Page 62

9 APPENDIX C: HELP Reserve Calculation and Tutorial

This outlines the steps in the calculation of the reserves requirement of the Health, Education and Life-

security Program (HELP) of SAJIDA as at the end of financial year 2008-2009. The valuation date is 30

June 2009.

Unearned Premium / Unexpired Risk Reserve Methodology

SAJIDA writes new HELP business on a daily basis and these policies would be effective for 1 year (the

duration of the policy) from the inception date. A member would pay an upfront Tk250 and would

receive the services provided under HELP for one year. For example, a new HELP policy issued on 1st

July

2009, it will be effective for one year until 30th

June 2009.

The unearned premium or unexpired risk reserve represents the premium that has been paid in advance

(and SAJIDA has received) for services that has not yet been provided. In the case of the new policy

issued in January 2009, as at end of June 2009, there is still 6 months of services left in the policy which

SAJIDA has not yet provided to the policyholder. A reserve would be recommended to be established in

respect of these policies which SAJIDA has already received premium upfront but with services that has

not yet been provided to its members (or likely to be provided).

Step 1: Obtaining Relevant Information

As the information of individual members (both in terms of new business information and in-force

business) is currently not available, we have used information on new loans granted as an estimate of

the new policies written under the HELP and the in-force business as at the end of June 2009. We were

provided with the following new HELP policies information:

(A) (B) (C) = (C)T-1

+

(B)T

(D) (E) = (C) - (D)


(End of Month)




Total number of new HELP fees since July 2008 from MIS Report

Difference

200806 69,878 8,126

200807 71,494 7,554 7,554 7,554 0

200808 72,069 6,020 13,574 13,576 -2

200809 73,029 6,719 20,293 20,073 220

200810 72,870 4,202 24,495 25,314 -819

200811 74,568 9,694 34,189 35,227 -1,038

200812 74,408 4,638 38,827 39,950 -1,123

200901 75,903 8,758 47,585 52,137 -4,552

200902 78,086 9,743 57,328 59,531 -2,203

200903 82,335 12,328 69,656 71,288 -1,632

200904 85,050 10,715 80,371 82,664 -2,293

200905 87,031 9,292 89,663 91,583 -1,920

200906 89,546 8,410 98,073 99,989 -1,916

200907 89,615 7,898 105,971 107,887 -1,916

Page 63

(A) (B) (C) = (C)T-1

+

(B)T

(D) (E) = (C) - (D)


(End of Month)




Total number of new HELP fees since July 2008 from MIS Report

Difference

200908 90,646 8,536 114,507 116,423 -1,916

Table 1: Number of New Loans Granted

We have used the figures in columns (A) and (B) as the exposure figures and new business figures

respectively. The inconsistency between the data provided and the data from the MIS report (column

(D)) is less than 2% (i.e. 1,916 / 98,073 = 1.95%). We therefore have employed the number of new loans

granted as an approximation to the number of new HELP policies issued in that particular month.

Step 2: Assumptions of Residual Risk

Proportion of Risk Component

In general, the Unearned Premium Reserve relates to the risk components of the insurance policy. In

this case, the risk components of the premium (or HELP fees) include the followings:

• Life Insurance;

• Health Insurance;

• Legal Service;

• Disaster Benefit; and

• Education Benefit

In addition to the risk components, the insurance policy also includes components which related to the

administration expenses in issuing as well as in maintenance of the HELP portfolio and SAJIDA. We have

estimated that the risk components to be 70% of the premium of TK.250 per policy. It should be noted

that we are also assuming that the current HELP fee is sufficient to cover the services the SAJIDA is

providing.

Delay of Claims

When we estimate the residual risk component of a policy, we need to take into account of any claims

that has incurred but not reported as at the valuation date (in this case 30th June 2009). Based on the

MIS report, around 1/3 of the claims would be paid after one month it has occurred. We, therefore,

have assumed claims will be paid out 1.5 months on average after it has occurred and SAJIDA will only

pay out claims which incurred with the policy year.

Persistency of policy

We also need to make assumption of the number of members leaving the program. Based on a

preliminary analysis, we have estimated that members are leaving the program on an average of 2% per

month. This translate to roughly around 78% of member remain in the program after 12 months.

SAJIDA has also provided an estimate of around 75% of the policy remains after 1 year.

Percentage of policyholder paying HELP more than once within a year

Page 64

We understand from the management of SAJIDA that a percentage of the members who would have

applied for loan more than once in a year. The main reason is that term of the loan usually last between

3 to 9 months and members may take out another loan after the current loan is fully repaid or expired.

We have not made further assumption on the percentage of policyholder who renewal their loan.

