9 – 11 November 2010 Manila, Philippines Report 6Th International

Report 6th International Microinsurance Conference 2010 Making insurance work for the poor

9 – 11 November 2010 Manila, Philippines

Edited by Zahid Qureshi and Dirk Reinhard Contents

1 Acknowledgements 18 Agenda 50 Agenda Day 2 morning sessions Day 3 morning sessions 2 Agenda Day 1 morning sessions 19 Parallel session 1 51 Parallel session 9 Pre-conference seminars Developing national micro Driving down cost – Process- insurance strategies – mapping to increase efficiency 3 Pre-conference seminar 1 The example of the Philippines in microinsurance processes Access to insurance – Policy seminar for regulators 22 Parallel session 2 54 Parallel session 10 and supervisors Academic track – Demand issues Developing natio nal micro insurance strategies 5 Pre-conference seminar 2 24 Parallel session 3 Performance indicators Case studies – Agriculture 57 Parallel session 11 Academic track – Impact on 9 Agenda 27 Parallel session 4 microinsurance Day 1 afternoon sessions Workshop – Introduction to good practice in microinsurance 59 Parallel session 12 10 Introduction and welcome Social performance indicators addresses 29 Plenary 2 for microinsurance Round table – Responses from the 12 Keynote speech private sector in the Philippines 62 Plenary 3 14 Plenary 1 Academic track – Do the poor 32 Agenda Institutional options for benefit from insurance? Day 2 afternoon sessions achieving scale and profitability – 66 Agenda Lessons from the Philippines 33 Parallel session 5 Day 3 afternoon sessions New distribution channels 67 Parallel session 13 38 Parallel session 6 Case studies – Health Protecting the poor against natural disasters 70 Parallel session 14 Claims handling 43 Parallel session 7 Client education – Insurance 74 Parallel session 15 literacy Academic track – Contract design issues 46 Parallel session 8 Life insurance 76 Parallel session 16 Monitoring microinsurance trends globally 79 Plenary 4 Round table – Is there profit in serving the underserved? 82 Field trips 84 Countries represented 86 Participating organisations 88 Acronyms Conference documents and 89 Outlook on Brazil, the host country presentations of the 7th International are available online at: Microinsurance Conference 2011 www.microinsuranceconference.org / 2010 Links: Munich Re Foundation www.munichre-foundation.org Microinsurance Network www.microinsurancenetwork.org Report 6th International Microinsurance Conference 2010 1

Acknowledgements

This report is a summary of the 6th For three days, over 80 speakers lessons drawn in various sessions of International Microinsurance Confer- and facilitators discussed innovative the 2010 conference. They have done ence that took place in Manila, Philip- and sustainable microinsurance a terrific job summarising the content pines, from 9–11 November 2010. programmes, illustrated by the latest and key messages of the speakers’ The Conference was hosted by the case studies and research results. presentations and the different views Munich Re Foundation and the Micro More than 15 countries were also repre- and opinions expressed during the insurance Network and supported sented through the regulatory bodies discussions of the various sessions in by Deutsche Gesellschaft für Inter of the insurance industry. This clearly a neutral manner. As the style of the nationale Zusammenarbeit (GIZ) and signals the increasing commitment of sessions changes, so does the style of the German Federal Department for insurance supervisors to supporting the individual summaries. Readers, Economic Cooperation and Develop- the development of inclusive insurance authors and organisers may not share ment (BMZ), the Department of Finance markets, which may include specific all opinions expressed or recommenda- of the Philippines, and Georgia State microinsurance regulations facilitated tions given – but these reflect the rich University’s Center for the Economic by the International Association of diversity of the discussions. Analysis of Risk. Insurance Supervisors (IAIS) and the A conference of such magnitude Access to Insurance Initiative (a2ii). The Philippines is a unique country needs a lot of people working behind in the world of microinsurance. It A key objective of the International the scenes. The organisation team – has a huge diversity of stakeholders, Microinsurance Conference is the Martina Mayerhofer, Christian Barthelt models and products, operating sharing of experience across continents and Petra Hinteramskogler – again together to achieve scale and sustain- and discussing current practices and did an amazing job to organise a very ability. With approximately 2.9 million lessons learnt. The many plenary special conference. We would also like microinsurance clients so far, further discussions and parallel sessions would to thank the secretariat of the Micro effort is required to reach an additional not have been possible without the insurance Network – Véronique Faber, 35 million potential clients. The contributions of the speakers and facili- Coralie Zacchino and Matthew Genaz- conference made clear again how tators from around the world. We would zini – for their support in communica- committed the government of the like to thank all of them for their willing- tion and evaluation of the International Philippines is to providing the best ness to share their knowledge. Our Microinsurance Conference. possible support and this commit- thanks go also to the 520 participants The 2010 event was the largest confer- ment was commended throughout the from 50 countries for contributing their ence on microinsurance ever. It has conference. The Philippines is not only comments and questions and making raised the bar substantially for future a front-runner in the industry, it also the discussions lively and thought- events. The conference organisers are acts as a role model for other countries. provoking. On behalf of the organisers, highly motivated to take on this chal- we would like to thank members of The organisers would like to thank lenge and to make the 7th International the conference steering committee. the Department of Finance for its Microinsurance Conference that will Without their work to identify suitable outstanding support for this event. The take place from 8–10 November 2011 speakers and presentations from the conference was honoured by the in Rio de Janeiro an even better event. 130 submissions that were received presence of Cesar V. Purisima, Secre- during the preparations for the confer- tary of Finance of the Philippines, Dirk Reinhard, Vice-Chairman, ence, this event would not have been during the opening session. The Deputy Munich Re Foundation, Germany, possible. Insurance Commissioner, Vida Chiong, Chairman of the Conference Steering paved the way to getting each and A special thank-you goes to the team Committee every important microinsurance player of rapporteurs – Andrea Camargo, Craig Churchill, ILO/Microinsurance in the Philippines on board, and Itoy Marie-Amandine Coydon, Martin Innovation Facility, Switzerland, Chair- Almario, member of the National Credit Herrndorf and Sameen Sahid, led by man of the Microinsurance Network Council, worked tirelessly behind the Zahid Qureshi – for helping us gather scenes to make this event a true success. and document points made and Munich and Geneva, April 2011

1 — Craig Churchill, ILO/Microinsurance Innovation Facility, Switzerland, Chairman of the Microinsurance Network. 2 — Dirk Reinhard, Vice-Chairman, Munich Re Foundation, Chairman of the Conference Steering Committee.

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Agenda Day 1 morning sessions 9 November 2010

Pre-conference seminar 1 Pre-conference seminar 2 Access to insurance – Performance indicators Policy seminar for regulators Hosted by the Microinsurance and supervisors Network Performance Hosted by IAIS, Indicators Working Group Microinsurance Network, Access to Insurance Initiative Vida Chiong Facilitators Deputy Insurance Commissioner, Bert Opdebeeck Insurance Commission, Microinsurance Programme Philippines Coordinator, Belgian Raiffeisen Foundation, Belgium G. Prabakhara Member, Life, IRDA, India Denis Garand President, Denis Garand and Martina Wiedmaier-Pfister Assoc., Canada Consultant to GIZ/BMZ Germany Joselito Almario Deputy Executive Director, National Credit Council/Depart- ment of Finance, Philippines Jacky Huma Head of Department – Insurance Compliance, Financial Services Board, South Africa Regina L. G. Simoes Technical Analyst – Market Information Division, SUSEP, Brazil Renata de Leers Head of Actuarial Department National Insurance Commission, Ghana Sen-Kai Yang Officer- Insurance Bureau, Financial Supervisory Commission, Chinese Taipei Maya Makanjee CEO, FinMark Trust, South Africa Facilitators Craig Thorburn Policy Advisory Consultant, World Bank, USA Doubell Chamberlain Managing Director, Cenfri, South Africa Report 6th International Microinsurance Conference 2010 3

Pre-conference Access to insurance – seminar 1 Policy seminar for regulators and supervisors

“On behalf of PNG Insurance As part of the conference, the Access Formalising the informal Regulator’s Office , I see to Insurance Initiative (a2ii) hosted a Implementing a sound supervision a great need for developing seminar for senior insurance sector regime can include the challenge of a microinsurance market policymakers, regulators and super- finding the way from a potentially with the support of renowned visors. It was attended by 55 repre- large number of informal providers organisations, MI service sentatives from 20 countries, as well towards a more formal system. The providers and donor aid as a number of members of the Joint agencies, and the approval of session looked at this challenge Working Group of the International the government authorities. through the experiences of the Philip- Association of Insurance Supervi- The Office of the Insurance pines and South Africa. Both countries sors (IAIS) and the Microinsurance Commissioner is supporting are looking to find a balance, devel- Network. and promoting microinsur- oping reasonable transitional arrange- ance activities in Papua The seminar focused on two key ments and recognising the need to New Guinea as this is the way issues policymakers face as they consider access to services, with the forward to improve the move forward with actions to improve aim of ensuring that these services are lives of low-income earners access to insurance markets in their valuable and can be expected to keep and the poor population.” efforts to combat poverty: formalising the promises made to customers. In Ludwig Repo, Deputy the informal, and facilitating outreach each case, it is perceived as important Insurance Commissioner, and innovation by formal players. to provide informal providers with Papua New Guinea Each issue was addressed through a a pathway – or more than one – to a During the conference closing session, facilitated discussion among panel more effective business structure and the participants were asked to e-mail some members as well as open discussion operation. immediate feedback to the conference among all participants where key organisers. Selected quotes from that In the Philippines, recent regulatory feedback are listed throughout this report. country experiences were shared and and policy reforms have highlighted discussed. the large number of entities that can benefit from adopting one of a range of models, from the partner-agent model to the provision of insurance through microinsurance MBAs or other suitable structures.

3 — Left to right: Joselito Almario, Deparment of Finance, Philippines; G. Prabakhara, IRDA, India; Martina Wiedmaier-Pfister, consultant to GIZ/BMZ, Germany. 4 — Left to right: Regina L. G. Simoes, SUSEP, Brazil; Renata de Leers, National Insurance Commission, Ghana; Sen-Kai Yang, Financial Supervisory 3 4 Commission, Taiwan; Doubell Chamberlain, CENFRI, South Africa. 5 —Jacky Huma, Financial Services Board, South Africa. 6 — Craig Thorburn, World Bank, USA.

