CARD MBA: Challenges in marketing microinsurance products

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Presentation made during the ICMIF Development Network Seminar in India, 2010.

Presentation made during the ICMIF Development Network Seminar in India, 2010.

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  • 1. Challenges in Marketing Microinsurance Products to Marginalized Sector of the Society. by Alex M. Dimaculangan CARD MBA General Manager CaMIA President ICMIF Development Workshop New Delhi, India December 6-8, 2010 Assisting people in coping with uncertainties ... CARD MRI Insurance Agency CARD Mutual Benefit Association, Inc. Protecting the gains of micro-credit ... CARD MBA
  • 2.
    • TOPICS TO BE DISCUSSED
    • Eight Walls of CARD Mutually Reinforcing Institutions [CARD MRI]
    • Microinsurance Defined
    • Microinsurance Providers
    • Microinsurance Agents and Brokers
    • Function of Microinsurance
    • Products & Services: Marketing Strategies
    • Policy on Claims Settlement
    • Operation’s Update
    • Microinsurance Challenges
    • Lessons Learnt
  • 3. 8 Walls of CARD MRI NAME OF INSTITUTION YEAR ESTABLISHED NATURE OF BUSINESS CARD, Inc. or CARD NGO 1986 Microfinance CARD Rural Bank 1997 Microfinance - oriented rural bank CARD Mutual Benefit Ass’n Inc. ( CARD MBA) 1999 Microinsurance CARD-MRI Dev’t Institute, Inc. (CMDI) 2005 Training Institute for staff, members & public CARD Business Dev’t Service Fdn. (BDSF) 2006 Business development CARD MRI Insurance Agency (CaMIA) 2007 Takes care of Partner-Agent Model Rural Bank of Sto. Tomas, Inc. (RBST) 2007 Microfinance - oriented rural bank CARD MRI Information Technology (CMIT) 2010 Information Technology
  • 4. BOAT PARTNERS BOAT PARTNERS Members of CARD lending institutions are Automatically become Members of CARD MBA
  • 5. Microinsurance Defined Tall Volcano – a volcano inside a volcano situated in Talisay and Sn Nicolas, Batangas, Philippines .
  • 6.
    • “ MICROINSURANCE PRODUCT ”
    • is an insurance policy where:
    • the amount of premium computed on a daily basis does not exceed five percent (5%) of the current daily minimum wage rate for non-agricultural workers in Metro Manila.
    • Php 404.00 x 5% = Php 20.20 per day
    • Php 20.20 x 7 = Php 141.40 or USD 3.00 per week
    • the maximum amount of life insurance coverage is not more than five hundred (500) times the daily minimum wage rate for non-agricultural workers in Metro Manila.
    • Php 404.00 x 500 = Php 202,000.00
    • or USD 4,390.00
    •   (The minimum wage for non-agri workers in Metro Manila Php 404.00 as of July 1, 2010)
    Based on IMC 1-2010 FOREX: USD 1.00 = Php 44.00 Microinsurance Defined CARD Mutual Benefit Association, Inc.
  • 7. Who Can Provide Microinsurance Contracts? Providing microinsurance contract can only be undertaken by entities registered and licensed by appropriate government regulatory bodies. These entities shall include but are not limited to any of the following: 1. Commercial Life Insurance Companies 2. Commercial Non‐life Insurance Companies 3. Mutual Benefit Associations 4. Cooperative Insurance Societies 5. Pre-need Companies 6. Health Maintenance Organizations Based on IMC 1-2010 Microinsurance Providers CARD Mutual Benefit Association, Inc.
  • 8.
    • Microinsurance Agents
    • To facilitate distribution of microinsurance products, a microinsurance agent/broker shall not be required to take the regular licensure examination.
    • Instead, he must attend an approved microinsurance training program and pass qualifying examination at the end of the program.
    • 2. Institutions engaged in microfinance activities may apply and be licensed as microinsurance agents/ brokers, provided the license shall only cover the solicitation of microinsurance products.
    Based on IMC 1-2010 Who Can Sell Microinsurance Products? CARD Mutual Benefit Association, Inc.
  • 9. Function of Microinsurance The Ruins – a tourist attraction in Talisay City, Negros Occ. Philippines .
  • 10. FUNERAL HOSPITAL MEDICAL EXPENSES DEATH SICKNESS DISABILITY INCOME FROM MICROCREDIT CYCLE OF POVERTY CAUSED BY MISFORTUNE INCOME FROM MICROCREDIT REMAINS !!! MICROINSURANCE CAN BREAK THE CYCLE OF POVERTY Function of Microinsurance CARD Mutual Benefit Association, Inc. All rights reserved CARD MBA 2009
  • 11. CARD Mutual Benefit Association, Inc. Protecting the gains of micro-credit ... CARD MBA CARD Mutual Benefit Association, Inc.
  • 12.
    • 100% collection in case of death of a member-borrower;
    • Accelerates member’s mobilization;
    • Enhances CARD MRI’s image as socially responsible institutions.
