Rural MicroinsuranceHelping the poor weather the storm
Richard LeftleyPresident & CEOMicroensure
2009 RBAP-MABS National Roundtable ConferenceMay 12-13, 2009
Hyatt Hotel and CasinoManila
The poor do not buy insurance
Premiums (in USDmn) 2006
Premiums in % of GDP
2006
Premiums per capita
(in USD) 2006
North America $1,258,301 8.67% $3,804.0Europe $1,484,881 8.27% $1,745.7Asia $800,819 6.63% $205.0Middle East and Central Asia $18,901 1.37% $62.5Africa $49,667 4.77% $53.6The Philippines $1,443 1.48% $17.2World $3,723,412 7.52% $554.8Industrialised countries $3,390,180 9.18% $3,362.2Emerging markets $333,231 2.69% $59.8
Source: Swiss Re, Economic Research & Consulting, sigma No. 4/2007
Client Demand: Chutes & Ladders
•The poor face huge risk•They seek to mitigate risk often informally•Informal mechanisms are poor value and insecure•Insurance is safety net•24% entering hospitals left below the poverty line in India
Supply from insurers is available
• Commercial insurance companies are interested in this market
• Life & property insurance is available from local insurers
• Crop and health harder to secure locally: need global reinsurers
Introducing MicroEnsure
• Started working on microinsurance in 2002
• MicroEnsure established in 2005• Currently serving 3,500,000 lives globally• Gates Foundation grant; $25m over 5
years• Expand into 11 new countries• Serve 25m people by 2012 – life, health, crop
Current Footprint
AMERICA’SMexicoColumbiaHonduras
AFRICAZambiaMalawiUgandaGhanaTanzaniaZimbabweMozambique
ASIAIndiaPhilippinesIndonesia
What’s needed to make it work?
Risk Carrier
Back OfficeFront Office
MicroEnsure model
Risk CarrierInsurersReinsurersCell CaptivesMutual Benefit Back Office
IT SystemsClaims mgmtProduct DesignTrainingEducation
Front OfficeRural Banks, MFI’s etc
NGO’s / Aid Agencies – such as child sponsorship
Retail – e.g. mobile phone kiosks Brokerage
Outsourcing
So what products do the poor want?
What forces unplanned spending on the poor?• Funerals• Medical emergency• Fire or natural disaster• School fees• Weddings• Crop failure in rural areas
Life Insurance
1. Mortgage Redemption – protects the lenderBorrower dies or is disabled during a loan period. The mortgage redemption pays off the outstanding loan plus interest to the lender.
2. Term Life – excellent for funeralsNormally loan linked and can provide a fixed sum insured upon death of borrower, spouse, children or parents.
3. Investment products – provides a saving returnReturn of premium plus interest upon maturity – can be problematic to collect the premium over 5 year term
Saturnina Santocildes, Iloilo
•A 57 year old widow fought for her children•Took 15 loans, the last was P9,000•She died after extracting her tooth•The P100,000 was split between the children: The youngest remain at school, the oldest started a business; one bought a cow
Property Insurance Products
• Philippines first micro housing product launched last year (Bahay Asenso)
• Protects the house against fire and all natural calamities• Provides cover for death arising from an accident• Provides evacuation benefit to cover costs
• Sold in units of P50,000; maximum of three units per borrower
Weather index products
• Demand from small hold farmers for inputs• Agri-Agra law could unlock significant
funds• Rural banks are worried about climate risk• Traditional insurance has issues; claims
payment• Solution is weather index products
• Quick and transparent claims trigger• Index available for a range of risks
Philippines Index Products
• Drought for rice farmers• Too little rain triggers a payment• Rainfall measured at an existing rainfall gauge
• Typhoon for rice farmers• Farmers location captured with GPS• Index uses windspeed and distance to measure
impact
• Excess rain (in development)• Pest & Disease available from PCIC
Livestock Insurance
• Protects against death of the animal• Biggest issue is the cost of
controlling fraud which boosts pricing
• MicroEnsure working on new technology which reduces fraud and price
Health Insurance Products
• High demand due to frequency of use
• Admin cost restricts us to in-patient cover
• Out-patient addressed in normal cash flow
• Needs to be a cashless facility – requires TPA
Indian micro health product
• Provides P22,500 cover for family of four• Service provided on a cashless basis• In-patient only cover• Costs P350 per year for family of four• Pre-existing and maternity from day-one• Working with SML – over 1.7m families
Why introduce micro insurance?
1. Provides a competitive advantage in an increasingly competitive lending market
2. Reduced risk for clients leads to lower PAR3. Additional revenue opportunity for the
rural bank from fee income4. Provides access to new markets (e.g. farm
input lending)
How to choose the right product?
• Start by understanding client demand, clarify what is already available and what do regulations allow?
• Balance these three requirements• Be realistic about operational capability• Internal & external needs differ
Balancing the conflicts
• Lower premium = lower commission• Better / cheaper products might attract
additional borrowers• Revenue from insurance will always be
lower than from lending• Insurers needs to make profit..how
much?• Its all about the client – right???
What's the bottom line?
• Revenues from insurance are low• Range from P3 – P50 per policy• Global average is P12 per policy
• Whilst this is incremental income, there is a cost associated with administration
• Complex products require investment or an able partner who can deliver
Communicating: Staff training
•Loan officers need to understand products•Loan officers train clients•MicroEnsure uses its own training teams to educate branch staff•There is no cost to the rural bank
Communicating: Client Education
Conclusions
• The poor want to mitigate risk• Insurance reduces lending risk and
generates revenue• Demand for; health, life, property, crop• Needs to be a partnership model• Back office is key in reducing
transactional cost and providing good service
Questions?
Thank you for your attention, more information:
www. microensure.com
richard.leftley @ microensure.com
william.martirez @ microensure.com