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Pre-conference seminar 1 Access to insurance – Policy seminar for regulators and supervisors

In South Africa, a significant propor- Facilitating outreach and innovation Lessons learnt tion of the population has been The second part of the seminar — Government action for a sound covered by funeral providers that will focused on the role of policymakers, microinsurance market develop- also have options to formalise, either regulators and supervisors in cat- ment is key, and the formalisation focusing on distribution functions or alysing outreach and innovation by question is important. as risk carriers through a concessional existing insurers. arrangement with transitional plans. — It is often necessary for the super- In each case, the emphasis of the Contributions from the insurance visor to lead on raising aware- regulatory changes is on consumer supervisors from Brazil, Chinese ness among all stakeholders and protection and the system was devel- Taipei and Ghana highlighted a range play a coordinating role. oped with extensive public commu- of ways that governments, directly — Much of the impact in terms of nication programmes with the sector and through the actions of insurance catalysing outreach was achieved participants. supervisors, can encourage innova- by raising awareness, long tion and action where it might other- Experts from the World Bank and before regulatory changes were wise have been dormant. the Consultative Group to Assist the made or specific actions taken. Poor (CGAP) noted that the formalisa- In Chinese Taipei, efforts to catalyse — Regulatory action needs to be tion question is important for many outreach are recent and microinsur- tailored to the domestic environ- jurisdictions as they move ahead with ance business is developing steadily. ment and take account of market more proactive or explicit approaches The Commission’s Insurance Bureau realities. to access issues in their regulation created a defined regulatory space and supervision. The IAIS is looking at for micro life and personal accident — Regulators must be able to drafting standards and guidance that policies and provided administrative monitor the impact of changes will include this issue as part of their incentives and public recognition to and adapt their strategy. review as well, so the seminar discus- motivate players to approach the less sion was beneficial as input to the IAIS well-served segments of the market. processes. Ghana is facing a challenge to facilitate outreach with an industry that is relatively weak yet already growing rapidly (including in microinsurance). The National Insurance Commission About the Access to (NIC) notes that microinsurance is a Insurance Initiative realistic, simpler starting product for The Access to Insurance Initiative the market to use as a basis to evolve. is a global partnership of insurance A recent policy paper issued by the supervisors and development NIC lays down the framework to be agencies. The Initiative is designed adopted, which will form the basis for to increase voluntary usage of integrating microinsurance into the suitable insurance products. new insurance regulatory framework as a specific business line. www.access-to-insurance.org Brazil’s Superintendência de Seguros Privados (SUSEP) started with initiatives to catalyse outreach as early as 2004, though initially with limited success. Learning from this experience, SUSEP initiated research projects as well as widespread engagement with public and private stakeholders. It plans to introduce regulatory changes that will permit the 106,000 correspondent banking agents to be used for microinsurance. Report 6th International Microinsurance Conference 2010 5

Pre-conference Performance indicators seminar 2

“A low coverage ratio This seminar was hosted by the Micro- Table 1 measuring the total popu- insurance Network’s Performance Nine performance principles lation may not be problem- Indicators Working Group. Key financial atic if the real target is performance indicators can be applied a subsection. To achieve to schemes offering different types efficiency, a microinsurer Good accounting Separation of data of insurance – including life, non-life, practices should try to reach a high health and agriculture – and for insurers Production of coverage ratio for its financial statements with different background and govern- targeted population.” ance structures – limited companies Good Relevant and Performance Indicators or mutuals. They allow insurers to insurance accurate data management Working Group of the systematically look at their progress – Calculation and practices Microinsurance Network and compare themselves to others in set-up of reserves the market in a transparent way. Efficient and Application support continuous claims monitoring To support the indicators, a handbook Clear investment

and spreadsheet are available for policy public use on www.micro-fact.org. The Good Technical insurance microinsurance factsheet enables the organisational capacity information necessary to be captured practices to calculate performance indicators Transparency with the help of graphic presentations. Client focus To make sure that there is “no excuse for not coming up with the indicators”, Appui au Développement Autonome (ADA) and Belgian Raiffeisen Foun dation (BRS) also offer workshops and direct implementation support to microinsurers in collaboration with GIZ. Experience from these workshops has confirmed again and again that transparency and systematic analysis help improve operations in microinsurance schemes, making them more relevant for clients and more stable over the long term. Key principles There are nine principles in three categories that provide qualitative guidance for running and monitoring microinsurance programmes (see Table 1). They underpin performance measurement as well as good management.

7 — Bert Opdebeeck, Belgian Raiffeisen Foundation, Belgium. 8 — Denis Garand, Denis Garand and Assoc., Canada.

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Pre-conference seminar 2 Performance indicators

Good accounting practices are key Good organisational principles Table 2 to evaluating the success of micro are important at various levels. Ten key performance indicators insurance programmes. Consider the Technical insurance capacity requires case of American International Group, a company to be not only suffi- now Chartis (AIG) in Uganda. It had ciently capitalised, but also have Product Coverage ratio a large microinsurance programme sound pricing methods and good awareness and Growth ratio there, but no idea of its profitability, as information systems and data- client satisfaction it could not separate microinsurance bases. For clients, regulators and Renewal ratio data from its mainstream operations. other stakeholders, transparency is Service quality Promptness of It was able to determine profitability important – especially for low-income claims settlement only after separating the data appro- clients who must have relevant and Claims rejection ratio priately. Based on data, companies easily understandable materials in should produce reliable financial their own dialect or local language. Product value Incurred statements – where is money coming Transparency also facilitates regular expense ratio in, where is it going out? This should external audits required by law to Incurred claims ratio be done from a client perspective – prevent fraud and other governance Net income ratio if a client pays 100 pesos in premium, problems. where does it go? Financial prudence Solvency ratio As a last principle, a client focus should Liquidity ratio Good insurance management practices be taken in all operational aspects: go beyond accounting principles. what levels of claims and expense Again, relevant and accurate data are ratios are appropriate, and what kind key to management – capturing the of return can companies can expect right information without taking on microinsurance? It can be difficult the risk of collecting excessive data to justify classic expectations of a that are then not put to appropriate 20 % return on equity (ROE) when use. Calculating and setting up taking into account the eventual value reserves is especially relevant for provided to microinsurance clients. schemes that build up capital (like Key indicators a savings scheme), or that insure clients for a specified time (e.g. a year) A list of ten quantitative indicators in based on a one-off payment. Also, four categories has been established companies need to carefully monitor to evaluate the status and progress claims – some may be “incurred but of microinsurance programmes not reported” (IBNR), others may (see Table 2). be “claims in course of settlement” (CICS). Association d’Entraide des Femmes (AssEF Benin), a mutual health programme, monitored its claims in real time – and discovered high claims payments due to community clinics providing more services then necessary to insured clients. As the problem was detected early on, it was possible to address it easily and quickly. On the assets side, a clear investment policy can help assure a prudent, diversified match to liabilities occur- ring in the future. Report 6th International Microinsurance Conference 2010 7

Product awareness and client satis- Expense ratios should reflect the Lessons learnt faction can be assessed with three “full cost” of doing microinsurance – — Financial performance indicators indicators: the coverage ratio of including commission payments to are important to help managers programmes, the growth rate of the partners or shared overhead costs. of the scheme better understand programme, and the renewal ratio. Both for financial stability and for their business. client value, expenses should be kept Similarly, renewal ratios in compul- low, depending on the type of insur- — Monitoring key performance sory programmes linked to credit ance scheme. indicators and trends enables might be low due to credit drop-outs – problems to be identified early though this may not be indicative of The claims ratio is more complex – on and swift action to be taken a problem with the insurance product low claims ratios are clearly beneficial before they escalate. itself. For a voluntary, continuously for the financial viability of schemes, offered product on the other hand, low while they can also indicate low client — All those involved in microinsur- renewals could point to an irrelevant value. Even from a purely commercial ance can begin with the indica- or excessively complex product, or perspective, very low claims ratios tors using the tools provided by to over-selling during the initial client can cause competitors to enter the www.micro-fact.org. Indicators acquisition. market. They could also indicate that should be calculated from the clients are not aware of their cover, outset, at the business planning In a related way, service quality can especially in compulsory schemes, stage and from the inception of be assessed by measuring the which can lead to reputation damage the scheme. promptness of claims settlement or action by regulators. and the claims rejection ratio. For — The main challenge in calculating the first measure, the client perspec- The net income ratio shows how relevant indicators is inability to tive is important again. While many much money is made (or lost) on a separate data. insurers settle claims within 24 hours, microinsurance scheme. — The indicators are interdependent this mostly only covers the period Finally, financialprudence is assessed and influence one another. They from receipt of complete documenta- through the solvency ratio and the should be interpreted taking into tion until disbursement of the money liquidity ratio. account the full picture, not just (sometimes only to the distribution isolated aspects. channel partner). As obtaining a death Solvency is concerned with financial certificate takes months in some viability over the long term – are assets countries or distribution channels available to cover liabilities that will take months to finally pay claims to arise in the future? Solvency issues are end-clients, the whole process from also relevant from a sector perspective, incident to claims settlement can still as the failure of insurers can reduce be unduly long for clients. public confidence in the system, which is why they must be subject to regula- See page 59 for a related report on The claims rejection ratio can also be tory supervision. parallel session 12 “social performance driven by different factors – exces- indicators for microinsurance”. sively complex products, lack of Liquidity is concerned with the short- education and marketing efforts or term availability of money to pay mis-selling would all give rise to claims promptly. Some assets, like concern, while the detection of fraudu- property, might be difficult to sell in the lent claims shows that the mechan- short term, which can pose a problem isms in place are working. when claims need to be paid. Product value is assessed through the All of these indicators are interlinked. incurred expense ratio, the incurred High renewals might result from strong claims ratio and the net income ratio product value and service quality, but resulting from the former two. are also important for maintaining a high growth rate and, by reducing marketing costs, a low expense ratio. A high claims rejection ratio can drive up expenses (for claims assessors) and reduce future renewal and growth ratios. It might also lower claim settlement time – where claims are rejected immediately. Report 6th International Microinsurance Conference 2010 8

9 — For the second time at “One of the many good things about the International Microinsurance this conference is that it is able to clearly Conference, a special policy seminar on regulation and demonstrate that microinsurance is supervision was held in Manila. No less than 15 countries were another tool that can be mainstreamed represented through high level representatives of the regulatory to lessen the vulnerability of the poor.” bodies of the insurance industry.

Irene B. Fernandez, Programme Officer, INAFI, Philippines 10 — Over 30 journalists attended the press conference held by the Munich Re Foundation, the Department of Finance, the Microinsurance Network and GIZ. 11, 12 — Among the 15 organi sations that presented their work in the exhibition space was the India-based Microinsurance Academy (left) as well as the Access to Insurance Initiative (right). 13 — 520 participants from 50 countries attended the 6th International Microinsurance Conference – the largest microinsurance conference ever.