    All rights reserved CARD MBA 2009 Value Added of Microinsurance to CARD MRIs … CARD Mutual Benefit Association, Inc.
  • 13. Marketing Strategies of our Products and Services
  • 14.
    • Life Insurance Product
    • 1.1. Accidental Death
    • 1.2. Total & Permanent Disability or TPD
    • 1.3. Motor Vehicular Accident Hospitalization [MVAH] Benefit with maximum benefit of Php10,000 [US$ 222.25] in case of hospital confinement due to motor vehicular accident. This rider is for the member and spouse only.
    • Member’s contribution (premium) for life insurance is Php 15.00 [USD 0.30] collected weekly at the village level.
    • The Life insurance program covers the member, spouse and all children 21 years old and below.
    Products and Services … CARD Mutual Benefit Association, Inc.
  • 15. DONATION of Php 1,000.00 for STILL BIRTH and NEWLY BORN died before the age of 14 days. 100,000.00 DUE TO ACCIDENT 10,000.00 50,000.00 DUE TO SICKNESS 3 YEARS & ABOVE 60,000.00 DUE TO ACCIDENT 10,000.00 30,000.00 DUE TO SICKNESS 2 YEARS BUT LESS THAN 3 YEARS 20,000.00 DUE TO ACCIDENT 5,000.00 10,000.00 DUE TO SICKNESS MORE THAN ONE YEAR BUT LESS THAN 2 YRS 12,000.00 DUE TO ACCIDENT 5,000.00 6,000.00 SICKNESS AFTER MEMBERSHIP SPOUSE - 2 ,000.00 CHILDREN - NONE 2,000.00 DUE TO PRE-EXISTING CONDITION LESS THAN ONE YEAR LEGAL DEPENDENT MEMBER BENEFITS (in Php) CAUSE OF DEATH OR TOTAL & PERMANENT DISABILITY LENGTH OF MEMBERSHIP Table of CARD MBA Life Insurance Benefits (Php 15.00 weekly contributions)
  • 16. 2. Retirement Savings Fund – Php 5.00 (US$ 0.10) per week collected at the village level together with the life insurance contribution (premium) 2.1. Lump-sum payment upon retirement 2.2. Mandatory Retirement Age at 70 2.2. Optional Retirement at ages 65, 66, 67, 68 & 69 3. Loan Redemption Fund – 0.125% of the principal amount of loan per month. 3.1. Amount of benefit = Principal amount of loan 3.2. Automatic Loan Offsetting upon Total & Permanent Disability (AutoLOAD) 4. Build Operate And Transfer (BOAT) Program – This is a technical assistance program for organized groups in putting-up their own mutual benefit association or MBA Products and Services … CARD Mutual Benefit Association, Inc.
  • 17. Our Life Insurance, Retirement Savings Fund and Loan Redemption Fund are mandatory products. All members of CARD’s micro-lending institutions and BOAT partners must take these products. The premium to these products are included in the weekly collection sheets of our Account Officers together with the loan amortizations. These microinsurance products become the key issues in recruiting members to CARD’s lending institutions and to BOAT partners. Meaning, they are highlighted as the selling point in recruiting members. To date, about 35% of members of CARD micro-lending institutions do not take loans, they are savers and taking microinsurance only. Marketing Strategies … CARD Mutual Benefit Association, Inc.
  • 18.
    • Package Assistance In case of Disaster (PAID) Plan. This product is under Partner-Agent Model between CARD MRI Insurance Agency ( CaMIA ) and Pioneer Intercontinental Insurance Corporation.
    • PAID Plan is worth Php 250.00 [US$5.50] yearly premium. It is a 3-in-1 benefit package that includes:
    • 5.1 Personal Accident of Php 100,000 (US$ 2,222);
    • 5.2 Funeral Benefit of Php 25,000 (US$550); and
    • 5.3 Residential House Reconstruction Start-up Capital or Re-House of Php 10,000 (US$222).
    • This is an optional product for the members and non- members of CARD MBA.
    Products and Services … CARD Mutual Benefit Association, Inc.
  • 19.
    • AKAP CARD – This is also under Partner-Agent Model between CARD MRI Insurance Agency ( CaMIA ) and Philippine Health Care, Inc. (PhilCare).
    • This is health care package for CARD MBA members ONLY and for their legal dependents with a yearly premium is Php 1,800 [US$40.00] with maximum benefit of Php 30,000 [US$ 667.00] for one year. The benefit includes:
    • 6.1 CONSULTATION or OUT-PATIENT CARE;
    • 6.2 HOSPITALIZATION or IN-PATIENT CARE;
    • 6.3 EMERGENCY CARE;
    • 6.4 ANNUAL PHYSICAL EXAMINATION
    Products and Services … CARD Mutual Benefit Association, Inc.
