Can mutual Microinsurance improve the living standard of the marginalized groups? The Sanasa Experience By L. B. Abeysinghe, SICL AOA 30th Anniversary Seminar Colombo Sri Lanka. August 2014

1. Presentation by
L. B. Abeysinghe-Consultant-SICL
At
AOA 30thAnniversary Seminar
26thAugust 2014
at Cinnamon Lakeside Hotel Colombo.
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2. Agenda……..
Definition & explanations of concepts used in the presentation.
Strategies of developing Microinsuranceto reach up to its objectives.
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Challengesencountered by Sanasa in conducting microinsuranceschemes.
What are the Lessons Learnt.
Sanasa as a Microinsuranceprovider –Transition from status of mutual to formal insurance provider.
Types of Microinsuranceproducts offered by Sanasa.
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3. Definition of Microinsurance
•Microinsuranceisdefinedas
“AMethodofprovidingprotectiontothelowincomepeopleagainstspecificperilsinexchangeforaregularpaymentofpremiumproportionatetolikelihoodandthecostofriskinvolved”
•Doesthisdefinitionexplainadequatelytheuniquecharacteristicsandthescopeofmicroinsurance?
-Itfailstodistinctmicroinsurancefromtraditional
insurance.
-Itdoesnotexplainspecificcharacteristicsofmicroinsurance.
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4. Definitions and Explanations of other Concepts
(a) Mutual
The concept of mutual can be understood clearly by comparing its features with those of Commercial Insurance Companies.
Mutualhadbeenabletoperforminsurancebusinessbetterthantraditionalinsurancecompaniesduringtheglobaleconomiccrisisexperiencedinrecentyears.
Mutualinsurerstendtohaveagreaterleveloftrustandcustomersatisfaction.
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Mutuals
Commercial Insurance Company
Ownership
Owned entirely by members/policy holders
Ownedbyinvestorswhohavepurchasedcompaniesstock.
Profits
Distributionthroughrebatestopolicyholders.
Profitsare distributedto the shareholders.

5. Definitions and Explanations of other ConceptsContd……..
(b) Living Standard
TheTermlivingstandardiscloselyrelatedtoqualityoflifethatprevailsinagivensocioeconomicclassinacertaingeographicalareaintermsof:
The Level of Wealth/Income
Comfort
Material goods
Necessities available 5

6. Definitions and Explanations of other ConceptsContd…….. (c) Marginalized groups
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Theterm“marginalizedgroups”canbedefinedasgroupsofpersonswhohavebeendeprivedofbeingservedadequatelyagainstperilsthroughinsuranceschemesoperatedbycommercialinsurancecompaniesorsocialsecurityinsuranceschemesadministeredbythestate.
Theterm“UnderservedSector”isalsousedtodescribethegroupofpersonsignoredbytraditionalinsurersandsocialsecurityinsurers.

7. Key factors that need to be considered in defining Microinsurance
•Indefiningmicroinsurance,initscorrectperspectiveitisessentialtoconsiderfollowingfactors:
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Concept of serving the poor & Marginalized /underserved groups.
Types of Product
Types of Insurance Provider
Distribution Channels
Other key factors that separate microinsurancefrom traditional insurance:
Simplicity
Accessibility
Efficiency of Process

8. The final goal of Microinsurance
•Inthecontextofabovedefinitionsandexplanationsitisclearthatthefinalgoalofdevelopingmicroinsuranceistoenhancethequalityofliferelatedtoacertainsocioeconomicclassinacertaingeographicalarea.
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9. The need for developing Microinsurance.
TheneedfordevelopingmicroinsuranceinanemergingeconomyofacountrylikeSriLankaisnoteworthy.
•InsuranceindustryinSriLankaisstillagrowingindustry.
•Theoverallinsurancepenetrationisonly1.2%.ThisisoneofthelowestintheAsianRegionwheretheaveragelevelofpenetrationat5.8%.
•Insurancepenetrationislowduetounawareness,ofinsurance,lackofattitudetowardstheinsurancebythemassesandthemajorityofpopulationbeinginlowincomegroups.
•Toenhancetheinsurancepenetrationandtherebytoimprovethequalityoflife, microinsuranceisconsideredtobethebestsolution.
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10. Strategies of developing microinsurance
i.ProductDevelopment
-Meetingtherealriskthattargetmarketrequires
-Minimizingthepricetoenhanceaffordabilityandaccessibility
-Simplicityinunderstandingtermsandprocedures.
ii.Productiondistributionthroughdifferentmodels
-Fullservicemodel
-Partneragentmodel
-Careprovidermodel
-Communitybasedorganizationmodel
iii.ConsumerEducation
Tocreatebetterunderstandingofmicroinsuranceasatoolofhouseholdriskmanagement.
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11. Sanasa Insurance as a microinsurer
•“SanasaInsurance”signifiesaninsurancecompanyregisterednamelyas“SeemaSahithaSanasaRakshanaSamagama”ofwhichEnglishversionis“SanasaInsuranceCompanyLimited”(SICL).
•CurrentlySICLoperatesbothLifeandGeneralInsurancebutasubsidiarycompanyisduetobeestablishedtooperategeneralinsurancebusinessseparately.
•SanasacommencedmicroinsuranceactivitieswellbeforetheincorporationofSICLthroughasubsidiaryorganizationcalledALMAO.
•ALMAO was a mutual organization owned by members and established to serve members of Sanasa & Funeral aid societies.
•DuetoabsenceofanyprovisionsinInsuranceLawinthecountry.SanasahadtoestablishSICLtocontinueitsmicroinsuranceservicesforthebenefitofSanasaMembers.
•AlthoughSICLisregistered,asatraditionalinsurancecompanyitisconcernedmainlywiththedevelopmentofmicroinsuranceproducts.
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12. Vision and Mission of the Sanasa Insurance Company
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Mission:
Tostrengthenthesocietythroughadequateriskcoverageanddevelopingthecommunitythroughcomprehensiveriskcover. Vision:
To establish a new society based on Co-operative principles.