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Agenda Day 1 afternoon sessions 9 November 2010

Opening Plenary 1 Welcome address Institutional options for achieving scale and profitability – Lessons from the Philippines Craig Churchill Jaime Aristotle Alip ILO/Microinsurance Innovation Chairman Emeritus, Facility, Switzerland, Chairman RIMANSI, Philippines of the Microinsurance Network Cooperative model Thomas Loster Richard Leftley Chairman, Munich Re President and CEO, Foundation, Germany MicroEnsure, UK Broker model Keynote speech Cesar V. Purisima Geraldine Desiderio-Garcia Secretary of Finance, Senior Vice President and Philippines General Manager, Country Bankers Insurance Corporation, Philippines Partner-agent model Lourdes Irene Minoza PhilHealth, Philippines Extending public insurance schemes to the low-income sector Facilitator Doubell Chamberlain Managing Director, Cenfri, South Africa Report 6th International Microinsurance Conference 2010 10

Introduction and welcome addresses

In a setting described as near-perfect, “The Philippines is prone to natural Table 3 the 6th International Microinsurance disasters and merely making micro- Microinsurance market Conference brought 520 partici- credit available is not enough to in the Philippines pants from 50 countries – the largest improve the lives of people”, said number yet – to Manila to share infor- Secretary of Finance Cesar V. Purisima Microinsurance Estimate mation, knowledge and experience in the keynote speech on behalf of market (millions) in the field and help chart the course President Benigno Aquino. “For those Microfinance clients 0.84 for further development of insurance engaged in agriculture and other of rural banks with services for low-income families. livelihoods related to it, a typhoon credit life insurance can destroy a life’s work and set them What attracted the annual forum to Members of micro- 0.55 back to where they began. Estab- the Philippines is its billing as one insurance MBAs lishing safety nets through micro- of the top three microinsurance Microinsurance 0.31 insurance will help us break this markets, along with India and South provision outside cycle of poverty. After all, breaking Africa. It is driven by a productive the MFI market the cycle of poverty will be the partnership between the public and Total formal 1.70 true measure of success of any private sectors, participative involve- government.” Informal estimate: 1.20 ment of stakeholders in the informal 50 % of members of as well as formal economy, and a For the better part of a week in Manila financial cooperatives judicious use of a firm microfinance delegates had much to learn, much Total market (millions) 2.90 base as a springboard for micro- to examine and explore, and much to insurance. The Philippines’ track take back home from the microinsur- Adult population, 54.10 2007 (millions) record in microinsurance is marked ance landscape of the Philippines. by harmonisation of a variety of Total microinsurance 5.4 % market share in approaches, products and distribu- adult population tion channels – all founded on what is seldom acknowledged in devel- Formal microinsurance 3.1 % opment circles as a critical success market share in factor: respect for the poor. And the adult population way forward shows, as one organiser Source: Gilberto M. Llanto, Piedad S. Geron, put it, “no fear of tackling difficult Joselito S. Almario (2008). Brochure “The lines such as index-based insurance microinsurance landscape of the Philippines”. Published by GIZ MIPSS, Manila 2010 to deal with the new challenges of climate change and natural disasters”.

14 — Craig Churchill, ILO/Micro insurance Innovation Facility, Switzerland (left), and Thomas Loster, Munich Re Foundation, Germany handing over a copy of the “Microinsurance Compendium” to Cesar V. Purisima, Secretary of Finance, Philippines.

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Thomas Loster, Chairman of Munich Re In his opening remarks, Craig Foundation, welcomed delegates to Churchill, Chairman of the Microin- the conference, which aimed to give surance Network, also referred to the them a first-hand look at “the unique G20 meeting and the nine principles position of the Philippines in devel- it has developed to promote finan- oping a broad-based framework for cial inclusion. Towards this end, the microinsurance”. Network is working with the IAIS on the Access to Insurance Initiative Recent natural disasters in Pakistan to help expand services to low- and the Philippines once again under- income clients, he said. “The micro- scored the need to spread insurance insurance industry is facing two key protection more widely, he said. questions”, he added. “First, is the That may be one of the reasons for provision of insurance to low-income three of the ten points in the Commu- households viable or profitable? That niqué of the Meeting of G20 Finance question will be addressed during Ministers and Central Bank Govern- the final plenary. And second, do ors – held in Gyeongju, Korea, on low-income households benefit from 23 October 2010 – referring to finance their insurance coverage? That is a and insurance, specifically more difficult question to answer, — “to promote inclusive and sustain- but Plenary 3 will attempt to provide able economic growth and some preliminary insights.” resilience in developing countries”; Taking part in 22 sessions, delegates — “to improve access to financial also had much to share from their services for the poor and SMEs”; own perspectives. They represented a broad spectrum of involvement — “to maximise the impact of in the sector: insurers and reinsurers, the work on financial inclusion development-aid agencies and and enhance coordination other international organisations, amongst different initiatives and regulators and supervisors, policy- stakeholders”. makers, NGOs, academics, technical “Microinsurance conferences, which experts and consultants. Some the Munich Re Foundation has held 80 speakers and facilitators tackled annually since 2005, have contributed case studies and academic research to these objectives”, he added. on innovative and sustainable microinsurance programmes and products, focusing on new distribution channels, claims-handling mechanisms, enabling the environment to nurture microinsurance, solutions for natural disasters, and insurance literacy. Report 6th International Microinsurance Conference 2010 12

Keynote speech 1 Cesar V. Purisima, Secretary of Finance, Philippines

To everyone who has flown in from The aim of President Aquino’s We are happy to report that, at the micro- abroad – I understand that there are programme is to alleviate poverty in the finance level, the Philippines is con- citizens from 50 different countries Philippines and continue the task that sidered one of the leaders. In a survey of here who have come from as far afield his mother was not able to complete. 55 countries, the Philippines was ranked as Europe, Latin America and Africa – To this end, we intend to accelerate the second in terms of success in reaching I’d like to convey the warmest welcome growth of the country by addressing the out to the poor in providing micro from our president, President Benigno three things that have held it back for finance. Simeon Aquino. Unfortunately, many years in the past: corruption, red Small business and microentrepre- because of his tight schedule, he could tape and incorrect policies, and an infra- neurship are key to creating opportun- not be here to personally welcome you structure gap that has widened between ities for the poorest of the poor. Various to the Philippines. us and our competitor countries. studies have been carried out and it You have probably read that we have He also realises that the poorest of the costs much more money to create a some of the nicest beaches in the poor cannot wait for the trickle-down job in large enterprises than in small Philippines. You have also probably effects of economic growth. That’s and medium-sized enterprises. In the read that the Filipinos are some of the why, as a key part of his agenda, he has Philippines, we have estimated that warmest people on earth and that is increased the Conditional Cash Transfer for a large enterprise to create a new probably also part of the reason you programme that supports the poorest job, it will cost at least a million pesos have all come here. And finally, you of the poor families in the country. We or approximately US$ 22,000 at the have probably read that we’re second estimate that there are about 4.6 million current exchange rate – whereas for among 55 countries in terms of micro- poor families in our country. With the small business and microenterprises finance penetration and that’s also a programme, we will be covering 2.1 it’s about US$ 1,000 or even less. reason why you’re here. million of these poor families and we So, the key is making sure that we give will be giving them cash transfers on Thank you to the organisers for the poorest of the poor access to credit the condition that they keep their chil- organising the conference here in and skills training, and really ignite the dren in school and that they bring them the Philippines. It’s an honour to power of the creative economy within to health centres so they will have a be among the hosts. our country. chance to live healthy lives in the future. The president’s mother, Mrs. Corazon Everyone has inherent talents. In fact, President Aquino sees this as an invest- Aquino, led a people power revolution this is what we need to tap with micro- ment in the future of the country. One of in 1986 that toppled a dictatorship. entrepreneurship so that, with very little the assets of the Philippines is actually After her presidency, she said that capital, with little training and given our demography. I have just come from true people power is not just attaining some access to the market, we can the meeting of the Finance Ministers political freedom or the right to vote. actually help them become successful of Asia-Pacific Economic Cooperation True people power to her is for people microentrepreneurs. (APEC) in Kyoto and one of the issues to attain true economic freedom. That’s raised by some of the participants there In a disaster-prone country like the why after her presidency she launched is the ageing population in their coun- Philippines, I think just giving micro- a movement called Pinoy Me that tries. I told them that in the Philippines, credit will probably be not enough to organised microfinance institutions by contrast, we have a young popula- break this cycle of destruction because, and facilitated the granting of micro- tion and our challenge is how to invest more often than not, we are hit with credit to the poorest of the poor in the in them – to make sure they become typhoons or other natural disasters. Philippines. productive participants in our economy For those engaged in agriculture and in the future when they come of age. other livelihoods related to it, a typhoon can destroy a life’s work and set them The challenge of the Aquino admin- back to where they began. Establishing istration and this government in safety nets through microinsurance, general is how to make the growth of I think, will help us break this cycle of our economy more inclusive. To this 15 — Cesar V. Purisima, poverty. After all, breaking the cycle end, the microfinance initiative and Secretary of Finance, of poverty will be the true measure of Philippines. microinsurance initiative are going to success of any government, improving play a big role in helping reach out the lives of its people. That is the goal to the poorest of the poor. We need of President Aquino. to break this vicious cycle of poverty. So the approach would have to be 1 The address was transcribed from audiotape at the macro-level and also at the and edited to fit the format of this report. micro-level where we realise that we This has been done with the highest possible are being blessed. accuracy. The text, however, does not reflect the spoken word entirely.

