Insights from India's microinsurance success


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India is the global leader in microinsurance. Innovation is blooming and new products and delivery models are being explored. More than 300 million low-income risks are insured. Indeed, more than 60% of microinsurance policyholders are to be found in India! What are the catalysts for the success of microinsurance in India? What role has the government as well as market forces played in the exponential growth of the sector? What can insurers learn from India's experience? The webinar focuses on "Insights from India's Microinsurance Success", one of the chapters of the newly launched "Protecting the Poor: A Microinsurance Compendium, Volume II" published by the Munich Re Foundation and the International Labour Office.

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Insights from India's microinsurance success

  1. 1. WEBINAR ON Insights from India’s Microinsurance Success Presenter: Rupalee Ruchismita Executive Director Center for Insurance and Risk Presenter: Management Presenter: Michal Matul Samrat Nandy Senior Research Officer Vice President for Client Markets Microinsurance Innovation Facility Swiss Re Services India Moderator: Jasmin Suministrado Knowledge Officer Microinsurance Innovation Facility1
  2. 2. Interfacing with the webinar system Hides/unhides the control panel Polls will also be opened during the webinar – participate by clicking on your answers Tell us what you think. Type your questions/ comments here even while the Please send chat presentation is on- TO STAFF going.2
  3. 3. Profile of participants More than 500 registered By Region participants By Type of Organisation By Participation in Microinsurance3
  4. 4. IN THE PANEL Insights from India’s Microinsurance Success Presenter: Rupalee Ruchismita Executive Director Center for Insurance and Risk Presenter: Management Presenter: Michal Matul Samrat Nandy Senior Research Officer Vice President for Client Markets Microinsurance Innovation Facility Swiss Re Services India Moderator: Jasmin Suministrado Knowledge Officer Microinsurance Innovation Facility4
  5. 5. Today’s webinar 1. Overview of Compendium II 2. Global microinsurance trends and evidence 3. Insights from India’s success  Key drivers  Impact of regulation  Growth of life insurance  Mass health insurance powered by PPPs  Government-sponsored agriculture insurance  New frontiers and enablers 4. Replication opportunities5
  6. 6. Compendium overview & global microinsurance trends6
  7. 7. Overview of Compendium II• Part 1 Emerging issues  Current trends in microinsurance  The potential of microinsurance for social protection  What is the impact of microinsurance?  Microinsurance and climate change• Part 2 Health insurance  Innovations and barriers in health microinsurance  Third-party payment mechanisms in health microinsurance  The elusive quest for estimates of willingness to pay for health microinsurance• Part 3 Life insurance  Savings in microinsurance: Lessons from India  Improving credit life microinsurance  Funeral insurance• Part 4 General insurance  Designed for development impact: Next-generation index insurance for smallholder farmers  Livestock insurance: Helping vulnerable livestock keepers manage their risk• Part 5 Insurance and the low-income market  The psychology of microinsurance: Small changes can make a surprising difference  Emerging practices in consumer education on risk management and insurance  Improving client value: Insights from India, Kenya, and the Philippines  Microinsurance that works for women  Formalizing the informal insurance inherent in migration: Exploring potential links between migration, remittances and microinsurance• Part 6 Insurers and microinsurance  Is microinsurance a profitable business for insurance companies?  Teaching elephants to dance: The experiences of commercial insurers in low-income markets  State and market synergies: Insights from India’s microinsurance success  Pricing of microinsurance products• Part 7 Delivery channels and intermediaries  New frontiers in microinsurance distribution  Microinsurance intermediaries• Part 8 Infrastructure and environment for microinsurance  The technology revolution in microinsurance  Access to insurance and financial-sector regulation  Protecting consumers while promoting microinsurance 7