Step 3: Calculation of Reserves

In Tk. (A) (B) (C) (D) (E) (F) (G) (H)

Month Number of New Loans

Granted

Equivalent of HELP

fee income

Number of months

to valuation

date

Number of

months of

reserve

Persistency factor

Net Risk Factor

Reserve Factor

Unexpired Risk

Reserve

200806 8,126

2,031,500 13 0.5 77% 70.00% 2.24% 45,566

200807 7,554

1,888,500 12 1.5 78% 70.00% 6.87% 129,670

200808 6,020

1,505,000 11 2.5 80% 70.00% 11.68% 175,744

200809 6,719

1,679,750 10 3.5 82% 70.00% 16.68% 280,214

200810 4,202

1,050,500 9 4.5 83% 70.00% 21.89% 229,911

200811 9,694

2,423,500 8 5.5 85% 70.00% 27.30% 661,502

200812 4,638

1,159,500 7 6.5 87% 70.00% 32.92% 381,666

200901 8,758

2,189,500 6 7.5 89% 70.00% 38.76% 848,554

200902 9,743

2,435,750 5 8.5 90% 70.00% 44.82% 1,091,689

200903 12,328

3,082,000 4 9.5 92% 70.00% 51.11% 1,575,351

200904 10,715

2,678,750 3 10.5 94% 70.00% 57.65% 1,544,246

200905 9,292

2,323,000 2 11.5 96% 70.00% 64.43% 1,496,635

200906 8,410

2,102,500 1 12 98% 70.00% 68.60% 1,442,315

Total

26,549,750 9,903,063

Table 2: Calculation of Reserves

The estimated reserves as at the end of June 2006 related to HELP policies written in the past is Tk 9.9

million.

Page 65

Formula:

• (B) – Equivalent of HELP fee income: (A) x Tk. 250

• (C) – Number of months to valuation date (30 June 2009)

• (D) – Number of months of reserve: as we have assumed a claims delay of 1.5 months and we

also assumed the policies are issued at the start of the month. We have used the formula (D) =

12 + 1.5 – (C) with the exception for the policies issued in June 2009 where we assumed full 12

months of premium to be reserved.

• (E) – Persistency factor: we have assumed a 2% monthly lapsed rate where policyholder either

default on the loan or have repaid the loan. In either cases, they are no longer covered under

HELP. We have used the formula: (E) = (1 – 2%)(C)

For example, policies issued in December

2008, as we have assumed policies issued at the start of the month, there is a period of 7

months between beginning of December 2008 and the valuation date (30 June 2009). The

persistency factor for month December 2008 is assumed to be (1 – 2%)7 = 87%

• (F) – Net Risk Factor: we have assumed 30% of policies are expenses while 70% refers to the risk

or services to be provided to the policyholders. The formula is (F) = 1 – 30%. Note: This value is

composed of 20% expenses (which includes overhead) in pricing plus doctor’s and lawyer’s

salaries. This is then 37-40%. To be conservative, we have chosen 30%.

• (G) – Reserve Factor: (G) = (D) / 12 x (E) x (F)

• (H) – Unexpired Risk Reserve: (H) = (B) x (G)

Step 4: Summary and Analysis

The estimated reserve as at the end of June 2009 related to HELP policies was estimated to be TK11.32

million. This represents around 40% of the premium written in the Financial Year 2008-2009. However,

over 80% of this reserve is related to policies written between January 2009 and June 2009 as a result of

the significant growth rate of the membership base of SAJIDA.

In Tk. Premium

As % of

Total

Premium

Reserves

As % of

Total

Reserves

As % of

Premium for

the relevant

period

June 2008 to

December 2008 (7 months) 11,738,250 44% 2,176,312 19% 19%

January 2009 to

June 2009 (6 months) 14,811,500 56% 9,141,474 81% 62%

Total

(June 2008 to June 2009) 26,549,750 100% 11,317,786 100% 43%

Page 66

In general, the higher the growth rate of the portfolio, the larger reserve SAJIDA needs to set aside for

the services not yet provided to the customer of HELP. We have further analysis the increase in

membership base of SAJIDA:

Row Period Number of New

Loans Granted

As % of first

observation

period

By Half Year

(1) July 2008 to December 2009 (6 months) 38,827

(2) January 2009 to June 2009 (6 month) 59,246 153% [(2) / (1)]

By Quarterly

(3) July 2008 to September 2008 (3 months) 20,293

(4) October 2009 to December 2009 (3 months) 18,534 91% [(4) / (3)]

(5) January 2009 to March 2009 (3 months) 30,829 152% [(5) / (3)]

(6) April 2009 to June 2009 (3 months) 28,417 140% [(6) / (3)]

As shown in the above table, there is a significant increase in the number of new loans granted (as more

new loans granted means more new HELP policies). The following table also shows the increase in the

number of active borrowers, it represents SAJIDA is taking on a larger portfolio of HELP policies.

Row Period

Number of Active

Borrowers (end of

relevant period)

Increase %

By Half Year

(1) July 2008 to December 2009 (6 months) 74,408

(2) January 2009 to June 2009 (6 month) 89,546 20% [(2) / (1) – 1]

By Quarterly

(3) July 2008 to September 2008 (3 months) 73,029

(4) October 2009 to December 2009 (3 months) 74,408 2% [(4) / (3) – 1]

(5) January 2009 to March 2009 (3 months) 82,335 11% [(5) / (4) – 1]

(6) April 2009 to June 2009 (3 months) 89,546 9% [(6) / (5) – 1]

As we understand no reserve was set aside for HELP at the end of June 2009 (Financial Year 2008-

2009. We recommend SAJIDA to set up a reserve for HELP by the end of next Financial Year 2009-2010

– end of June 2010.