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President Aquino wants to transform In fact, one of the three goals of We would like to start a dialogue the country, change its governance President Aquino – reducing the infra- among people of the world, countries so we can realise the true potential structure gap of our country – would of the world, to establish a frame- of the Philippines. The Philippines is depend on our ability to tap and mo- work by which we can help one a blessed country. For those of our bilise savings in our country, because another beyond charity in addressing friends from abroad who are here for infrastructure requires substantial the impacts of climate change. the first time, I hope you do get the investments and long-term capital. So In 2009, we faced two typhoons of an chance to go outside Metro Manila. we need to match insurance money intensity we have not seen in 25 years. We have some of the most beautiful and long-term savings with long-term My guess is, it is probably because beaches in the world right at the coral investment. The role of the government of climate change. But experts will triangle that has two-thirds of the is to create the framework for that to have to weigh in on that. I have an world’s coral variety. happen. And we at the Department of idea to propose that countries should Finance are committed to making sure We’re also right at the centre of what be asked to participate in mandatory that that happens. will be the most dynamic economic disaster insurance where the premium region of the world in the next 50 years. Without a vibrant economy, especially will be computed based on the carbon So there is really no reason why we at grass-roots level, I don’t think we will footprint of the country so that you link will not be able to attain or get back to be able to attain and sustain the high responsibility for climate change with our lofty perch of 50 years ago as being growth rates that are needed to reduce the financial cost of such a change. one of the most advanced economies poverty in our country. So, even at country level, insurance is in Asia. On that note, I would like to congratu- very important – because those two What we need to do is make sure we late the organisers of this conference typhoons set the Philippines back by address the three things I mentioned and congratulate the participants. as much as 2 % of GDP and here we earlier, but at the same time also reach Thank you for choosing the Philippines are trying to grow the country much out to the poorest of the poor and make as the venue for this microinsurance faster than we have done in the past. sure that we have inclusive growth. In conference. I hope you will be able to I encourage participants in this the past, statistics were good. We’ve share best practices so that we can conference, the practitioners of micro- had 45 straight quarters of economic improve the chances of success of insurance, the proponents of micro growth even during the global eco- microinsurance. insurance, to consider developing nomic crisis. But the reality is that our Microinsurance is difficult. The cost of this product that I think is going to poverty levels continue to increase. setting up the delivery mechanism, and play a very important role in breaking So the solution is to make sure that we packaging the product to make sure the vicious cycle of losses from also address this at the grass roots. that it is viable, is going to be a chal- natural disasters in countries like the This initiative of microfinance and lenge. Convincing the poorest of the Philippines. microinsurance will go a long way poor to buy insurance is also going to towards attaining this objective. I wish you a very successful conference be a challenge. After all, what do they and to those who visited us from afar On the part of the government, we have to lose because they are already who have read the wrong travel guide, will create an environment that ensures at the bottom of the pyramid. I think we I again extend the warmest welcome of that microinsurance is given as have to change mindsets. We need to our President and hope you enjoy your great a chance of success as possible sell this to them as a way to ensure that, visit and take back happy memories by having the right regulatory envir- whatever effort they invest in getting to share with family and friends back onment, by having the right support themselves out of the present situation, home. mechanism, and by helping in the microinsurance will protect them from education of our people because potential disasters. Thank you very much. even beyond the micro level, the A last point: an appeal to our friends penetration rate of insurance products in other countries. One thing that has in the Philippines is not as deep as in happened to the world outside of the other countries. After all, insurance is a globalisation of trade, the globalisation way of mobilising a country’s savings. of travel, the globalisation of culture, is the globalisation of climate change. In fact, the Philippines, being a coastal country, has been identified as one of the 12 most vulnerable countries in the world. But we, as a community of nations, have not really addressed the mechanism by which everyone in the world shares the burden of climate change. Report 6th International Microinsurance Conference 2010 14

Plenary 1 Institutional options for achieving scale and profitability – Lessons from the Philippines

The plenary presented four institu- The MBA model is based on a view of An MBA tends to experience little tional models for achieving scale microinsurance primarily as a pro- fraud because of the community and profitability in offering insurance poor development initiative. MBAs are ownership. While at the start of the to low-income clients in the Philip- non-stock, non-profit organisations scheme some members may try to pines. How appropriate and effective owned by their clients and registered cheat the system (“by dying and rising a model is in a particular situation with the Securities and Exchange again”), this phenomenon decreases may be assessed in the context Commission (SEC) and the Insurance as the community-based institution of the microinsurance value chain Commission (IC). They generally serve takes hold and gets to know each (see Figure 1). clients of MFIs between the ages of policyholder by name and place. 18 and 65 years. An MBA has four key The community sees an intrinsic value Mutually Beneficial Association characteristics: in the service provided, which is (MBA) why the number of MBAs and their — Legitimacy: it is licensed and There are 5.3 million poor in the clients has been increasing steadily regulated by the government. Philippines with an average income in the Philippines. — Purpose: it is anchored in social of US$ 1.40 a day. In an increasing objectives. The country’s biggest MBA is the number of low-income communities, — Structure: member-owned, insurance arm of CARD MRI, in itself microinsurance is slowly changing member-governed. the biggest microfinance institution the culture of not talking about death. — Operations: community-based (MFI). It is a co-founder of RIMANSI Dying in the Philippines is expensive; recruitment, efficient claims Organization for Asia and the Pacific, the poor have to borrow for a proper processing (“1-3-5 rule”). a regional resource centre based in funeral – a financial burden they the Philippines. RIMANSI was estab- can jointly offset through a commu- lished to help professionalise the nity-based insurance scheme. management of MBAs and set up related microinsurance programmes. Through its advocacy of expanding the outreach of microinsurance to poor households in Southeast Asia, the MBA model is being replicated in Cambodia, Vietnam and Indonesia.

Figure 1 Microinsurance value chain

Marketing, sales, policy administration, claims payment, servicing by third parties

Intermediation channel

Investment Risk Admini Transaction Aggregator Clients carrier stration platform

Technology

Policy origination, premium collection, policy administration

Source: Chamberlain, Doubell. Presentation [based on Bester/Chamberlain/Hougaard (2007); adapted from Leach (2005)]. 6th International Microinsurance Conference 2010 Report 6th International Microinsurance Conference 2010 15

Partner-agent model Country Bankers Life Broker This is an institutional model used Number of people insured In addition to an MBA and the partner- widely for microinsurance that 800,000 agent model, an intermediary can involves an MFI or NGO as an agent add value to the microinsurance Insured risks to market and deliver a product while supply chain and help achieve scale Creditor’s group life, a partner insurer underwrites it. In and profitability. family protection the Philippines, MFIs and rural The framework for microinsurance banks have followed this approach, Premium range comprises three main functions: linking with insurance companies to US$ 6.49 per year risk carrier (a regulated legal entity distribute various products. Following 45 years of operation, able to carry the risk), front office Offering microinsurance in a partner- Country Bankers Life now reports an (a trusted brand with accessible and agent arrangement benefits both the “actual claims experience that is low-cost points of sale), and back MFI and the insurer. only 70 % of the allocated claims office (to design product/processes, amount” and an “actual administrative train staff and clients, collect/store/ Advantages for an MFI: cost that is 20 % less than projected report data, administer claims). — Reduces the level of risk expenses” – making the programme a The MBA model encompasses all — Provides more comprehensive very profitable one. However, Country three, and the partner-agent approach services without additional Life views its microinsurance as a covers the first two. An intermediary administrative costs social protection programme that or broker focuses on the third func- — Increases capacity to offer credit helps uplift the lives of the impover- tion. Whichever institutional option and savings products ished, providing “family protection for is used to carry out the roles of a risk one year for less than one peso a day, Advantages for an insurer: carrier and the front office, the back or US$ 6.49 annually”. office work remains to be done, — Acquires easy access to target and there are substantial efficiencies market in outsourcing it to a microinsurance — Sells a variety of products to broker. By aggregating numerous a large market accounts, intermediaries can use scale — Broadens its network to negotiate better products from — Increases capacity to be innovative insurers. In addition, they can bring — Good use of money and time imagination to the process as they An insurer closely identified with the deal with a range of products. rural banking system in the Philip- pines is Country Bankers Life, set up in 1965. Through 1,800 rural banks – 70 % of the total – it now covers 800,000 lives. Its main products, aimed at farmers, fishermen and market vendors in the countryside, are creditor’s group life and a microinsurance package called CB Kalinga (“Care”), covering up to five members of a family.

16 — Jaime Aristotle Alip, RIMANSI, Philippines.

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Plenary 1 Institutional options for achieving scale and profitability – Lessons from the Philippines

MicroEnsure Philippines Public-private partnership Some of the challenges PhilHealth has been facing for coverage Number of people insured KaSAPI of the informal workers include 1,200,000 Number of people insured — identification of poor families by Insured risks 27,853 (as of December 2009; the local social welfare official; Personal accident, life, funeral, from selected branches of partner loan redemption, hospitalisation, organisations) — sustainability of poor families’ calamity, micro-housing, property enrolment in the subsidised Insured risks programme; Premium range Hospitalisation and regular PHP 770 (US$17.50) to PHP 3,500 outpatient — the small numbers of informal (US$ 79.55) per annum workers enrolling in the scheme; Premium range MicroEnsure Philippines, established US$ 27 per member — travel and the transaction costs in 2006 by global insurance intermed- (also covers qualified dependents) of paying the premiums: often iary MicroEnsure LLC, now works with higher than the premium itself. Providing universal healthcare is six MFI partners and three insurers. a huge challenge for most govern- It serves over three million people ments. Even where there is a state annually with a wide range of innova- healthcare scheme, covering workers tive products: group life insurance in the informal economy is particu- with funeral and accident covers (re- larly difficult. In the Philippines the placing credit life), loan redemption, National Health Insurance Program Pamilya Sigurado (insurance for entire (NHIP), which is administered by family), and Negosyo Asenso (busi- PhilHealth, has pursued public- ness cover for microentrepreneurs). private partnerships to reach out to Its micro housing insurance, Bahay more informal economy workers Asenso, covers not only fire and light- and provide access to social health ning but also typhoon, flood, earth- insurance. PhilHealth’s mandate of quake, landslide, volcanic eruption and universal coverage of all Filipinos was tsunami. Moreover, its climate-respon- made a priority by President Benigno sive agricultural products include Aquino, as declared in his inaugur- weather-index-based crop insurance ation speech in June 2010. The Aquino for drought and dry spells as well as administration aims to achieve the excess rain and typhoon wind speed. goal within three years. The NHIP has MicroEnsure data, compiled from a component programmes tailored to McKinsey Report based on interviews, cover the employed sector, overseas shows that, of a typical annual premium workers, retirees, and the self- for a family, 70 % is paid to the insurer employed and informal workers, as as risk premium, 10 % goes to the well as a sponsored programme that MFI, and 20 % to MicroEnsure as inter- subsidises premiums for the poor. mediary’s commission. MicroEnsure The most challenging of the sectors considers its fee good value for the mentioned is the informal workers. MFI as it would have cost more for the insurer or a consultant to provide back-office support.

17 — Left to right: Richard Leftley, MicroEnsure, UK; Facilitator: Doubell Chamberlain, Cenfri, South Africa; Geraldine Desiderio-Garcia, Country Bankers Insurance Corporation, Philippines; Lourdes Irene Minoza, PhilHealth, Philippines.