  8. 8. Microinsurance Trends• More low-income households are covered by insurance Asia Latin America Africa Total 2006 66 8 4.5 78 2009 14.7 2011 350 to 400 45 to 50 18 to 24 <500• Stakeholders in microinsurance are becoming more diverse  Over 30 international insurers and reinsurers offer MI products  The number of delivery channels has increased with new technologies  Increasing involvement of governments and other enablers• Providers are offering more varied range of products  From credit life and other automated life covers to health, agriculture, property or savings- linked products8
  9. 9. Client Value and Viability: Evidence so far• Knowledge about microinsurance impact is emerging  Evidence on impact of health microinsurance on reduction of out-of-pocket health expenditures and an increase of utilization of health care services (based on 22 studies)• Microinsurance offerings improve over time  Clear correlation between client value and the maturity of microinsurance markets• Automated and basic products are viable  Credit life and other automated life covers are viable  Government involvement makes health insurance feasible  More comprehensive health and agriculture products may need smart subsidies or other government interventions in value chain9
  10. 10. Insights from India’s microinsurance success10
  11. 11. Business case: Industry Characteristics Other Private 5 Largest Private Insurance Insurance Companies, 6% Companies, 16% Public Insurance Companies 5 Largest Private Insurance Companies Public Insurance Other Private Companies, 78% Insurance Companies 5 Public Insurers are larger than all the Private Players!11
  12. 12. Business case: Tracking impact of Rural and Social Sector Targets General Insurance: Rural-Social Premium by Companies for 2008-09 & 2009-10 16 14 Premium Amount in INR (billions) 12 10 8 6 4 2 0 2008-09 2009-10 State and Center supported health Has the insurance industry discovered a insurance schemes have contributed sustainable business case for the rural and significantly to the portfolio increase social sector?12
  13. 13. Key drivers • Government commitment • Conducive regulation • Public Private Partnerships • Specialized market players • Product and process innovations13
  14. 14. Key driver: Conducive Regulation • Forced Familiarity through Rural and Social Sector Obligations • Facilitative regulation such as Micro Insurance Act, 2005 • Encouraging regulation allowing Standalone Health Insurance Companies • Supportive Regulation in Allied sectors – Banking, IT14
  15. 15. Evaluating Regulation: Tracking impact of Rural and Social Sector Targets General Insurers: Rural-Social Premium collected from 2005-06 to 2009-10 50 45 Premium Amount in INR 40 33 35 30 27 30 (billions) 20 10 0 2005-06 2006-07 2007-08 2008-09 2009-10 General Insurance without AIC The Surge • General Insurance: Sudden growth in overall rural and social business from 2008-09 to 2009-10 even though number of insurance companies has remained • The rural portfolio has grown steadily exceeding regulatory targets!15
  16. 16. Evaluating Regulation: Evaluating Regulation: Tracking impact of Micro Insurance Act, 2005 Life Insurance: Rural/Social vs Micro Insurance Premium Collection 70,000 65,221 Amount of Premium Collected in INR (millions) 60,000 50,969 50,000 42,362 40,000 30,000 20,000 10,000 108 386 206 - 2007-08 2008-09 2009-10 Rural Premium MI Premium • Life Insurers: The rural portfolio has grown steadily exceeding regulatory targets! • Whereas, the MI portfolio remains insignificant Need for revisiting MI Act 2005?16
  17. 17. Swiss Res India experience in MI - Life • Sourcing of Retail products is expensive (localised advertising, bare-foot agents, high-lapsation, averse to risk products) • Unhealthy price pressure on credit life (insurers under pressure to fulfil quota, big MFIs in superior bargaining position) • Exciting new channels (Looking to reduce the dependence on MFIs -Common Service Centres, Cooperatives, Rural banks, Rural Postal Life) • Potential for savings-linked product (flexible surrenders, transparent maturity benefits, fair incentives to the intermediary)17
  18. 18. Mass health Insurance Chronological map of pro-poor mass health insurance schemes in India 2003 2005 2007 2008 2009 YESHASVINI WEAVERS AAROGYA RSBY TNCM INSURANCE SRI 3 million 1.6 million 70 million 80 million 35 million lives families lives lives lives 58% 18% nil 5% nil TPA- INSURER INSURER INSURER INSURER Manager IMPLEMENTOR IMPLEMENTOR IMPLEMENTOR IMPLEMENTOR Hospital- care Hospital-Care Hospital-Care Hospital-Care Hospital-Care18
