2010 RBAP‐MABS Regional Roundtable Conference Pan Paciﬁc Hotel, Malate, Manila November 23, 2010
Micro insurance ProvidersInsurance and insurance-like providers Life and Non-life Insurance Companies Cooperative Insurance Societies (CIS) Insurance/Service Cooperatives Mutual Benefit Associations (MBAs) Preneed Companies Health Maintenance Organizations (HMOs)Intermediaries- entities or individuals such as brokers and agents- facilitate provision of insurance services by licensed insurance providers Brokers act on behalf of the clients in the purchase of insurance products Agents act on behalf of the insurance companies in the solicitation of insurancebusiness
Managing Micro insurance Products and Partners The Intermediary Model Risk Carrier • Insurance Company • Reinsurance Company • Cell CaptiveFront Office Back Office• MFIs, • Systems – Data Capture/• Rural Banks Reporting• Aid Agencies • TPA – Claims Servicing• NGOs • Product Design/Negotiation• Retail • Training and Education
Managing Micro insurance Products and Partners The Intermediary ModelMICROENSURE AS AN INTERMEDIARY Negotiates with insurance companies on behalf of clients to keep premiums to a minimum Aim is to achieve sustainability for insurance companies, product distributors, and clientsEffective Product Distribution Workin partnership with organizations that are currently serving the poor such asmicrofinance organizations, rural banks, as well as humanitarian organizations that areproviding non-financial servicesSophisticated MIS system / Back Office Processing Key to minimizing the cost of micro insurance Tracks details of clients covered, collects premiums and administers claims.Extensive market research and insurance expertise Products designs that address the real financial risk management needs ofthe poor
Establishing Partnership to Micro insurance ProviderImportant Factors:1. Products and Product Development an insurance provider that Can understand the needs of the clients. Can understand operational realty of the Bank Should be able to design a product that is more suitable for all parties2. Transaction cost Management Information System for transacting insurance business An insurance provider/intermediary that benefits from a wider client bases and global reach can fund such an overhead Investment in system reduces transaction cost Operating efficiencies
Establishing Partnership to Micro insurance ProviderImportant Factors:3. Administration best equip to handle administration relating to claims processing4. Additional channel of sale5. Staff training and Client Education6. Range of Sustainable Product7. Distribution Network/Linkages8. Technological Enhancement9. Expertise and experience in insurance and microfinance10. Required no capital outlay on the part of bank
Innovations: Micro insurance promotion and service delivery A critical component inManagement SystemAutomated Insurance the timely and cost effective provision of micro insurance services to Rural Banks and MFIs A state-of-the-art technology that specializes in thefollowing: Data encoding Large volume data processing Data Management Insurance Claims Processing Data Synchronization Automated Reports
Marketing Micro insurance Services Identify target market Determine the main messages to convey Protection Solidarity Optimism Trust Three Step marketing Process Raise awareness Cultivate an - About insurance understanding of Activate the - About a specific insurance (costs market insurer/intermediary and benefits Source: Protecting the Poor, A Micro insurance Compendium edited by Craig Churchill
Marketing Micro insurance ServicesA major hurdle for marketing insurance to the poor is the lack of differentiation between microinsurance and conventional insurance productsClient education designed to promote understanding of the options for managing risk explain the fundamental concepts underlying insurance and the terms that define it so that the poor can determine what is the most suitable option in their particular caseDevelopment of comic books in clients local languages provide an understanding of insurance in an informative and easily understandable format.Materials are the result of in-depth research into client understanding andattitudes concerning insurance
Comparison between Commercial Insurance and MicroinsuranceSource: Adapted from Almazan (2005) Commercial Insurance Microinsurance Those who have the capacity to Those who do not have the pay large sums of money as capacity to pay large sums as premium premium. TARGET GROUP Those who are costly to serve due to socio-economic status, location, and the like. MOTIVE Profit Solidarity and Mutual Aid Profit menu is varied and complex Product menu is limited and aimed at individuals simple, aimed at the whole family PRODUCT/SERVICES of the member Highly Restrictive Limited or no restrictions For profit, stock corporations Mutual Benefit Associations, DELIVERY SYSTEM cooperatives & other forms of mutual aid organization OWNERSHIP Proprietors; stockholders Membership-based Proprietors; stockholders, Democratic; regardless of share DECISION MAKING depending on voter’s rights capital or size of contribution, “one person-one vote” Return on investments and Return on share capital, dividend patronage refund as in SURPLUS cooperative, and membership equity value for MBAs.