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To overcome these challenges, the To further increase the programme’s Lessons learnt government initiated a programme scale and sustainability, PhilHealth — Institutional options getting results called KaSAPI in 2005. It links plans to in the Philippines include the MBA, PhilHealth with established organ- — adopt a National Household partner-agent model, intermediary, ised groups to increase and sustain Targeting System to systematically and public-private partnership. membership of informal sector identify the poor; Within each, there should be workers, implement an alternative flexibility to try a different model payment scheme, develop innovative — improve benefits and their delivery; more suited to a new product or a approaches to marketing social — accredit more collecting agents target market or niche. health insurance and help limit beyond MFIs (so far 44 banks adverse selection in the informal — A diversity of approaches and and 11 non-banks have been sector (see Figure 2). efforts to harmonise differing accredited); interests mark the microinsurance Though KaSAPI has been growing — include smaller organisations experience of the Philippines: what and is financially sustainable, some (minimum membership required works best in a local community of its partner groups have experienced now is 1,000); and its culture. drop-out rates as high as 50 %. — conduct an aggressive information, — Working in partnership with other education and communications organisations with a similar clien- campaign to increase public under- tele can help reduce costs and standing and appreciation of the increase access. National Health Insurance Program. — For the poor, not only is the premium a burden but also any costs related to receiving benefits, such as travelling to a facility for healthcare. — Value to the client and simplicity should drive each step of microinsurance provision and delivery, from product development to Figure 2 sales to claims service. KaSAPI, a triple win: the Philippines government’s KaSAPI programme links informal economy workers, MFIs and PhilHealth to offer health — Success of the front office depends insurance to informal workers. on the quality of back-office work. Working in partnership with other organisations with a similar clientele can help reduce costs and Informal economy workers increase access. — Protection for financial implications of illness — Payment flexibility — Lower premium — More benefits — Time and hassle savings

PhilHealth Microfinance institution — Increased, sustained — Fulfil social mission coverage — Additional membership — Improved financial — Reduced portfolio at risk stability of the programme for informal sector workers

Source: Minoza, Lourdes Irene. Presentation “Strategies in providing financial protection to the informal sector”. 6th International Microinsurance Conference 2010 Report 6th International Microinsurance Conference 2010 18

Agenda Day 2 morning sessions 10 November 2010

Parallel session 1 Parallel Session 2 Parallel Session 3 Developing national Academic track – Case studies – Agriculture microinsurance strategies – Demand issues The example of the Philippines Gil S. Beltran Jing Cai Francesco Rispoli Under-Secretary, Department UC Berkeley, USA Technical Adviser, IFAD, Italy of Finance, Philippines Determinants of microinsurance Niels Balzer Public-private partnerships – adoption – Evidence from Policy Officer, UN World Food The process of the formulation a field experiment in rural China Programme, Italy of strategies Andrew Zeitlin The potential for scale and Vida Chiong University of Oxford, UK sustainability in weather index Deputy Commissioner, Education, prices and peers in insurance Insurance Commission, the promotion of composite Ashutosh Shekhar Philippines microinsurance – Evidence from Agricultural Analyst, Overview of the microinsurance a randomised controlled trial CIRM/IFRM, India policy and regulatory regime in Kenya 90,000 livestock in Eiichi Sasaki Facilitator Vizianagaram – A case study Senior Financial Sector Richard Phillips on addressing moral hazard Specialist, ADB, Philippines Chair of the risk management and transaction costs through Role of the ADB in the develop- and insurance department, a community-based livestock ment process of the national Georgia State University, USA insurance scheme. microinsurance strategy Facilitator Antonis Malagardis Gabriele Ramm Project Manager, GIZ-MIPSS, Consultant to GIZ, Philippines Germany Role of the GIZ in the development process of the national microinsurance strategy Facilitator Piedad S. Geron Consultant, Philippines

Parallel session 4 Plenary 2 Workshop – Introduction Round table – Responses to good practice from the private in microinsurance sector in the Philippines Denis Garand Geraldine Desiderio-Garcia President, Denis Garand Chair, Microinsurance and Assoc., Canada Committee - PLIA, Philippines John Wipf Michael Rellosa Microinsurance Consultant, President, PIRA, Philippines Denis Garand and Assoc., Fermin Gonzales Philippines President, CLIMBS, Philippines (This session was intended for people new to the topic of Rolando Victoria microinsurance.) Executive Director, ASKI, Philippines Lalaine Joyas Executive Director, MCPI, Philippines Facilitator Danilo Songco Executive Director, PinoyMe Foundation, Philippines Report 6th International Microinsurance Conference 2010 19

Parallel session 1 Developing national microinsurance strategies – The example of the Philippines

“It is very clear from the To analyse the evolution of microin- The Regulatory Framework for the Philippines experience that surance in the Philippines, the session strategy was shaped in coordin the collaborative effort evaluated three issues: ation with all the sectors involved. between the private sector As a result there are 1,410 MFIs and — Government strategies to fight and the government (for commercial banks serving seven against poverty especially through policy, legal framework and million clients today (see Figure 3). regulation) brings mean- microfinance ingful success in reaching — The national strategy and regula- Applying the same principles, a Micro- out to the poor.” tory framework for microinsurance insurance National Strategy and Regu- — The support of donors (Asian latory Framework was launched in Sosthenes Kewe, Financial January 2010 with the support of the Sector Deepening Trust, Development Bank (ADB) and GIZ) ADB and GIZ. Its aims were to spread Tanzania In the mid-’90s, a government policy nationwide education campaigns to fight against exclusion was proving about insurance, to promote the avail- unsustainable; a large number of ability of appropriate microinsurance programmes were being subsidised products, to facilitate distribution and but the private sector was not involved to adopt performance standards. and there was a low level of outreach. In 1997, a new strategy was outlined: The microinsurance market in the the National Strategy and the Regula- Philippines at the end of 2010 included tory Framework for Microfinance, the 11 life and non-life companies, and driving principles of which were to 20 microinsurance MBAs spread around the country. While the coun- — involve the private sector by try’s strong microfinance sector has creating a partnership with the been the major driver of microinsur- public sector; ance, the catalysts of this growth are — end the system of subsidies, with the Insurance Commission and MBAs. government only focusing on creating the right environment for microfinance; — build a market-oriented approach.

Figure 3 Microfinance inthe Philippines yesterday and today

Yesterday Few large MFIs with outreach of less than half a million clients in 1997

Today — 1,410 MFIs — 7 million clients — Commercial banks providing 18 — Gil S. Beltran, wholesale Under-Secretary, Department funds to of Finance, Philippines. retail MFIs

Source: Beltran, Gil. Presentation “Public-private partnerships – The process of the formulation of strategies”. 6th International Microinsurance Conference 2010 18 Report 6th International Microinsurance Conference 2010 20

Parallel session 1 Developing national microinsurance strategies – The example of the Philippines

Box 1 The Commission has the mandate to The ADB, which has supported the Features of Regulatory Framework enforce application of the Regulatory growth of the microfinance sector in Framework, protect policyholders, the Philippines for more than ten years, Links premium/contribution and and promote growth and financial implemented a special project to the maximum sum of guaranteed stability of its regulated entities. develop microinsurance in 2008. The benefits to the daily minimum wage project has been providing technical for non-agricultural workers in Micro-MBAs are non-profit organisa- and financial assistance to formulate Metro Manila, the manner and tions whose members pay regular and develop the Regulatory Framework frequency of payments coinciding contributions before a contingent for microinsurance, create perform- with their cash flow. event and receive a predetermined ance standards, establish a road- amount after the event (see Box 1). Allows only regulated entities to map to financial literacy in microin- provide microinsurance, with a special The enabling law for MBAs was surance, draft relevant circulars and regulatory space specifying a guar- the Insurance Code of 1978. More regulations, and train both regulators antee fund, capitalisation and appro- recently, two circulars were issued: and microinsurance providers. priate risk-based capital for micro- one on 15 May 2006 outlined micro- The GIZ assistance has approached insurance, when necessary. MBAs insurance regulation and declared microinsurance on three levels: wholly engaged in microinsurance are policy objectives, and the other macro: supervisory authorities and required to have a lower guarantee on 29 January 2010 reviewed proposals ministries; meso: service providers and fund, and cooperative insurance soci- of a technical working group to social protection; and micro: insurers, eties lower capitalisation. include interested commercial intermediaries and customers. In the insurance companies as microinsur- Mandates market conduct, reducing process, the GIZ-sponsored Micro- ance providers and expand delivery the period of claims settlement to insurance Innovations Program for channels to include MFIs as possible a maximum of ten days and of suicide Social Security (MIPSS) in the Philip- microinsurance agents. exclusion to one year, and requiring pines has collaborated with the ADB in a refund of the premium if a suicide Two aid organisations have been in developing the Regulatory Framework. claim is not compensable. the forefront of international assist- It has also focused on product innov ance to help develop microinsurance ation, financial protection, in particular Qualifies three delivery channels: in the Philippines: the activities of the enhancing KaSAPI to improve health- — Licensed insurance providers ADB and GIZ are mainly directed at care in the informal sector and increase — Licensed agents and brokers of guaranteeing the regulatory environ- viability of micro health insurance, commercial insurance companies ment to ensure the safe provision and developing index-based insurance — Microinsurance agents of microinsurance, and to increase against natural disasters. relevant stakeholders’ awareness of Restricts agents to selling microinsur- Another notable initiative of MIPSS and buy-in to microinsurance. ance products only. Such an agent is the setting up of a Microinsurance is not required to take the regular Resource Center as “a distinctive agents’ licence examination but must hub” to deal with concerns of attend and pass a microinsurance providers and other stakeholders. training programme. MFIs and cooperatives may be licensed as agents provided they sell microinsurance products to their clients only. Undertakes initiatives to formulate performance standards and promote financial literacy, with a special focus on the rights and responsibil ities of the insured and providers. Report 6th International Microinsurance Conference 2010 21

Box 2 Lessons learnt Features of the regulation for — Strong private-sector collaboration MBAs providing microinsurance is needed to implement financial in the Philippines inclusion reforms. In 2006, the Insurance Commission The Memorandum Circular of 2006 — Capacity-building is more import- of the Philippines launched its reduced the guaranty fund for new ant than subsidising microen- initiative to promote microinsurance and existing MBAs wholly engaged terprises. Limited government by officially declaring the month of in providing microinsurance from intervention enhances competi- January of every year as “Microinsur- PHP 125m (US$ 2.8m) to PHP 5m tion, and setting performance ance Month”. To kick off the initiative, (US$ 112,000). This will only apply standards builds and develops the Commission issued a ground- to an MBA recognised as a “micro strong, effective and sustainable breaking circular defining microin- insurance MBA”. An MBA can be private finance entities. surance and its minimum features, recognised as a microinsurance MBA building on provisions in the Insur- if the following conditions are met: — Regulators also need capacity- ance Code. building as promoters and facilita- (a) It only provides microinsurance tors of microinsurance. Microin- Under the Insurance Code, separate policies to its members surance receives a big push when provisions are applicable for Mutual (b) It has at least 5,000 member- regulators consider it “business Benefit Associations and for Coop- clients as usual”. erative Insurance Societies as they are both considered as non-stock, To build-up their capitalisation over — Appropriate regulatory frame- non-profit organisations. The Code time, microinsurance MBAs are work – reasonable, achievable defines an MBA as “any society, required to increase their guaranty and sustainable – facilitates private- association or corporation, without fund by an amount equivalent to sector involvement in micro- capital stock, formed or organised not 5% of their gross premium collections insurance while protecting the for profit but mainly for the purpose until the amount of the guaranty consumer. of paying sick benefits to members, fund shall reach PHP 12.5m — The support of donors is critical or of furnishing financial support to (US$ 280,000). in capacity-building. members while out of employment, Source: Gilberto M. Llanto, Piedad S. Geron, or of paying to relatives of deceased Joselito S. Almario, “Developing principles for — MFIs are an entry point for micro- members of fixed or any sum of the regulation of microinsurance: Philippine case insurance but delinking insurance study”, Discussion Paper Series No. 2008-27. money….” It shall collect fixed and Philippine Institute for Development Studies, from credit is an option that needs regular premiums from its members October 2008 to be explored further. and it shall not, in any way, “be — Studies are also needed on how organised and authorised to transact to make micro health insurance business as a charitable or benevo- more viable. lent organisation….”

