Delivering on the Promise of
Microinsurance:
Putting Clients First
Delivering on the Promise of
Microinsurance:
Putting Clients First
Presenter:
Birendra Mohanty
Vice President, Financial I...
Agenda
 Introduction to the financial experience and the
factors underlying the profitability of the various
microinsuran...
Introduction to insurers
Product Market Distribution Organizational
Structure
South Africa
Group funeral
(2003)
Individual...
Business viability analysis framework
Profitability
Sustainability and value creation for shareholders
Scale Claims costs ...
Scale
 Health microinsurance business accounts for over 27% of the health insurance premiums written by ICICI
Lombard (US...
Profitability
Policies
CIC (Credit Life) 210 000
OM (Funeral) 100 000+
ICICI Lombard
(Health-W&A)
2 200 000
ICICI Lombard
...
7.76 12.26
23
15.21
20.1
FY 2008 FY 2009 FY 2010 FY 2011 FY 2012
# lives Enrolled (in mns)
ICICI Lombard: Reducing claims ...
ICICI Lombard: Reducing claims cost (2)
Effect
Build
Efficient
Claims
Process
61%
98%93% 99%95%
80%80% 72%78%
RSBY Weaver ...
La Positiva: Reducing administrative costs
Low sales costs: Sales supervisors hired locally. Staff of
distribution partner...
Old Mutual: Monitoring to identify improvements (1)
Servicing is taking
up 30% of sales
force time
Lower sales
productivit...
Manual paper driven
processes
High cost of
administration
Low Efficiency Levels
Automation of
processes
Prioritising On-
B...
CIC: improving organizational structure
Specialized
unit
• 2001: Incubated as department under Life & Health
division
• 20...
Putting clients first: many aspects of value
PRODUCT
• Coverage, service quality,
exclusions and waiting periods
• Sum ass...
Aggregators
End Members
Body Repatriation:
Transportation of the deceased
anywhere within South Africa
Transportation of a...
La Positiva: improving access
Water Boards are closer to rural population.
Before, limited to MFIs, NGOs and retail stores...
CIC: Reducing costs for clients
Before Now
PRODUCT
ACCESS
COST
EXPERIENCE
Transaction
costs
Distribution
costs
Premium
col...
ICICI Lombard: Enhancing client
experience
RSBY Weavers/ Artisans
 95% claims settled to hospital
within 30 days
 Higher...
Summary: Pathways for client value and
business viability
Simple offerings Higher-value
offerings
Design
Success
factors
R...
Delivering on the Promise of
Microinsurance:
Putting Clients First
Presenter:
Birendra Mohanty
Vice President, Financial I...
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Webinar on "Delivering on the Promise of Microinsurance: Putting Clients First"

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Despite massive growth of microinsurance coverage, millions of poor households lack access to good value products. What can we learn from the pioneers about their struggle to offer quality products in a viable way? What product types and designs provide the best value for the poor? How does client-orientation contribute to the insurer’s bottom line?

This webinar focused on the performance of microinsurance providers from India, South Africa, Kenya and Peru, and examined drivers of profitability as well as strategies that contributed to providing value for customers.

Published in: Economy & Finance, Business
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Webinar on "Delivering on the Promise of Microinsurance: Putting Clients First"

