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Microinsurance: Not Insurance As You Know It!
Microinsurance provides alternative insurance options for low-income individuals compared to conventional insurance. It is delivered through various channels directly to customers and uses innovative products like weekly premium payments and payouts for life events beyond death. The story of Jorina Bibi shows how microinsurance helped her rebuild her life and business after her husband's death, while Budi's story without insurance ended in poverty and human trafficking. Microinsurance helps vulnerable populations better withstand financial shocks and maintain their economic position.
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Microinsurance: Not Insurance As You Know It!
- 1. MicroInsurance Not insurance asyou know it! Gabriel Flores Dr. Phyllis SantaMaria
- 2. Warm up! Walkaround and introduce yourself to three other people • Name • What you do • Why are you here tonight? 2
- 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. What is insurance? Lloyd’s of London 4
- 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. What are youropinions about insurance? – [insert photo of Lloyd’s building] Inside Lloyd’s of London (BBC photo) 6
- 7. Some opinions aboutinsurance… 7
- 8. Blind people describingan elephant… 8
- 9. Catheryn’s story: UKvs US 9
- 10. Different views ofmicroinsurance Financial analysts Donors Insu Poor rers peo Academics ple Microfinance ins5tu5ons 10
- 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. Jorina Bibi, aBorrower 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. 2008: Budi andher 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. 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. 2008: Jorina Bibi’sand her children’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. How does microinsurancehelp cushion the impact of shocks? Wealthy Economic Levels Non-poor Vulnerable non-poor Moderate poor Extreme poor Destitute Loan Cycles and Impact of Losses 16
- 17. The 4 mainmicroinsurance 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. How does microinsurancediffer? Fast Needs based Groups Response On your EducaMon CollaboraMon doorstep MARKET SIZE: 4 BILLION PEOPLE GLOBALLY (2-‐3 BILLION POLICIES)
- 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. Life insurance withflexibility 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. 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. Comprehensive healthcare with ID card Microcare - 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 clinic Photo courtesy of MIRT 22
- 23. Integrated insurance package VimoSEWA 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 $23.00 Marketing of SEWA through outdoor folk theatre. Photo courtesy of MIRT 23
- 24. Key challenges Clients Insurance products and • Negative attitude industry • Don’t see the value • Little knowledge of the • Low and irregular income market • Low premiums • High transaction costs Delivery 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. 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. What new thingshave you encountered tonight? • 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
- 27. ARE YOU READYTO TAKE ACTION? 27
- 28. How to getinvolved • 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. Contact Information • MoslehAhmed – 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