19 — Vida Chiong, Deputy Commissioner, Insurance Commission, Philippines. 20 — Left to right: Piedad S. Geron, Philippines; Eiichi Sasaki, ADB, Philippines; Antonis Malagardis, GIZ-MIPSS, Philippines.

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Parallel session 2 Academic track – Demand issues

“It is not yet evident that While getting formal risk protection Microinsurance take-up: microinsurance brings certainly holds promises for the A randomised experiment in China about impact to the poor poor, the “if, why and how” of clients’ Rice production insurance, China people. This is an area where purchasing microinsurance remains further studies have to a tough issue for both insurers and Number of people insured be done to inform whether academics. Insurance practitioners 16,000 households at poor people will be better often develop a gut feeling for which experimental sites off with microinsurance.” products and distribution chan- Insured risks Sosthenes Kewe, Financial nels work better than others – and Weather disasters Sector Deepening Trust, routinely develop and adapt products Tanzania to meet market demands. On the Premium range academic side, methodological innov- US$ 30 per selection of contracts ations like randomised experiments A research project by the University of can help to explore these issues more California at Berkeley studied several systematically. The academic track determinants of insurance take-up in thus featured a session on demand a crop insurance programme covering issues – reporting on evidence from disaster damage, e.g. from storms a randomised experiment on crop and floods. The area depends heavily insurance in China, and health insur- on rice production, with over 70 % ance in Kenya. of household income coming from rice cultivation. The first experiment focused on financial literacy, trust and social network effects. Farmers were randomly assigned to one of four sessions. They differed in the amount of information provided – with two simple (20-minute) and two intensive (50-minute) sessions, and the time in which they were conducted – pairs of simple and intensive sessions were conducted with a time lag of 2–4 days. Additionally, high or low take-up rates were triggered in the early sessions of some test runs by offering “buy” or “no-buy” as a default.

21 — Jing Cai, UC Berkeley, USA. 22 —Andrew Zeitlin, University of Oxford, UK. 23 —Richard Phillips, Georgia State University, USA.

21 22

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Results confirmed that improving Friends, fear and finance: Buying Lessons learnt farmers’ financial literacy and trust health insurance in rural Kenya — Microinsurance clients are highly in the insurance company can raise Bima ya Jamii, Kenya price-sensitive – reducing price- microinsurance take-up rates; and points and improving client value that social networks can help diffuse Number of people insured compared to premium could thus financial knowledge and trust in the 48,000 strongly increase acceptance. programme to farmers not having Insured risks taken part in the sessions. — Non-acceptance can be driven In-patient hospitalisation, personal by various factors – trust, risk aver- The second experiment analysed accident and funeral expenses sion, presentation of products, the effects of different menu options Premium range or a combination thereof – and being offered to the farmers on the US$ 50 per year some of these influences are insurance take-up. The contracts not clearly determined, a fact offered three different indemnity and A second study, financed by the Inter- that should be considered in the premium sizes, with higher premium national Labour Organization (ILO), analysis of under-performing subsidies for higher-ticket contracts. covered the take-up of health insur- programmes. Some farmers were offered only ance in rural Kenya. It addressed a the cheapest contract, others the two puzzle in studies on take-up – that — Peer information and social lower options, and some all three risk-averse people are often unlikely networks can play a certain role options. to buy insurance – by considering in driving acceptance, but find whether clients are confident that the their limits when people mistrust Having more options increased insurance promise will actually be pyramid schemes or have no insurance take-up. While few farmers honoured in the event of a claim. The actual experience with the actually chose the higher-value research measured the risk attitude programme. Peer influences contracts, having these available actu- of participants with a lottery game, might grow stronger over time. ally increased take-up of the lowest- and trust with a specially designed cost option available to all farmers — Insurers can influence take-up trust game. Data was gathered from by almost a third. A menu effect can by indirect measures – such as 150 tea collection centres in the Mount be used to explain this paradox, with composing the right menu of Kenya area that were offered Bima ya different options being available options. Some of these options Jamii, a composite health insurance signalling product quality and raising might be counter-intuitive – product of the Co-operative Insur- trust in the offering. relying solely on gut feeling ance Company (CIC) Kenya. Clients might thus mislead insurers when could pay the insurance out of future they are designing products tea bonuses, and got a referral fee for and sales efforts. introducing friends to the product. As a key outcome, the price sensibility of farmers seems to be particularly high – a relevant finding, considering that premiums have just been raised in the scheme. Moreover, peer effects were weak, but could be strengthened by introducing the referral fee – even though people are quite wary of pyramid schemes. The individually expected health expenditures were only weakly related to take-up, which may be explained by the influence of trust in the insurance scheme’s capacity to deliver. Report 6th International Microinsurance Conference 2010 24

Parallel session 3 Case studies – Agriculture

“My colleague and I have Farmers in developing countries Findings and an example from the no insurance background. are exposed to many risks, in particu- WRMF study We are climate-change lar weather perils, which will become Index-based insurance presents many researchers working with even more important with climate advantages. It is transparent for the stakeholders to explore change. Their risk management clients and eliminates any subjectivity opportunities for de- strategies generally leave the farmers in payouts, because of the use of a veloping a climate-based highly vulnerable to low-frequency risk management scheme pre-identified and measurable index. covariate risks (e.g. severe drought) for farmers in Nigeria. The It reduces the operational and transac- and produce suboptimal outputs. contacts we made and the tion costs because there is no need exchange of experiences The question is whether agriculture to do on-farm loss adjustment, which during the conference has index-based insurance can help permits a rapid payout. It avoids been extremely useful to resolve this issue. adverse selection and moral hazard. us. Coming here has been a good investment.” The International Fund for Agricultural Index-based insurance, however, Development (IFAD) and the UN World presents some disadvantages and Ewah Eleri, Director, Food Programme (WFP), in a joint challenges too, including the potential International Centre for initiative called the Weather Risk difference between the loss suffered Energy, Environment and and the payout triggered by the index Development, Nigeria Management Facility (WRMF), have analysed opportunities, challenges (called basis risk), the limitation of and good practices of weather-index- perils to one or two covered by the based insurance in 36 programmes index, and the difficulty in replicating and published a study on them. the scheme because it has to be specifically tailored to each location This session presented the findings and crop. of the WRMF study “The potential for scale and sustainability in weather- index insurance for food security and rural development” including an example from Ethiopia and a livestock insurance programme in Andhra Pradesh, India.

24 — Left to right: Ashutosh Shekhar, CIRM/IFRM, India; Gabriele Ramm, Consultant to GIZ, Germany. 25 — Francesco Rispoli, IFAD, Italy. 26 — Niels Balzer, WFP, Italy.

24 25

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WRMF study example: The policy’s underwriting involved Key lessons from the WRMF study Drought insurance pilot Ethiopia a simplified version of the Food and on index-based weather insurance Agriculture Organisation’s ( FAO) Number of farmers insured — Create a proposition of real value Water Requirement Satisfaction Index 137 to the insured, and offer insurance (WRSI), using the LEAP (Livelihoods, as part of a wider package of Insured risks Early Assessment and Protection) services. Experiences analysed Drought for haricot beans software developed by the WFP and showed that, as a stand-alone the World Bank. The software helps Premium product, it is limited in scope. quantify and index the drought and Approximately 11 % of the sum excessive rainfall risk. — Graft onto existing, efficient insured. delivery channels (e.g. farmers During the crop season, rainfall data Average per farmer associations, associations, generated by newly installed low- US$ 40 financial service providers, traders, cost, fully automated weather stations input suppliers, government In 2009, the WFP provided assistance was used to monitor actual rainfall. programmes). for a pilot drought index project Claims experience was reasonable. in Ethiopia, in partnership with — Build the capacity and ownership Erratic and less-than-normal rain- the Ministry of Agriculture, Nyala of implementation stakeholders. fall resulted in a payout of some Insurance and the National Met 50 % of the total sum insured, about — Invest in client education and Agency. The drought insurance for US$ 25,000, which the cooperative training to increase awareness of haricot beans during the meher distributed among insured members. index insurance products. (July–September) season covered 137 members of the Lume-Adama The project showed that farmers are — Improve the infrastructure, quality Farmers Cooperative Union in ready to buy this kind of insurance and availability of weather data. Bofa, Oromia. The premium was if it is easy to understand and coupled — Invest in innovation and use of approximately 11 % of the sum insured, with other services such as credit technology (e.g. remote sensing pre-financed by the cooperative. or provision of weather services or applications) to push the frontiers advice. of index insurance. — Monitor and evaluate products to promote continuous improvement. Figure 4 Traditional farmer risk management strategies — Promote an enabling legal and regulatory framework. — Use a holistic approach to risk management, promoting financial and non-financial tools.

— Crop diversification — Sub-optimal farm — Farm fragmentation output — Share-cropping — Highly vulnerable — Savings, credit, Result to low frequency remittances covariate risks — Temporary employment (e.g. severe droughts) — Intra-community sharing — And more

Source: Balzer, Niels and Rispoli, Francesco. Presentation “The potential for scale and sustainability in weather-index insurance for food security and rural development”. 6th International Microinsurance Conference 2010 Report 6th International Microinsurance Conference 2010 26

Parallel session 3 Case studies – Agriculture

Community-based livestock insurance The product is essentially a loan Among the challenges faced by the protection scheme linked to livestock programme are: Livestock insurance ownership, with the community Andhra Pradesh, India — The community as risk-bearer is bearing the risk by pooling premiums. exposed to covariate shocks. Number of cattle insured The sum insured is the value of cattle 90,000 declared by the owner, and the annual — Enrolment, done once a year, premium is 4 % of that value (which keeps new animals purchased by Insured risk good results reduced to 2 % for 2009). members waiting to be insured. Livestock mortality The programme is managed by a — Heavy dependence on the insur- Premium federated structure of small self-help ance adviser for transactions will 4 % of cattle value groups across the community. There impede the programme’s expan- (reduced to 2 % for 2009) are no underwriters, and transaction sion to other districts, requiring Livestock insurance, perceived to be costs are kept low with the help of increasing use of technology for high-risk, is expensive and has a a “bima mitra” (insurance adviser), data management. negligibly low outreach among the involved in the process throughout – In this case, the choice of self-help poor. In India, where most of its from registering the insurance groups and the community approach 283 million head of cattle are found application to inspecting the dead was made to overcome some of the in low-income agricultural commu- cattle and issuing the death certificate. issues faced in the partner-agent nities, only 7 % are covered under Claims are paid within seven days. model, currently used by 90 % of live- insurance. Few insurers have entered Community vigilance and supervision, stock insurance plans. Reliance on the the market. A major reason is moral together with veterinary care for loss community eliminates dependence hazard, with one out of every four prevention, have reduced the number on an insurance intermediary and, claims deemed fraudulent. of claimants from 2.73 % to 0.67 % in with peer monitoring of policies and Now a community-based livestock five years, while the number of cattle claims, creates more trust between insurance scheme is making a insured has increased from 3,000 to the insurer and the insured, offsetting difference in the Vizianagaram district 90,000 (see Figure 5). moral hazard and resulting in easier of Andhra Pradesh. claims verification and faster payouts. In both examples looked at in the session, a major challenge is scaling- Figure 5 up. In index-based insurance, distri- Progress of the community-based livestock bution is limited to the area and risk insurance scheme in Andhra Pradesh covered by the index. Expansion of a community-based programme depends on transforming simple processes into professional front- and Number of Cattle / Enrolments back-office functions. 100,000 90,035 Community-based livestock insurance can succeed with the use of a 80,000 simple process, an insurance adviser or another qualified microinsurance delivery channel, group monitoring 60,000 48,675 and veterinary care to add value. However, for the programme to grow, the capacity of the insurance adviser 40,000 will need to be supplemented with increasing automation of functions.