13. •Sanasa MicroinsuranceProducts could be categorized As follows:
(1) Products related to financial products of MFIs.
Eg: Loan Protection and life savings
(2) Products offered for welfare of families of low income groups.
Eg: Funeral Aid Insurance & Suwadayaka(Health Insurance)
(3)Productstoprotectpropertiesofindividuals,societiesandSMEs.
Eg:PropertyInsurance(Fireandburglary,etc.)&Utthamavi
(4)ProductsfordevelopingAgriBusiness.
Eg:WeatherIndexBasedCropInsuranceforPaddyandTeagrowers&Sanasa
CattleInsurance.
(5)Lifepoliciesadaptedtomeettheinsuranceneedsoflowincome
earners.
Eg:Wholelife,Endowment,EducationandLifepensionpolicies
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Microinsuranceproducts offered by
Sanasa insurance.

14. Premium Income (in Rs. Million)
•Products related to microfinance 20112013
-Loan Protection 6.81 14.08
-Life Savings 0.02 0.16
•Products offered for members family welfare
-Funeral Aid Insurance 16.46 14.58
-Suwadayaka(Health Insurance) 3.63 7.13
•Products offered to cover properties of
individuals society members and SMEs 39.7 54.2
•Products for developing AgriBusiness
-WII for Paddy 0.9 5.9
-WII for Tea -5.5
-Cattle Insurance 1.1 10.1
Total 68.62 111.65
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Business Progress of MicroinsuranceProducts (non life) -in details.

15. •Products related to financial products of MFIs 20112013
-Loan Protection& Life savings -claims paid (Rs. Mn.)6.02 3.5
No of beneficiaries 66 43
•Products offered for members family welfare
-Funeral Aid Insurance -claims paid (Rs. Mn.) 14.3 11.6
No of beneficiaries 1413 1173
-Suwadayaka(Health Insurance) -claims paid (Rs. Mn.) 2.52 4.7
No of beneficiaries 1092 1383
•Property Insurance -claims paid (Rs. Mn.) 3.1 3.4
No of beneficiaries 34 38
•Agriculture Insurance -claims paid (Rs. Mn.) 3.0 8.3
Crop(WII) & Livestock
No of beneficiaries 4868 22946
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Details of benefits Provided to Sanasa MicroinsurancePolicy Holders (Non life)

16. Business Progress of Life MicroinsuranceProducts.
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Life201120122013
Premium income (Rs. Million) 128.1 202.9 285.3
No. of policies in force 77462 110,637 124,435
Claims paid (Rs. Million) 4.5 9.9 13.4
No. of Claims paid 148 191 248

17. Challenges faced by Sanasa Insurance in Promoting MicroinsuranceProducts
•ThereisnoprovisionsininsurancelawinthiscountryformicroinsuranceandoperationofinsuranceactivitiesbymutualsandotherCBOs.
•Insomecountriesregisteredmicroinsuranceorganizationsareenjoyingrelaxedprovisionsundertheinsurancelawpertainingtomicroinsurance.SuchfacilitiesnotavailableinSriLankayet.
•Absenceofnationalpolicyfordevelopmentofmicroinsuranceasatoolofriskmanagementhasresultedanunhealthysituationbetweenthepolicymakersandmicroinsurancepractitionersintheinsuranceindustry.
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18. Challenges faced by Sanasa Insurance in Promoting MicroinsuranceProducts. Contd………..
•Developmentofinnovativeproductshavebeenhinderedduetothefactthatsuchexerciseneedssignificantrecoursesandtechnicalexpertisetoconductinitialresearchandproductconfiguration.Trainingfieldstaffandpotentialclientswillalsoincurheavyinvestments.
•Negativeattitudetowardsmicroinsurancenotonlyfromthepotentialclientsbutalsofromfrontlinestaff,fieldstaffandofficersofthegovernmentdepartmentswhoareinchargeofcommunitydevelopmentprogramshasbeenagreathindranceforthedevelopmentofmicroinsurance.
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19. •ThereisagreatnecessitytoaccommodatemicroinsurancelegislativelyinSriLankatoenableinsurancecompaniesoperatemicroinsurancebusinesswithcollaborationofMFIswelfaresocietiesandothercommunitybasedorganizations.
•Designingamicroinsuranceproductrequiresservicesofexpertsforconductingmarketassessmentproductconfigurationandproductpricingandalsofortrainingoftrainerstoeducatepotentialclientsandalsotomembersoffrontlinestaffandfieldstaff.AvailabilityofsuchservicesfromexpertscouldbemadeavailablethroughaMicroinsuranceDevelopmentCentersetuplegislatively.
•MicroinsuranceproductssuchasloanprotectionHealthInsurance,FuneralAidInsurance,AgriInsuranceBusinesshavehadgreaterimpactonlivesoflowincomegroupinSriLanka.
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Lessons Learnt in implementing microinsuranceschemes by Sanasa Insurance.

20. SANASA Insurance Company LimitedThank You…
Sanasa Insurance Company Limited.
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No: 340 2/1, R. A. De Mel Mawatha. Colombo 03.