  1. 1. Delivering on the Promise of Microinsurance: Putting Clients First
  2. 2. Delivering on the Promise of Microinsurance: Putting Clients First Presenter: Birendra Mohanty Vice President, Financial Inclusion Solutions Groups ICICI Lombard, India Presenter: Nelson Kuria Chief Executive Officer CIC Insurance Group, Kenya Presenter: Janice Angove Lecturer in actuarial science University of the Witwatersrand, South Africa Presenter: Lourdes del Carpio Gómez de la Torre Director Rural Insurance La Positiva Seguros y Reaseguros, Peru Moderator: Craig Churchill Team Leader Microinsurance Innovation Facility 9 July 2013 Presenter: Thembisa Mapukata Executive Head, Foundation Market Old Mutual, South Africa
  3. 3. Agenda  Introduction to the financial experience and the factors underlying the profitability of the various microinsurance products  Learning from the experiences in developing quality product offerings in a viable way  What product types and designs provide the best value for the poor?  How does client orientation contribute to the insurer’s bottom line?
  4. 4. Introduction to insurers Product Market Distribution Organizational Structure South Africa Group funeral (2003) Individual funeral and savings (2011) Burial society and funeral parlour members Salaried agents of insurer Separate unit Kenya Credit Life (2001) Health (2007) Savings (2010) Members of cooperatives, MFIs Cooperatives and MFIs Planning to set up separate subsidiary India Subsidized Health (2005) and agriculture (2003) Artisans, low income population, farmers In-house sales team Product line business units Peru Life (2008) Personal accident (2009) Rural population Water boards, MFIs Separate unit V V M M V M V
  5. 5. Business viability analysis framework Profitability Sustainability and value creation for shareholders Scale Claims costs Distribution and administration costs Overarching factors Defining and accessing the market Pricing for the risk Working with groups Structure of the insurer and market context Valued benefits and affordability Managing anti- selection and claims fraud Leveraging off existing infrastructure Risk management Incentivising distribution channels Reinsurance as risk management tool Simplicity Monitoring and feedback
  6. 6. Scale  Health microinsurance business accounts for over 27% of the health insurance premiums written by ICICI Lombard (US$261 million) and credit life accounts for 12% of group life premiums at CIC (US$24 million).  Policy volumes are low compared to potential market size. Policies CIC (Credit Life) 210 000 OM (Funeral) 100 000+ ICICI Lombard (Health-W&A) 2 200 000 ICICI Lombard (Health-RSBY) 5 500 000 ICICI Lombard (Weather) 3 000 000 La Positiva (PA) 40 000 La Postiva (Life) 2 000 V V M M V V M -100% -50% 0% 50% 100% 150% 200% 250% 300% 350% 2009 2010 2011 2012 Growth of Premium Volumes
  7. 7. Profitability Policies CIC (Credit Life) 210 000 OM (Funeral) 100 000+ ICICI Lombard (Health-W&A) 2 200 000 ICICI Lombard (Health-RSBY) 5 500 000 ICICI Lombard (Weather) 3 000 000 La Positiva (PA) 40 000 La Postiva (Life) 2 000 V V M M V V M -80% -60% -40% -20% 0% 20% 40% 2008 2009 2010 2011 2012 Gross (of Reinsurance) Profit Ratios
  8. 8. 7.76 12.26 23 15.21 20.1 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 # lives Enrolled (in mns) ICICI Lombard: Reducing claims cost (1) Fraud controls (fraud triggers and internal surveillance team) Quality empanelment (grading hospitals) Efficient claims management process (in-house TPA) Scale on technology platform (smart card based)
  9. 9. ICICI Lombard: Reducing claims cost (2) Effect Build Efficient Claims Process 61% 98%93% 99%95% 80%80% 72%78% RSBY Weaver & Artisans Gross Loss Ratio FY 2008 FY 2009 FY 2010 FY 2011 FY 2012  In-house claim settlement for operational efficiency  Large empanelled network to ensure more and more claims shift to cashless mode (Hospitals: 2100 and out-patient network: 900)  Maker Checker for all process  Outputs:  Better control mechanism for out-patient claims  Reduction in claims turn around time to 25 days from 65 days  Cost of claim processing reduced from $1.3 per claim to $1  Reduced fraudulent claims
  10. 10. La Positiva: Reducing administrative costs Low sales costs: Sales supervisors hired locally. Staff of distribution partner leveraged for selling insurance. Before: Sales supervisors hired at the headquarters Low promotion costs: Cost of local radio and murals 4% of advertising costs in urban areas. Permanent advertising with in-house marketing staff. Before: Promotion outsourced. Radio done few months a year. Low capacity building cost: Use of e-learning course for sales force training. Few on site workshops. Printed “sales guide”. Before: Only on site workshops with low attendance.
  11. 11. Old Mutual: Monitoring to identify improvements (1) Servicing is taking up 30% of sales force time Lower sales productivity Poor service levels Pure Sales Focus Introducing service consultant Improved top line growth Improved retention from dedicated service focus In Progress Before Monitoring & Reporting Benefits incorporated in business plan & tracked monthly Sales 10% ahead of target & 50% up from last year (big scheme focus) (as at End June) Lapse rate improved by 5% Increased new business through organic member growth    = = =
  12. 12. Manual paper driven processes High cost of administration Low Efficiency Levels Automation of processes Prioritising On- Boarding & Claims Processes Lower cost of servicing & administration Increase Process Efficiencies In Progress Before Monitoring & Reporting Cost of technological improvements to justify investment (RoI) Lower manpower requirements for capturing Less queries at claims stage Lower cost/policy Improved turnaround times and service levels resulting in volumes Enrollment: 7 to 3 days Claims: 17 to 5 days    = = = Old Mutual: Monitoring to identify improvements (2)