20,000 3,519 4,756

0 2006 – 07 2007 – 08 2008 – 09 2009 – 10

Claims 88 120 327 193 received

Source: Shekar, Ashutosh. Presentation “Case study – Community-based livestock insurance scheme”. 6th International Microinsurance Conference 2010 Report 6th International Microinsurance Conference 2010 27

Parallel session 4 Workshop – Introduction to good practice in microinsurance

This interactive session covered Box 3 There are different types of microinsur- the basics of microinsurance for those Definition of microinsurance – ance products with varying degrees new to the topic. What it is and what it is not of difficulty that have enjoyed varying levels of success (see Figure 6). Microinsurance can be defined simply Microinsurance is… as insurance for the poor. It makes Microinsurance is most suited to “…the protection of low-income insurance accessible to those who do segments of the population that have people against specific perils in not have access to traditional insur- informal insurance or those who exchange for regular premium ance. It is designed to protect low- are insurable but do not have access payments proportionate to the likeli- income households against specific to the service. It is not, however, an hood and cost of the risk involved.” risks, and it is important that products appropriate product for the poorest be designed to reach this market Draft Donor Guidelines, CGAP of the poor, who cannot afford to pay (see Box 3). Working Group (2003) for any insurance services and are beyond the reach of market mecha- For traditional insurance companies, “…not a specific product or product nisms. this entails a major shift in the line. It is also not limited to a specific approach to markets: going back to provider type. Microinsurance is the The “insurable poor” often work in the the essentials of insurance and trying provision of cover to a specific market informal economy, and have irregular to recreate it for a new segment, by segment, i.e. low-income people.” cash flows. They are vulnerable to re-learning how to offer it to this new risks – though they may be able to IAIS Issues Paper (2007) audience. The insurance products cope with some risks through social designed need to be mindful of coping networks. They are also often not very mechanisms that the poor already familiar with formal insurance and have in place to deal with risks, and may not trust insurance companies. use insurance to improve on these Some mainstream insurers may be mechanisms. tempted to approach microinsurance Microinsurance can be understood on a trial-and-error basis, but compre- as a tool to help manage risks – it is hensive research is a must for a proper a tool, but not the solution in and of entry into the market. itself. It needs to be linked to other initiatives. Figure 6 Most common types of microinsurance

Degree of Credit life difficulty

Term life / Personal accident

Savings life

Property insurance

Endowment life

Health insurance

Agriculture Degree of success

Source: Roth, J., McCord, M., Liber, D. “The landscape of microinsurance in the world‘s 100 poorest countries”. MicroInsurance Centre, 2007 Report 6th International Microinsurance Conference 2010 28

Parallel session 4 Workshop – Introduction to good practice in microinsurance

In such research and demand studies, The bancassurance model in South Lessons learnt a key skill required is designing the Africa – in which insurance is sold on — Microinsurance is different from survey and posing questions in focus the back of a savings account – has a traditional insurance and requires groups that elicit reliable responses. It high level of enrolment but a disap- a variety of approaches, but is important to put options in context pointing retention rate. Those who simplicity is the key. for people, for example by asking have dropped out did not understand them to compare their preferences what they were buying and how it — The typical insurance company for two specific benefit packages at met their needs. approach to a market entry – put two different prices. Without a refer- it out there and adjust as you go – In microinsurance distribution, a ence point, people will opt for all the does not work for microinsurance. social connection with the client is coverage possible and be willing to more important than a commercial — Research and demand studies pay only a very small amount. connection. Collecting premiums are essential for learning what After defining a target market in a and settling claims requires customer microinsurance clients want and region, a key step is to identify insur- interaction. In rural areas, lack of need. When asking about pricing, able risks. Understanding the critical infrastructure calls for transactions put a couple of options in the gaps in risk management by low- through existing networks and group context of the covers each amount income households is the starting meetings. can buy. point in developing products that are Premiums are low, and a large — Pricing needs to be reviewed feasible, acceptable and affordable. number of policies need to be sold. regularly as experience varies. It may be possible to sell a product As the volume grows, the right IT and that does not relate to a client’s real — Building up insurance aware- management information systems needs, but it would not help keep ness may take time and resources need to be introduced at the right time that customer. Even when a product beyond an individual programme. in the right way – keeping in mind is well founded on research and well What will work depends on the that at customer level whatever is targeted, ongoing education of clients community’s culture and history presented must be simple and easy to build up insurance awareness and as well as institutions people trust. to understand and deal with. This financial literacy is needed to sustain can make or break a microinsurance — In building trust, what works best their interest and commitment. business. is informal word of mouth. — Practitioners could use a step- by-step “how to” guide in layman’s terms (“Microinsurance for dummies”).

27 —Denis Garand, Denis Garand and Assoc., Canada. 28 — John Wipf, Denis Garand and Assoc., Philippines.

28 Report 6th International Microinsurance Conference 2010 29

Plenary 2 Round table – Responses from the private sector in the Philippines

Although the Philippines is the To cover this huge market, the micro- ASKI (Alalay sa Kaunlaran Inc.) is twelfth most populous country in the insurance in the Philippines is mainly a non-stock, non-profit organisa- world and its insurance industry offered by cooperatives, member- tion formed in 1986 to promote and is considered advanced among based associations and microfinance develop micro and small-to-medium- countries in the region, its existing institutions – with associations of life sized enterprises and deliver social insurance business is estimated as and non-life insurers also actively services. Its business units include the third smallest in East Asia. engaged in developing new prod- microfinance, MBA, a marketing ucts, and legislative reforms for the co-operative and a foundation. Being The country’s population is low-income market. The round table close to its clients, it noticed that they particularly vulnerable: 40 million represented five organisations. need not only microcredit, but also Filipinos live below the poverty line other financial services such as micro- and are exposed to major risks, CLIMBS (Co-op Life Insurance and insurance. ASKI has now entered and the country suffers on average Mutual Benefit Services) is a coopera- into various partnerships with private 20 typhoons a year. Such a huge tive insurer created as a pioneer in insurance companies for the provision number of poor exposed to such 1971 of what later came to be known of microinsurance products. a frequent threat holds a lot of poten- as microinsurance. Now it has one tial and promise for microinsurance. million Filipinos insured (3.5 million MCPI (Microfinance Council of the Indeed, it is estimated that the including family members). CLIMBS’ Philippines) is the national association country’s microinsurance market microinsurance products are distrib- of MFIs in the Philippines. It has alone is worth at least PHP 20bn uted by cooperative insurance centres, 47 members including NGOs, banks (US$ 0.4bn) a year. which proves to be very efficient. and cooperatives, which collectively CLIMBS also cooperates with life and represent 55 % to 60 % of all micro- The insurance market in the Philip- non-life private insurance companies. finance clients in the country. The aim pines has been marked in recent In its efforts to meet the market needs, of MCPI is to promote innovation years by the crisis which resulted CLIMBS has placed a primary focus on and help microfinance institutions in pre-need companies becoming reimbursing all claims within seven respond to evolving needs of the poor. insolvent, leaving many people days. It now plans to expand its micro- Almost all members of the MCPI offer without recourse. As many people insurance range, by preparing the microinsurance to their microcredit equate pre-need with insurance, this ground for health services to coopera- clients, in collaboration with insur- had an adverse effect on people’s tive members, as well as through its ance companies, by creating their own perception of insurance. Besides, the recently launched insurance against MBAs, or through in-house microin- behaviour of some insurance compa- extreme weather conditions, in part- surance schemes. The main priorities nies does not improve the situation nership with Munich Re and GIZ. of these MFIs remain the payment of as they resort to long delays in the claims and staff training. payment of claims.

29 30

29 — Geraldine Desiderio-Garcia, PLIA, Philippines. 30 — Left to right: Michael Rellosa, PIRA, Philippines; Danilo Songco, PinoyMe Foundation, Philippines. 31 — Fermin Gonzales, CLIMBS, Philippines. 31 Report 6th International Microinsurance Conference 2010 30

Plenary 2 Round table – Responses from the private sector in the Philippines

PLIA (Philippine Life Insurance Asso- In its prospective market, PIRA sees Box 4 ciation) is the umbrella organisation three types of Filipinos: Rising to the challenge of life insurance companies in the — The dangerously uninsured: In response to the government’s Philippines, whose primary objectives No money to spare, insurance call to increase provision of micro- are to “propagate and spread the not a priority, bad perception of insurance, the private sector is concept, principles and benefits of insurance, simply uninformed pursuing a number of specific object- life insurance” and to “serve as a ives brought out in the plenary: forum for exchanging ideas and infor- — The reluctantly underinsured: mation”. The association is actively Only buy insurance because it is — Help enhance financial literacy engaged in discussions and technical required by law or by the bank among the poor – in particular working groups to formulate new their understanding of risk pooling — The happily insured: Consider microinsurance products. PLIA is also and how loss and fraud control insurance as a risk management working on increasing distribution helps everyone insured. tool through partnerships, the develop- — Reach out to organised groups to ment of flexibility to adapt to market The reasons why the market is still engage workers in informal sectors changes, the forging of partnerships largely untouched are various. First, and lower distribution costs. with accredited organisations and a many Filipinos do not have enough continuous study of microinsurance spare money to buy insurance, and — Help community-based institutions data for appropriate analysis and they will sometimes consider risk- professionalise management and recording. management expenses not to be a governance. priority. Secondly, the Filipinos would PIRA (Philippine Insurers and Rein- — Improve insurers’ own participa- generally not be aware of the posi- surers Association) is the umbrella tion in the low-end sectors by tive role microinsurance can play in organisation of the 83 members of separating microinsurance data the mitigation of their risks. Last but the non-life insurance industry in the from mainstream operations not least, Filipinos often have a bad Philippines. Among its members, and setting distinct performance perception of insurance. only eight non-life insurance standards for it. companies offer microinsurance PIRA is taking numerous measures — Focus innovation on the need products. to improve the microinsurance offer to protect the poor against cata- to low-income people. In particular, strophic losses. it is involved in lobbying for reforms. The Insurance Code of the Philippines is 36 years old and – in the opinion of the sector – is in need of a thorough update. Furthermore, a tax reform has been requested by the market to remove the Documentary Stamp Tax which burdens microinsurance premiums and is detrimental to the poor. Finally, PIRA is demystifying insurance for the masses through education and promotion of a good image for the industry.

