Microinsurance presentation made by John Balmforth (Chair of the ICMIF Board)
MicroinsuranceProviding MeaningfulProtectionJohn BalmforthChairmanInternational Cooperative and MutualInsurance Federation2ndAnnual General Insurance Exchange19-21 March 2013Sydney
ICMIF Represents:Direct members• 219 members in 72 countries• Represents 6.1% of world’s insurance market by premiums• USD 241 billion in premiums• USD 1.35 trillion in assets• Over 300,000 staff employed by membersIndirect members• Includes members of mutual trade associations• 2,906 members• With USD 620 billion in premiums• Represents 14.5% of the world’s insurance market• Almost one third of membership involved in microinsuranceand Takaful
Insurance and Poverty Alleviation“The poorest citizens of the poorest countries aretypically exposed to the greatest risks.Earthquakes, floods, drought, disease, crime alltend to hit the poor hardest. Vulnerability andpoverty go hand in hand, but microinsurance holdsout the promise of breaking a part of the cycle thatties them together.”Jonathan Morduch 2006
“Microinsurance is the protection of low-income people against specificperils in exchange for regular premium payments proportionate to thelikelihood and cost of the risk involved”Protecting the Poor: a microinsurance compendium (Volume II) 2012“The term “microinsurance” typically refers to adapting insurance servicesmainly to clients with low income and no access to mainstream insuranceservices.”Microinsurance Network“Microinsurance is insurance that is accessed by low-income population,provided by a variety of different entities, but run in accordance with generallyaccepted insurance practices (which should include the Insurance CorePrinciples) “Issues in Regulation & Supervision of Microinsurance, IAIS papers (2007)What is Microinsurance?
Key Characteristics ofMicroinsurance• Low Income People• Specific Perils• Limited Access to Mainstream InsuranceServices• All Business Lines• Affordable – premiums commensurate withincome• Various providers• Variety of channels• Formal (Regulated) and Informal (Unregulated)Markets
Lack of Insurance in EmergingMarkets• The cooperative and mutual sector• Microinsurance through cooperatives• Issues for regulators• Case study: Mutual microinsurance in practice
Microinsurance PotentialMarket• Assume – Income USD 1.25 to USD 8.0 per day• 2.5 Billion People• 3 to 4 Billion Policies• USD 30 to USD 50 Billion Premiums• Growth 10%pa
Is Microinsurance Working?• 500 million currently covered• 78 Million in 100 Countries in 2007• 80% Asia• 15% Latin America• 5% Africa• India 300 million• China 40 million
Is Microinsurance Working?• Growth driven by commercial insurance sector• Support from donors and governments• Focus on numbers• Recognition Microinsurance needs to be clientfocused
Microinsurance Challenges• Coverage• Regulation• Moral hazard and Fraud• Adverse selection• Education and trust• Technical expertise• Affordability• Retention• Sustainability• Penetration
‘The success of microinsurance should not be assessed by measuringuptake, but by measuring actual impact’Stefan Dercon, DFID‘To succeed in this market, it is essential that insurers change theirattitude and adopt an open mind to the particular needs andcharacteristics of the market.’Accenture‘Microinsurance providers need to understand client needs andpreferences in order to improve their products and processes, andhence improve client value’Microinsurance Innovation Facility‘Mutuals and cooperatives should be better recognised as a distinctand important form of organisation for insurance provision.’Arup Chatterjee, ADB
Key Attributes for Success• Understanding and responding to customersneeds• Value for money• Customer service and claims management• Policyholder = member• Instilling mutual values in staff• Prevention and risk management• Community concern• Financial inclusion
Mutual/Cooperative Values• Self-help, self-responsibility• Democracy, equality, equity• Solidarity• Honesty, openness• Social responsibility, caring for othersSource: International Cooperative Alliance (ICA)
Mutual/Cooperative Advantagein Microinsurance• History of organising the poor• Members Interests - by the members• Trust• Ownership and loyalty• Peer pressure• Surplus reinvested or redistributed• Inclusive• Work together for the common good
Challenges forMutual/CooperativeMicroinsurance• Transitioning to formalisation – RegulatoryCompliance• Governance• Insurance expertise• Technical and financial capability• Working in isolation• Lack of awareness from stakeholders
Does Mutual/CooperativeOwnership Work in EmergingMarkets?• ICMIF Members in emerging markets:• Premiums 2011 up 15.5% on 2010• Asian members up 20.7%• Latin American members up 15.6%• Pre –tax profits USD 447m up 22%• Assets USD10bn -2011, USD 5.8bn - 2007
ICMIF Mentoring Microinsurers• Development function established in 1963• Annual Development Network Seminar• Web site www.microinsurance.coop• Microinsurance simulation• Participant in global forums• Development arm -Allnations -USD1.5minvested in developing mutuals/coops.
Uplift Mutuals, IndiaGrowing from the Grassroots
ICMIF Microinsurers• CARD MBA• CIC Kenya• Uplift Health Mutuals
Summary• Microinsurance• Risk Protection for the Poor• Integral tool in Poverty Alleviation• Potential Market over 2.5 billion people• Client Centred Approach Provides Real Value andImpact• Mutual/ Cooperative model highly successful• Regulation a Key Issue• Microinsurance Works
A Question?Is microinsurance a solution torisk management forAustralasia’s poor?
ICMIFA global reach forlocal strengthThank youwww.icmif.org