Microinsurance: Not Insurance As You Know It!


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The UK Microfinance Club meets monthly to discuss the latest developments in microfinance around the world. Wednesday 17 October saw discussion around Microinsurance - uncovering the important value, importance and pitfalls. Global expert in Microinsurance, Mosleh Ahmed provided expert input to the material that was presented by Microfinance without Borders to the UK Microfinance Club.

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Microinsurance: Not Insurance As You Know It!

  1. 1. MicroInsuranceNot insurance as you know it! Gabriel Flores Dr. Phyllis SantaMaria
  2. 2. Warm up! Walk around and introduceyourself to three other people • Name • What you do • Why are you here tonight? 2  
  3. 3. After tonight’s session, you will be able to...•  Distinguish the benefits of microinsurance and how it differs from conventional insurance•  Describe how microinsurance helps people maintain and possibly improve their position on the economic pyramid•  Select a way to get involved with microinsurance 3  
  4. 4. What is insurance? Lloyd’s  of  London   4  
  5. 5. What is insurance?•  House •  Unemployment:•  Life Gov’t•  Car & Consumer •  Disaster: Gov’t Goods •  Security: Gov’t &•  Health: NHS & Private Private •  Injury: Corporate•  Pensions: Gov’t & •  Professional: Private Individuals 5    
  6. 6. What are your opinions about insurance? –  [insert photo of Lloyd’s building] Inside  Lloyd’s  of  London  (BBC  photo)   6  
  7. 7. Some opinions about insurance… 7  
  8. 8. Blind people describing an elephant… 8  
  9. 9. Catheryn’s story: UK vs US 9  
  10. 10. Different views of microinsurance Financial  analysts   Donors   Insu Poor rers    peo Academics   ple   Microfinance  ins5tu5ons   10  
  11. 11. Budi, a Borrower •  A loan, NO insurance,1998   NO savings •  43, two sons, husband died •  NO assets, home, job, money, help from in- laws •  Moved to Dhaka, Bangladesh, seeking job and shelter 11  
  12. 12. Jorina Bibi, a Borrower with Insurance•  A loan, NO savings•  Insurance with Delta Life on her husband’s life 1998  •  29, widowed, 3 young children•  Her in-laws demanded the life insurance money•  She refused, got thrown out with her three children 12  
  13. 13. 2008: Budi and her children•  She and her two sons begged, scavenged food and slept on 1998     pavements in Dhaka•  US$ 0.50 a day•  We lost contact –  Budi disappeared – probably victim of a human trafficking gang –  Elder son, then 16, in jail for robbery –  Younger son, then 13, breaking bricks at a Photo by courtesy of Mike Bedner, Alberta, Canada; Rotary construction site GSE Member on visit to Bangladesh 13  
  14. 14. 2008: Jorina Bibi, a Delta Life Policyholder•  With help of friends and an NGO she 2008   moved into a home for destitute women•  With part of £80 from her husband’s life insurance –  rented some land –  built a hut to live in –  set up a poultry business A Delta Life Microinsurance beneficiary and her poultry farm Photo by Gono-Grameen Bima Manager, Delta Life 14  
  15. 15. 2008: Jorina Bibi’s and herchildren’s success•  Today a micro entrepreneur –  employs 4 people –  earns Taka 8,000 (£64) per month•  Her children are successful –  Daughter got a teaching degree and teaches at a local school –  Both her sons finished college and joined her business Jorina Bibi’s daughter Nasreen (1st from left), a teacher, with some of her colleagues Photo by Gono-Grameen Bima Manager, Delta Life 15  
  16. 16. How does microinsurance help cushion the impact of shocks? WealthyEconomic Levels Non-poor Vulnerable non-poor Moderate poor Extreme poor Destitute Loan Cycles and Impact of Losses 16  
  17. 17. The 4 main microinsurance products Life  Insurance:  oFen  given  by  MFIs       Health  Insurance:  needs  health  care  providers       Livelihood  Insurance:  machinery  Crop  and  livestock  Insurance:  needs  sophisMcated  data  such  as  50  yrs’     rainfall    