Page 67

10 APPENDIX D: MICROINSURANCE KEY PERFORMANCE

INDICATORS (KPI)

The CGAP Working Group on Microinsurance, together with Appui au Développement Autonome (ADA), and Belgian Raiffeisen Foundation (BRS) have published a booklet titled Performance indicators for microinsurance: A handbook for microinsurance practitioners which the reader is encouraged to download 1 (for free). This booklet focuses on just ten key indicators which will be briefly described here.

Measuring financial performance reveals a program’s strengths and weaknesses. It allows managers to determine how the program is performing and to identify which areas need improvement. The indicators in the booklet are, however, preceded by nine key principles regarded as an integral part to microinsurance management and “a priori conditions” without which transparent and accurate performance measurement is impossible. Table F-1: The nine key principles No. Principle What it means

1 Separation of data Capture separate microinsurance data. Accumulate it and manage it as a valuable resource.

2 Collection of relevant and accurate data Seek expertise to design a MIS and database, then collect the correct and accurate data.

3 Production of financial statements Using the data, prepare Balance Sheet, Income Statement, and Cash Flow Statement using accrual accounting principles.

4 Calculation and setting up reserves Calculate reserves correctly and then fund them. Reflect the reserves correctly in the financial statements.

5 Efficient claims management Continuously monitor and analyze claims data to assist with understanding of the insured risks and claims experience.

6 Clear investment policy Develop and abide by a formal investment policy. 7 Technical expertise Develop the right technical expertise. 8 Transparency Clear and transparent communication. 9 Client satisfaction Focus on client / member satisfaction.

The ten indicators are just the key indicators and not intended to be an exhaustive monitoring system. They measure performance in key areas of the program, and more detailed indicators should be used to diagnose and ferret out specific problems. Trends in the indicators should be analyzed and monitored closely as these are more informative than snapshots of indicator values. Table F-2: the ten key MI performance indicators

Indicator Interpretation from consumer perspective 1 Net income ratio Shows how profitable the program is

Product value 2 Incurred expense ratio Shows how efficiently the service is delivered 3 Incurred claims ratio Shows how valuable the program is

5 Promptness of claims

settlement Time spent to settle claims, an indicator of service quality and efficiency.

Service quality 6 Claims rejection ratio

Proportion of claims rejected which points to how well the insured understands the product

1 See http://www.microinsurancefocus.org/

Page 68

Indicator Interpretation from consumer perspective 4 Renewal rate Shows how satisfied the insured is Awareness and

satisfaction 7 Growth ratio Rate of growth for a given period Indicator Interpretation from consumer perspective 8 Coverage rate Proportion of the target market that is covered 9 Solvency ratio Financial strength of the program

Financial prudence 10 Liquidity ratio

Financial capacity of the program to pay its short term liabilities

Inherent in this set of principles and indicators is the assumption that microinsurance managers are guided by a strategic business plan which is updated regularly. Preparing a business plan and managing it accordingly is in itself an important principle that all business endeavours should practice automatically. If an organisation has other businesses or services aside from microinsurance, the business plan should be a comprehensive one but with a sub-plan for microinsurance. All business plans naturally contain performance targets; for microinsurance these targets should include projected key indicator values in the business plan. Later, as Management monitors actual performance, special attention should be given to the variance in actual and projected indicator values.

Page 69

11 APPENDIX E: HELP Projections

The projections presented are by no means precise. They do give a good picture of what the financial situation of SAJIDA would look like given these assumptions:

1. Growth: 15% per year as per SAJIDA 2. Claims: This is a per policy expense based on average policies expected in the year (not

at end of year). Per policy values are from the pricing section. a. Health: Tk 85 b. Death: Tk 85 c. Disaster: Tk 1.5 d. Scholarship: Tk 27

3. Increase in Actuarial Liabilities: This is a detailed calculation. An approximation of 4-5% of premium would suffice.

4. Operations Expense: 20% of premium 5. Training: 500,000 Tk per year 6. Distribution: 0.1% of premium 7. Overhead Expense: This was not included in the 2009 income statement and 5% of

premium was included in the SAJIDA budget for Overhead. Our calculations suggest that 10% of HELP premium is an appropriate approximation for the MFI overhead.

Overhead Expense Calculation

2008

Annual Report

A. MFI Salaries 58,584,120.00

Already Allocated:

B. Help salaries ( includes 10% of branch mgr/acct – approx 500,000) 4,000,000.00

C. Balance of Branch mgr/acct salaries (500,000 /.9) 5,000,000.00

D. Balance of MFI salaries to be allocated (A-B-C) 49,584,120.00

E. Time allocation of MFI staff to HELP 5%

F. Total Takas to allocate to HELP (D x E) 2,479,206.00

G. 2008 HELP premium (from income statements) 25,326,079.00

H. MFI Overhead as a percent of HELP premium (F / G) 10%

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