  • 20. PAID plan and AKAP CARD are voluntary products. These products are design based on the needs of the members (NEED ANALYSIS) We are creating demands for these products by attending weekly Center Meetings to discuss the features and benefits of these products. CMDI has developed Microinsurance Modules for these products and discussed by our Account Officers, MBA Coordinators and CARD MBA staff during weekly Center Meetings. We provide brochures, posters and flyers to introduce these products. Marketing Strategies … CARD Mutual Benefit Association, Inc.
  • 21. But the best selling point of CARD MBA’s products and services and in recruiting members to CARD MRI and BOAT partners is our …. 1 – 3 - 5 Day in Target in Claims Settlement . Marketing Strategies … CARD Mutual Benefit Association, Inc.
  • 22. 3 If the dead body is already buried at the time of validation and with complete documents, the claim must be settled within three days upon notification. 5 [ On the 5th day upon notification, all claims must be given action with finality. Claims with incomplete documents will be given denial letter but still can be settled upon completion of required documents thru the letter of reconsideration. 1-3-5-day Target in Claim’s Settlement This Claim Settlement Model is replicated by more than 25 organized groups providing formal or informal microinsurance program to their member-clients. This becomes the battle cry of RIMANSI. All rights reserved CARD MBA 2009 1 If the dead body is not yet buried at the time of validation, the claim must be settled within 24 hours upon notification. Claims Settlement … CARD Mutual Benefit Association, Inc.
  • 23. We can manage our 1-3-5-day Target in Claims Settlement because we know our members by NAME , by FACE and by PLACE of RESIDENCE because we meet them weekly in our Center Meetings.
    • We group our members into Centers
    • Each Center is composed of an ave. of 35 members
    • 60 Centers belong to ONE CARD Branch
    • 5-6 Branches belong to ONE CARD Area
    • 5-6 Areas belong to ONE CARD Region
    • So we have Centers = Branches = Areas = Regions to closely supervise our microfinance and microinsurance operations.
    Claims Settlement … CARD Mutual Benefit Association, Inc.
  • 24. Operations Update Php 605.329 m (US$ 13.45 M) Php 6.596 m (US$ 146,578) Fund Balance (Members’ Equity) 6,020,760 142,655 Number of Insured Individuals Php 2.526 billion (US$ 56.14 M) Php 6.61 m (US$ 0.146.89 m) Total Assets Php 606.085 m (US$ 13.47 M) Php 0.974 m (US$ 21,645) Total Paid Claims 1,204,152 28,531 Household - Members as of October 31, 2010 Sept. 09, 1999 PARTICULARS CARD Mutual Benefit Association, Inc.
  • 25. Microinsurance Challenges Chocolate Hills , Bohol, Philippines
  • 26.
    • At the Village level [Based on the Impact Survey of Insurance in the Rural and Urban Areas]
    • 1. Notions that insurance brings bad luck
    • 2. Negative insurance experience because of industry dysfunctions like:
      • 2.1. premium collectors no longer around after payment of first year premium
      • 2.2. branch is already closed when filing claims
      • 2.3. cheated by sales agent
    Microinsurance Challenges CARD Mutual Benefit Association, Inc.
  • 27.
    • At the Microinsurance Provider and Broker’s level
    • Microinsurance Brokers are required to put- up paid up capital of Php 500 m [USD 10.9 m].
    • Mutual Benefit Associations (MBAs) must raise their guarantee fund every year by 5% of the total contributions up to Php 125 million [USD 2.78 m].
    • Commercial insurance companies have difficulty to find associations whose membership is viable enough for Partner-Agent model.
    • Although there is Central Bank circular that allowing rural banks to cross sell microinsurance products, there is no implementing rules and regulations yet.
    Microinsurance Challenges CARD Mutual Benefit Association, Inc.
  • 28. At the Microinsurance Provider’s & Broker’s level 5. Establishing the network of microinsurance agents (MI Agents) is a real challenge because: 5.1. prospective MI-Agents lack basic education, thus, training them is a challenge; 5.2. some commercial insurance agents are not willing to take-on insurance business with very small premium. Microinsurance Challenges CARD Mutual Benefit Association, Inc.
  • 29. Lessons Learnt… In designing microinsurance product or service, its features and benefits should come from the members. Need analysis should be done before designing a product… BOTTOM – UP approach Documentation must be very simple and the terms and conditions must be easily understood by the members. For the premium to be affordable, payment should be in a ‘SACHET Type’. In CARD MBA, instead of collecting Php 80.00 [US$ 1.75] monthly, we collect Php 20.00 [US$ 0.45] weekly. Php 15.00 for life insurance and Php 5.00 for retirement savings. To attain the highest possible retention rate and to attract more members, we have to settle claims as quickly as possible like our 1-3-5-day target in claims settlement. CARD Mutual Benefit Association, Inc.
  • 30. THANK YOU... SALAMAT PO... Old Houses – a tourist attraction in Vigan, Ilocos Sur, Philippines . Gracias Amigos y Amigas !!!