Microinsurance Delivery ModelsInstitutional Options Description Advantages ChallengesPartner-Agent Model An established insurance Insurer is able to reach a Trained staff to explain company works with a market it cannot reach on insurance in ways the distribution channel. its own illiterate poor can e.g., MFI, that actively MFI can provide members understand serves low-income clients with better services at The distribution channel Insurers bear the risk lower risk must still be licensed as an The poor get valuable agent protection that otherwise would not be accessible to themMutuality Model Savings and credit Helps monitor moral Capacity Issues cooperatives or credit hazard unions offer loan Reduces transactions cost protection insurance Remains responsive to clients’ needs and interestDirect Sales Model Insurance companies Helps overcome control Higher costs of a new directly serve low-income problems in the partner- delivery structure that only clients through individual agent and mutual models serves an insurance agents on salary or function commission-basisCommunity-based Model Non-profit schemes that Reaches not only the poor Sustainability have voluntary membership but also more of the Policy holders pre-pay poorest premiums into a fund and are entitled to specified benefits Technical Assistance and general oversight are given by a network support organization
The Intermediary Model An intermediary could be a corporate or individual partnership structure working on either a local or global scale partnering with a risk carrier (most likely an insurance company). The intermediary could be an agent on behalf of a single insurance company or a broker and work for multiple insurers it is most likely that the intermediary would seek to service large groups of clients. Value Added Service: Additional Channel of Sale- without systems, MFIs are often unable to offer insurance products to their clients outside of the loan. An intermediary brings the capability to track clients and record who has paid premiums even when a loan is not in force. Staff Training- an intermediary is well placed to provide organizations staff with training in the product and the basics of insurance. This increases financial literacy and ultimately client satisfaction.
Innovative insurance products: Security/insurance for the entire family Loan redemption - fire and calamity assistance - unemployment insurance - daily hospital income benefit Micro housing insurance - fire, lightning, typhoon, flood, earthquake, volcanic eruption, landslide) - evacuation assistance and family personal accident insurance Protection to micro entrepreneurs and their tools of trade - property insurance - burglary/housebreaking - personal accident insurance - money, securities and payroll - electronic equipment insurance - fidelity guarantee Climate responsive index products - weather index based crop insurance for drought/dry spell, excess rain, and typhoon wind speed
Micro Insure Linkages Banks, MFIs, Cooperatives & Credit Unions‘ Church Groups & Networks Humanitarian Aid & Child Sponsorship Major Donor Groups Social Aggregators Microfinance intermediaries Global Health Care Providers Academic & Government Institutions Professional Service Providers Aid Agencies Foundations Cell Captive facility Bill and Melinda Gates Foundation Levi Strauss Government Partners FoundationPAGASADepartment of MicroEnsureAgricultureBPRE Reinsurance AIMS EMBU Linkages in Actuarial Presence in Opportunity Consultancies other International - Delloite and Touche Countries
Synergy Framework Group of Companies MicroEnsure Product Development Unified Marketing Church Rural MFI COOPs NGO Others Org. BankInsured Insured Insured Insured Insured Insured Insured
Value Added Service SERVICES:“Enterprise Development Model” • Training COMMUNITY BASE • Capacity & Capability Building SOCIAL PREPARATION • Value Formation • Establishment of Systems & Procedure Sales & Promotions Outlet Creation TRAINING & • Agricultural INSTITUTIONAL Production (rice) Networking/ DEV’T Linkaging a. Pre-production MARK ETING AL SERVICES: DEVEL OPME FINANCI SERVICES: Marketing Development NT MFI ASSISTAN CE • Technology Transfer • Farm Equipment & Machinery Loan • Production Loan and Assistance • Irrigation Development • Crop Insurance SERVICES: SERVICES: • Post-harvest Equipment Loan • Business Advisory • Intro of Post-harvest • Training & Skills Dev’t. Enterprise Facilities • Enterprise Dev’t. & Mktg. • Quedan System Loan Creation • Skills & Mgt. Dev’t. • Warehousing • Product Dev’t. & Packages and Promotion • Intermediate Storage • Rice Mill • Laboratory Analysis & Bonded Warehousing • Solar/Mechanical Drying