AMERMS Workshop 16: Effective Micro Insurance to Reduce Vulnerability (PPT by Joseph Aseffa)


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Effective Micro-Insurance and Micro Health Insurance Programs to Reduce Vulnerability
ROOM: Tsavo B
Chair: Mr. Richard Leftley, CEO, MicroEnsure, USA
Panelist: Mr. Yoseph Aseffa, Chief Technical Advisor, Microinsurance, International Labour Organization (ILO), Ethiopia
Panelist: Mr. Nelson Kuria, Managing Director, Co-operative Insurance Company of Kenya Limited (CIC), Kenya

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AMERMS Workshop 16: Effective Micro Insurance to Reduce Vulnerability (PPT by Joseph Aseffa)

  1. 1. Africa–Middle East Regional Microcredit Summit Effective Microinsurance and Micro Health Insurance Programs to Reduce Vulnerability Yoseph Aseffa, ILO Nairobi, 7 – 10 April 2010
  2. 2. ILO’s Microinsurance Program : The Microinsurance Innovation Facility seeks to increase the availability of quality insurance for the developing world’s low income families to help them guard against risk and overcome poverty. The Facility works closely with Insurers and microcredit institutions and provides innovation grants and capacity building support. The Access to Insurance Initiative is a global programme to strengthen the capacity and understanding of insurance supervisors to facilitate their role as key drivers in expanding access to insurance markets. The goa of the Initiative is to enhance broad-based, demand-oriented and sustainable access to insurance for low-income clients.
  3. 3. What is microinsurance? <ul><li>Low premium insurance for people earning even less than US $2 a day. </li></ul><ul><li>Microinsurance covers a broad variety of insurance products, for example, life, health, accident, livestock, crop and property insurance. </li></ul><ul><li>The most common microinsurance product offered by many microcredit institutions is credit life , but coverage can be improved to provide better value for the insured. </li></ul><ul><li>Innovative products and distribution channels, consumer education, technology and cost efficient management are key to success in the delivery of microinsurance. </li></ul>
  4. 4. Who can offer microinsurance? <ul><li>Insurers, </li></ul><ul><li>Microcredit institutions (MFIs, SACCOs) in partnership with insurers </li></ul><ul><li>Large microcredit institutions that can establish and manage insurance companies </li></ul>
  5. 5. Should MFIs offer insurance? <ul><li>Commercial </li></ul><ul><li>Lower credit risk </li></ul><ul><li>Enhance client retention </li></ul><ul><li>Bolster product profitability </li></ul><ul><li>Diversify income streams </li></ul><ul><li>Reach out to new markets </li></ul><ul><li>Social </li></ul><ul><li>Help clients to reduce their vulnerability </li></ul><ul><li>Improve client welfare </li></ul>primary motivations:
  6. 6. Making the Partner-agent model work <ul><li>Choose a trustworthy insurer – Your reputation is at risk </li></ul><ul><li>Involve the insurer in understanding customer needs </li></ul><ul><li>Manage contract admin and claims* </li></ul><ul><li>Eliminate exclusions </li></ul><ul><li>Maintain and analyse data </li></ul><ul><li>Share the profits </li></ul>
  7. 7. Effective microinsurance products: 1. Life and Health <ul><li>Life insurance has huge potentials around Africa </li></ul><ul><li>Insurance products that go beyond credit life, such as term life, accident and disability, health, etc. offer better value proposition to the insured. </li></ul><ul><li>For example, </li></ul>
  8. 8. What microinsurance cover 50 cents a day can buy: an example ? 500 Accidental injury: Emergency medical expenses, transport 10,000 10,000 10,000 Microinsurance value pack ? Death of spouse ? Accidental injury: major covers 10,000 Death, natural & accidental Other
  9. 9. Effective microinsurance products: 2. Agricultural insurance - crops <ul><li>Weather Index Crop Insurance is relevant for drought prone areas, but inadequate infrastructure necessitates unending pilot studies, </li></ul><ul><li>Multi-peril crop insurance providing different layers of cover (basic inputs, inputs plus subsistence, average output, etc) also covering life and property risks, provides immediate and scalable coverage without requiring long-term pilot tests. </li></ul>
  10. 10. Basic crop inputs cover: an example <ul><li>In the absence of insurance, a peasant farmer with 200 kgs of seeds plants 100 kgs, and “saves” 100 kgs in the event he gets a bad harvest. This is self-insurance. In case of a bad harvest, he has seeds for the next planting season. If the harvest is good, he has produced only 50% of his potentials. </li></ul><ul><li>With a basic cover that is very affordable, he plants 200 kgs. If harvest is bad, the insurer pays him 200 kgs. If the harvest is good, he will have doubled his output! </li></ul><ul><li>Such a simple crop scheme easily doubles output/ productivity in addition to providing security to farmers. </li></ul>
  11. 11. Microinsurance innovations: There is always a better way… Thank you! <ul><li>Yoseph Aseffa </li></ul><ul><li>ILO Regional Office for Africa </li></ul><ul><li>Addis Ababa, Ethiopia </li></ul><ul><li>E-mail: [email_address] </li></ul><ul><li>Phone: +251 91 150 2950 </li></ul>