  18. 18. How does microinsurance differ? Fast   Needs  based   Groups   Response   On  your   EducaMon   CollaboraMon   doorstep  MARKET  SIZE:  4  BILLION  PEOPLE  GLOBALLY  (2-­‐3  BILLION  POLICIES)  
  19. 19. Delivery channels Insurance   companies   Bank,   Post  office   Employers Hire  Charge   service  providers  Retailers   Mutuals Suppliers   Low Cooperatives Income People Labour unions On-line & ATM Cell  phones   MFIs   Smart  cards   NGOs   19  
  20. 20. Life insurance with flexibility Amparar Policy by LA EQUIDAD, Colombia for their cooperative members only •  Monthly premium US$ 1.00; basic coverage US$ 1,250.00 •  50% pay out for treatment in case policy- holder contracts incurable disease while insured •  After policyholder’s death for two years – Child’s education expenses –  Medical expenses for dependents – Monthly food vouchers – Utility bills Beneficiaries of a La Equidad AMPARAR policy by courtesy of La Equidad 20  
  21. 21. Indexed rainfall insurance BASIX- India •  Collaboration: World Bank, IFC, and ICICI Lombard Bank, July 2003: benefits indexed to rainfall •  3rd Year – 2005 – 23,080 policyholders •  5th year – 2007 – 37,685 policies sold •  8th year – 2010 – 97,700 policyholders NOW IN 7 STATES in INDIA, PRODUCTS INCREASED Farmer in India waiting for rain by courtesy of BASIX 21  
  22. 22. Comprehensive healthcare with ID cardMicrocare - Uganda•  Provides in-patient and out- patient treatment and prescription medicine•  Several thousand policy holders•  Started as a NGO; now a licensed Uganda insurance company•  A Microcare desk at a participating hospital has a third party administrator to reduce moral hazard by beneficiaries or the clinicPhoto courtesy of MIRT 22  
  23. 23. Integrated insurance packageVimo SEWA co-op, India•  Three packages: death, sickness, loss of assets•  Annual premiums or fixed deposits•  Special benefits for fixed deposit members –  Maternity $6.90 –  Dentures $13.80 –  Hearing aid $23.00Marketing of SEWA through outdoor folktheatre. Photo courtesy of MIRT 23  
  24. 24. Key challengesClients Insurance products and•  Negative attitude industry•  Don’t see the value •  Little knowledge of the•  Low and irregular income market •  Low premiums •  High transaction costsDelivery channels •  Clients’ high expectations•  Poor infrastructure•  Low insurance competence •  Lack of data for pricing •  Low retention rate•  Slow claims handling •  Few health care providers to link with health products 24  
  25. 25. Cautions about microinsurance!•  NOT a ‘magic bullet’•  NOT the right risk mgmt solution for all poor people•  Microfinance institutions –  Don’t have all skills required –  Must assess expenses and risks before offering Microinsurance –  MUST NEVER act as insurers unless they have huge resources 25  
  26. 26. What new things have you encounteredtonight?•  What are the benefits of microinsurance?•  How does it differ from conventional insurance?•  How does microinsurance help people maintain and possibly improve their position on the economic pyramid? 26  
  28. 28. How to get involved•  Tweet your insights to @MicrofinanceWoB (We’ll Tweet back!)•  Sign up to our mailing list on your Smartphone www.microfinancewithoutborders.com and get copies of tonight’s presentation•  Book for our free event: Practical Microfinance in Action! Tue 13 Nov, 6.30-9 pm at Allen & Overy•  Enquire about MWB’s –  Practical Microinsurance Consultancy Courses –  Consultancy support for Insurers, Regulators and Microfinance Institutions 28  
  29. 29. Contact Information•  Mosleh Ahmed –  info@microfinancewithoutborders.com•  Dr Phyllis SantaMaria –  Mobile: +44 7715 004 303 –  Landline: +44 207 839 0844 –  Email: phyllis@microfinancewithoutborders.com•  Gabriel Flores –  Mobile: +44 7834 528 966 –  Email: gabriel@microfinancewithoutborders.com 29