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CHAPTER 16CHAPTER 16Microinsurance:Microinsurance: ProvidingProviding

ProfitableProfitable

Risk Management PossibilitiesRisk Management Possibilities

for thefor the

LowLow--Income MarketIncome Market

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Key Risk Facing Poor PeopleKey Risk Facing Poor People

DEATH

ILLNESS OR INJURY

LOSS OF PROPERTY (THEFT, FIRE)

NATURAL DISASTER (EARTHQUAKE,

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TYPES OF MICRO INSURERS:

TYPES OF MICRO INSURERS:

COMMERCIAL INSURERSCOMMERCIAL INSURERS

NGOsNGOs

MUTUALSMUTUALS CBOsCBOs

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MICRO INSURANCE PRODUCTSMICRO INSURANCE PRODUCTS

& SERVICES& SERVICESLIFE

HEALTHCARE

DISSABLITYFUNERAL

LIVESTOCK

LOANSLOANS

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Opportunities for Insurers in

Microinsurance

Growth

Big Market

ProfitabilityControls

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STRATEGY FOR GROWTH IN MISTRATEGY FOR GROWTH IN MI

ORGANISATIONAL DEVELOPMENT

PRODUCTDESIGN

MARKETINGDECIDING THE MODEL

SUSTAINIBILITY

ROLE OF GOVERNMENT

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ORGANIZATIONAL DEVELOPMENTORGANIZATIONAL DEVELOPMENT

ORGANIZATIONAL STRUCTUREORGANIZATIONAL STRUCTURE

RECRUITMENTRECRUITMENT

TRAININGTRAINING INSTITUTIONAL CULTUREINSTITUTIONAL CULTURE

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PRODUCT DESIGNPRODUCT DESIGN

Product design starts with four basicsteps:

DEFINETHETARGET GROUP IDENTIFY INSURABLE RISKSIDENTIFY INSURABLE RISKS

DETERMINEKEY PRODUCTDETERMINEKEY PRODUCT

FEATURESFEATURESESTABLISH PAYMENTCAPABILITIESESTABLISH PAYMENTCAPABILITIES

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MARKETINGMARKETING PROMOTING INSURANCETO THE POOR The poor often lack familiarity with

insurance and do not understand how itworks.They need greater awareness.

To persuade poor regarding insurancebenefits with their limited resources tomeet any perils.

To make sure the safety return of their

sum with additional benefits even if theydont claim.

Creating trust among low income peoplefor insurance providers

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MICROMICRO--INSURANCE DELIVERYINSURANCE DELIVERY

MODELSMODELS One of the greatest challenge for microOne of the greatest challenge for micro--

insurance is the actual delivery to clients.insurance is the actual delivery to clients.Methods and models for doing so varyMethods and models for doing so varydepending on the organization, institution,depending on the organization, institution,

and provider involved.and provider involved. In general, there are four main methodsIn general, there are four main methods

for offering microfor offering micro--insuranceinsurance

1. THE PARTNER1. THE PARTNER--AGENT MODEAGENT MODE2. THE FULL2. THE FULL--SERVICE MODELSERVICE MODEL3. THE MUTUAL MODEL3. THE MUTUAL MODEL4. THE PROVIDER Model4. THE PROVIDER Model

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STRATEGIES FOR SUSTAINABILITYSTRATEGIES FOR SUSTAINABILITY

LIMITBENEFITSLIMITBENEFITS

FOCUS ON EFFICIENCYFOCUS ON EFFICIENCY

DIVERSIFY INCOMESOURCESDIVERSIFY INCOMESOURCES

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ROLE OF GOVERNMENTSROLE OF GOVERNMENTS

Governments can promote the developmentof supply and demand for micro insurancethrough a variety of other mechanisms.

CREATING AN ENABLING LEGALENVIRONMENT

EDUCATION ANDSOCIAL MARKETING

STRENGTHENING INSTITUTIONS

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MarketMarket

Microinsurance potential market betweenMicroinsurance potential market between1.5 and 3 billion1.5 and 3 billion

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Egypt 11% of population lives on less than USD2 per dayPilot project since February 2008

Product: Death/Disability microinsurance

Customers: 30,000.Distribution: through Planet

Finance

Columbia Pilot project since November 2007Product: accident microinsurance

Customers: 639,000Distribution through supermarkets

Sub-SaharanAfrica

Pilot project since Sept 2007

Product: Death/Disability microinsurance

Customers: 3,000.Distribution through PlanetFinance

India 80% of population lives on less than USD2 per dayActive since 2003

Products: Risk-Life, accident and health schemes

Customers: 1.6 Mill ..Distribution through 182 NGOs asCare,Activists for social alternatives,SKS

Indonesia 52% of population lives on less than USD2 per dayPilot project since Sept 2006

Product: Credit-Life microinsurance

Customers: 84,000Distribution through several local

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Profitability

Profitability in microinsurance is earned byoffering appropriate products to masses ofpeople in an efficient manner.

Microinsurance products have very lowmargins. But if these products are sold tolarge numbers of people, the accumulatedincome could be quite substantial.

Examples include La Equidad in Colombia,Tuw Skok in Poland,CARD MBA in thePhilippines,AIG Uganda, and Delta Life inBangladesh.

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Controls Microinsurance demands strong and innovative

controls for adverse selection, moral hazard, andfraud.

Microinsurance requires strong controls, theremust be a flexible approach to managing them.

For example, a death certificate usuallyaccompanies a death claim. But in manycountries it is almost impossible to obtain a deathcertificate in rural areas, making it inappropriateto require such a document from ruralpolicyholders.

To confirm the death, some organisations use aservice with a wide network and may settle theclaim immediately in cash or in kind. Othersrequire letters of confirmation from religiousand/or local political leaders. In this way, controlis maintained using mechanisms that aremanageable for rural policyholders.

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RECOMMENDATIONS ANDRECOMMENDATIONS AND

CO

NCLUSIO

NCO

NCLUSIO

N Simplification of products where requires makingSimplification of products where requires making

them easy to understand, easy to use, sell andthem easy to understand, easy to use, sell andservice.service.

Simplifying and making premium payment plansSimplifying and making premium payment plans

flexible to suit people needs.flexible to suit people needs. Focus on volumes by targeting large groups.Focus on volumes by targeting large groups.

Claim settlement to be timely, simple andClaim settlement to be timely, simple andtransparent.transparent.

Maximizing the benefit of connectivity to reachMaximizing the benefit of connectivity to reachthe unserved markets.the unserved markets.

Using additional innovative distribution channelsUsing additional innovative distribution channelsto achieve costto achieve cost--efficiency in agricultural markets.efficiency in agricultural markets.

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Thank UThank U