  13. 13. CIC: improving organizational structure Specialized unit • 2001: Incubated as department under Life & Health division • 2007: Cross-divisional unit allowing to sell composite products Fragmented strategy • 2010: demerging Life and General fragments business and increases duplication • Annual growth rate dropped from 49% in 2010 to 2% in 2012; with increasing costs Specialized subsidiary • Re-launching the process of independent composite microinsurance vehicle to be managed by multi-skilled staff while enjoying shared services • To be spinned-off as separate subsidiary that will embrace most of the functions with expected expense ratio below 20%.
  14. 14. Putting clients first: many aspects of value PRODUCT • Coverage, service quality, exclusions and waiting periods • Sum assured in relation to costs • Eligibility criteria • Value-added services ACCESS • Choice and enrolment • Information & understanding • Premium payment method • Proximity COST •Premium to benefit •Premium to client income •Other fees & costs •Cost structure and controls EXPERIENCE • Claims procedures • Claims processing time • Policy administration & tangibility • Customer care PACE client value assessment tool
  15. 15. Aggregators End Members Body Repatriation: Transportation of the deceased anywhere within South Africa Transportation of a body can cost up to 50% of the benefit payout and the delivery would require logistical capability by the parlour or burial society Old Mutual delivers it at less 1% of the premium through a strategic partner Medical Emergency Services: Access to medical emergency services The target market has limited access to medical service Free ambulance services and emergency medical personnel are provided under the funeral policy Financial Education: Access to free financial education Financial literacy levels are very low Free financial education is provided in response to markets needs and in support of governments developmental targets (at annual cost of 0.2% of net profits 1 2 1 Old Mutual: Extending product benefits PRODUCT ACCESS COST EXPERIENCE
  16. 16. La Positiva: improving access Water Boards are closer to rural population. Before, limited to MFIs, NGOs and retail stores. Anyone can enroll. No need to be member of any organization or have a credit approved. Before, product was sold only to farmers. No documents required to issue the policy. The policy is handed out immediately after the premium is paid. Sales force can check product information using the e-learning tool or the printed sales guide. Before, they had to call the headquarter staff to clarify product characteristics. Proximity Inclusive Simple enrolment process Clear information PRODUCT ACCESS COST EXPERIENCE
  17. 17. CIC: Reducing costs for clients Before Now PRODUCT ACCESS COST EXPERIENCE Transaction costs Distribution costs Premium collection costs Terms and conditions A visit to the nearest CIC Branch Office Savings product distributed through tied agents Costs through financial institutions can add a further 33% to premium Exclusions and disaggregated products Within walking distance at cooperatives, MFIs, retailers and Co-op Bank correspondent banking outlets Distribution using existing business outlets saving 21% of costs for equivalent product using tied agent Collecting premiums through mobile money platform (negotiated terms) and through existing distribution structure Removing exclusions, extending age limit to 75 and bundling to allow cross- subsidy. Enhancing credit life cover.
  18. 18. ICICI Lombard: Enhancing client experience RSBY Weavers/ Artisans  95% claims settled to hospital within 30 days  Higher enrollment ratio and average family size year on year (62% enrolment in FY 2013 with 3-member family size)  90% of claims count are cashless  Average claim settlement TAT is 25 days  High sum insured in out patient to cover occupational hazards 0.01 0.45 1.1 1.75 2008-09 2009-10 2010-11 2011-12 No. of hospitalizations in millions 19% 18% 15% 12% 10% 8% 6% 3% 3% 2% Infections Respiratory Medical General Orthopaedic Gastroenterology Endocrinology Circulatory Dermatology Urinary - genital Gynecology 0% 5% 10% 15% 20% Out patient services utilisation PRODUCT ACCESS COST EXPERIENCE
  19. 19. Summary: Pathways for client value and business viability Simple offerings Higher-value offerings Design Success factors Results (only if consolidated) Partial/single cover, low premium, mandatory, ‘human’ distribution Meeting ‘universal’ needs, product education, claims, tangibility Client value better than alternatives for specific risks; positive profitability rates Multiple covers, VAS, voluntary options, technology-driven distribution, PPPs and subsidies Benefit package, market segmentation, promotion, sales, gradual investments with strong cost controls, organizational structure More complete risk- management solutions for clients; higher scale, higher profits Many options & steps
  20. 20. Delivering on the Promise of Microinsurance: Putting Clients First Presenter: Birendra Mohanty Vice President, Financial Inclusion Solutions Groups ICICI Lombard, India Presenter: Nelson Kuria Chief Executive Officer CIC Insurance Group, Kenya Presenter: Janice Angove Lecturer in actuarial science University of the Witwatersrand, South Africa Presenter: Lourdes del Carpio Gómez de la Torre Director Rural Insurance La Positiva Seguros y Reaseguros, Peru Moderator: Craig Churchill Team Leader Microinsurance Innovation Facility 9 July 2013 Presenter: Thembisa Mapukata Executive Head, Foundation Market Old Mutual, South Africa

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