  19. 19. Swiss Res India experience in MI – Govt. sponsored health schemes • Successful PPP model that’s scalable and fair to all stakeholders • Open to misuse. The Government is aware and in conjunction with insurance companies are working to plug the drain • Least cost wins. Price sanity evolving cycle by cycle • More detailed guidelines required for common surgeries, hysterectomy, hernia, cataract etc • Has contributed immensely in the creation of medical care infrastructure • Stakeholders still a long way to go in terms of investing for better resources, both human and material. Partly linked to the timely release of premiums by the Government. • Selection of medical network, tariff structure and the TPA choice play a vital role in the success of a scheme19
  20. 20. Agriculture Insurance: NAIS Agriculture Insurance: Offered by Agriculture Insurance corporation (AIC), the public Insurer Growing percentage insured 19 million farmers of small farmers in the portfolio 35 is heartening 30 25Millions of 20farmers Farmers covered 15 10 Farmers who claimed 5 Area (hectare) 0 20
  21. 21. Swiss Res India experience in MI - Weather Weather Insurance in India was able to sustain and scale up from a pilot project to a market due to: • Transparent index that is clearly understood by all parties • Commitment of local insurer to understand index, interest for commercialization and willingness to assume part of the risk • Use of effective distribution channels e.g., insurers, governmental institutions, MFI/NGO/SHG, input suppliers, banks, post office • Legal framework that recognizes index products • End-customer awareness of the benefits of the product • Support from government of India via premium subsidies and standardization of products (transparency and affordability) • Support from international reinsurers (technical inputs and risk capacity)21
  22. 22. New Frontiers and Enablers Catalytic Infrastructure : • Micro Insurance Data Bank • Enabling accreditation and standardization in allied sectors (weather data, health care) • Public good like identification cost to be borne by state and methodologies to standardize brought in22
  23. 23. Microinsurance Map: Market Potential: No. of rain gauges state-wise23
  24. 24. Enabling Sector Growth: Microinsurance Map a Databank24
  25. 25. New Frontiers and Enablers Industry Directions: • New Distribution channels:  Banking Correspondents,  Internet kiosks,  Rural supply chains (dairies, fertilizer and seed companies etc.) • Specialized actors • Products:  Cover risk reduction and tangible services,  Portfolio covers25
  26. 26. Delivery and Products Bundled Products - Farm Inputs with NEW • Rural supply chains crop insurance, DISTRIBUTION • Rural internet kiosks - Telemedicine with CHANNELS Health Insurance • Business correspondents Over The Counter Products Hospitcash • Rural MFI (BASIX)MFI DISTRIBUTION • Urban MFI (EQUITAS) Credit Linked Insurance MUTUALS & NGO • Risk carriers (DHAN Foundation) LED MODELS • Insurer partners (SKDRDP, VimoSEWA) Community Based Group Insurance Schemes • Agent based GOVERNMENT • India Post Life Insurance FACILITATED • Bancassurance (Regional Rural Rural postal life insurance CHANNELS Banks, Co-operative Banks) Crop Insurance26
  27. 27. Replication opportunities27
  28. 28. Replication Case 1: Pioneer to Kilimo Salama in Kenya ("Safe Agriculture") Syngenta Foundation main driver of the Kilimo Salama initiative Swiss Re Safaricom • Risk Capacity • Policy registration • Pricing • Premium payment Reinsurance • Settlement Premium • Insurance policy Calculation • Claims payment • Claims payment Seeds, fertiliz UAP Insurance er and chemicals Stockists Premium Farmers Weather data Kenya Meteorological Department28
  29. 29. Replication Case 2: IndiaPost to NIPOST and SONAPOST • INDIAPOST has 150,000 post offices! • Rural Postal Life Insurance (RPLI in 2009-10) had 9.9 million life policies  Burkina Faso: SONAPOST in collaboration with local life insurer provides life insurance for 10USD annual premium.  Nigeria: NIPOST in collaboration with ONE Network is building a network of 50,000 agents to distribute many financial services29
  30. 30. WEBINAR ON Insights from India’s Microinsurance Success Presenter: Rupalee Ruchismita Executive Director Center for Insurance and Risk Presenter: Management Presenter: Michal Matul Samrat Nandy Senior Research Officer Vice President for Client Markets Microinsurance Innovation Facility Swiss Re Services India Moderator: Jasmin Suministrado Knowledge Officer Microinsurance Innovation Facility30