32 — Rolando Victoria, ASKI, Philippines. 33 —Lalaine Joyas, MCPI, Philippines. 32 33 Report 6th International Microinsurance Conference 2010 31

A key point agreed around the Lessons learnt table was that raising awareness — Prompt payment of claims is key of microinsurance and enhancing to improving the insurance collaboration among various players industry’s image in the low-income in the private sector on initiatives for sector. the low-income market are essential. These measures would ensure future — For MFIs, MBAs and cooperatives, growth and expansion of not only microinsurance is an opportunity microinsurance but also the insurance to expand their own core services industry as a whole in the Philippines. as well. They are in line with what President — Continuing support of the Benigno Aquino has urged all Filipinos government, in particular the to do: help one another build a Insurance Commission, is needed better future in the bayanihan spirit of to create and sustain an enabling communal unity and effort. environment. — Regulation should create space for microinsurance innovation and have flexibility to allow insurers to adjust practices and adapt to market changes. — Accredited organisations in the private sector should continue forging partnerships to further develop microinsurance.

Figure 7 Bayanihan is the principle of communal unity, which divides the effort and multiplies the effect.

Source: Christer Youth Ministry of the Church of Christ in Dulangan, Digos City, Davao del Sur, Philippines Report 6th International Microinsurance Conference 2010 32

Agenda Day 2 afternoon sessions 10 November 2010

Parallel session 5 Parallel session 6 Parallel session 7 Parallel session 8 New distribution channels Protecting the poor against Client education – Life insurance natural disasters Insurance literacy

Hosted by the Microinsurance

Network Insurance Education

Working Group

Anja Smith Part 1 Part 1 Part 1 Director, Cenfri, South Africa Case studies Case studies Case studies Introduction to new distribution Ramakrishnan Devaprakash Aurore Lambert Rob Rusconi channels Project Director, CARE, India Project Manager, GRET, Researcher, Tres Consulting, Barbara Magnoni Property insurance for protecting Cambodia South Africa President, EA Consultants, USA poor against natural disaster Insurance literacy for Savings and insurance – Understanding global migration factory workers Lessons from the leaders Isabelle Delpeche and remittances Department Manager, AIC, Haiti Viviene Pearson Martin Hintz Huijing Yang Lessons learnt from the 2010 Manager, Image and reputation, Consultant, Allianz Life, Division Manager, PICC, China earthquake SAIA, South Africa Indonesia Case study on channel What works and what does not – The 100-million-dollar baby – Su Buda establishment of microinsurance Practical experience from A micro-endowment Associate Professor, National project in PICC the South African Insurance success story Climate Center, China Association Mariana Torres de Urquidi Weather-index-based Hengxuan Su Head of Microinsurance Busi- insurance in China – The chal- Vice President, China Life, China ness, Banco Compartamos, lenges of dealing with data Experience from implementing Mexico microinsurance in China To every challenge there is an innovative solution for Part 2 Part 2 Part 2 sustainable microinsurance Challenges and solutions Workshop Workshop on Max Vijay products for index insurance case (India)

Facilitator Thomas Mahl Michal Matul Facilitator Michael McCord Innovative Solutions Manager, Research Officer, ILO/Micro- Craig Churchill President, MicroInsurance Munich Re of Singapore, insurance Innovation Facility, ILO/Microinsurance Innovation Centre, USA Singapore Switzerland Facility, Switzerland Developing meso-scale Aparna Dalal solutions to protect the poor – Independent Researcher, USA A reinsurer’s perspective Facilitator Richard Leftley Ralf Radermacher President and CEO, Director of Research and MicroEnsure, UK Training, Microinsurance Pitfalls of index insurance Academy, India Facilitator Thomas Loster Chairman, Munich Re Foundation, Germany Report 6th International Microinsurance Conference 2010 33

Parallel session 5 New distribution channels

One of the biggest problems faced Table 4 by the microinsurance sector is finding Emerging alternative distribution categories appropriate distribution channels – reviewed in Cenfri’s study all the effort is considered lost if the product cannot be distributed. This session explored distribution channels Channels Characteristics and issues other than MFI-based ones with a focus Cash-based retailers — Examples: Pep, Shoprite, Carrefour on credit risks, and bancassurance. (e.g. supermarkets — Cash premiums They use alternative approaches that and clothing retailers) — No account — Limited client information — achieve scale through — FMCG* environment, regular interaction concentration; (client will return) — build on an infrastructure footprint; — Lack of financial services culture may — employ an existing transaction make active selling difficult platform; — allow insurance to be sold as a Credit-based retailers — Example: Casas Bahia (e.g. furniture and — Existing financial services capacity allows stand-alone voluntary product and white goods stores) for active selling — have a trusted brand. — Credit-based contractual relationship In a review of 14 such models in South — Extensive client data — Screened/filtered client pool Africa, Colombia, Brazil and India, — Benefit settles outstanding credit the Centre for Financial Regulation (but with some additional value) and Inclusion (Cenfri) reviewed such alternative distribution channels Utility and — Examples: Codensa, Gas Natural, including cash-based retailers (e.g. telecommunications Telefonica, Telmex, AES Electropaulo supermarkets and clothing stores), companies — Contractual client relationship (account-based) credit-based retailers (e.g. furniture — Benefits provide for continued service — Various sales approaches: agents, stores), utility and telecommunication mail shots, in- and out-bound call centres companies, and third-party payment — Low claims may signal low value to clients providers (see Table 4 for a description of the different distribution models). Third-party — Example: Take-it-Eezi, Cover2go, Wiredloop payment providers — No data on clients The models reviewed displayed — No contractual relationship varying levels of “passivity” in — Loose client relationship engaging with the client. While some (lower reputational risk) – no trusted brand models relied on the client to initiate — Premium payment rather than sales channel? the transaction and provide for no verbal communication on the product, * Fast-moving consumable good others have a very active sales process. The level of passivity of the Source: Smith, Anja. Presentation “Beyond sales – Growing alternative distribution channels into one-stop shops”. 6th International Microinsurance Conference 2010 sales process is often influenced by the level of costs imposed by market- conduct regulation in a specific country.

34 — Anja Smith, Cenfri, South Africa.

34 Report 6th International Microinsurance Conference 2010 34

Parallel session 5 New distribution channels

According to the findings, alternative Table 5 distribution models have placed a lot Balanced distribution requires a client as well as of emphasis on the premium collect- business perspective ion process, but less on servicing and claims payment. More innovation and thinking are still required and Business perspective Client perspective models have to evolve in such a way Product — Realistic pricing — Meets needs that they become “one-stop shops”. features — Ease of administration — Simplicity The business perspective and client perspective on what is important in Sales — Most important phase — Informed purchase decision sales and distribution are described in for business — Understand value Table 5. — Achieve take-up proposition and costs — Client retention — Understand how to successfully realise value from products (servicing and claims)

Premium — Low cost — Ease/convenience collection — Integration into insurer — Flexibility management system — Low transaction cost

Servicing and — Real-time information — Easy access administration and reporting to — Ease/convenience track performance — Low transaction costs — Low cost

Claims — Only pay legitimate claims — Most important phase processing — Cost-effective claims for the client assessment and administration — Ability to claim successfully — Risk monitoring and — Easy access management — Low transaction costs — Simplicity (few documents required) — Quick turnaround

Source: Smith, Anja. Presentation “Beyond sales – Growing alternative distribution channels into one-stop shops”. 6th International Microinsurance Conference 2010

35 — Barbara Magnoni, EA Consultants, USA. 36 — Huijing Yang, PICC, China. 37 — Mariana Torres de Urquidi, Banco Compartamos, Mexico. 38 — Michael McCord, MicroInsurance Centre, USA, 35 36 facilitator of this session.

37 38 Report 6th International Microinsurance Conference 2010 35

Avoiding misalignment of priorities Successful partnerships will require To overcome the different challenges dedication and a greater emphasis on of being the delivery channel, Banco At the moment, sales is the most servicing and claims payment, and Compartamos relies on the product important phase in distribution from care will need to be taken to ensure development process, making sure it the business perspective, while claims that the intermediary chain does not has good market research to under- processing is most important for the become longer and more expensive. stand the clients’ needs and to design client. This misalignment of priorities products transforming these needs is a major cause of problems in Making life insurance “stupidly into reality. distribution. simple” – Compartamos’ approach The “new” channel, though involving Factors attracting these distributors Banco Compartamos, Mexico an MFI, is notable for successfully to the microinsurance market can Number of people insured distributing micro products that are vary from retention and protection of 2,937,908 “100 % life insurance – no credit life”. existing clients to gaining new clients Founded in 1990 as an NGO, Compar- through the sale of a new product. Insured risks tamos of Mexico has grown to be Which of these factors motivates a 99 % for natural and accidental Latin America’s largest lender to micro distribution channel will determine the death, and 1 % for terminal illness businesses. The micro life insurance division of responsibilities between and total disability products it distributes are voluntary, the insurer and distributor and remu- Premium range with no age limit, no pre-existing neration structures. US$ 4 for US$ 1,250 of benefit conditions or other exclusions, no An alternative channel needs to focus amount for four months of medical examinations and payment of on identifying the value of microinsur- coverage claims within 48 hours. ance to clients by offering products that are voluntary, closer to their lives, reliable and tangible.

Figure 8 Rather than merely reacting to issues, it is important to try to understand the reality of client needs. Following this process will enable products to be developed that respond to that reality.

Marketing Sales Premium collections Services Claims

Simple products Training Finance for Diversification Simple process premiums

Simple Prevention culture Adapting to loan Responding Simple requisites methodologies methodologies to client needs

Right partner Intangible service Operative costs Time of response

Source: Torres de Urquidi, Mariana. Presentation “MFIs as delivery channels”. 6th International Microinsurance Conference 2010 Report 6th International Microinsurance Conference 2010 36

Parallel session 5 New distribution channels

Compartamos determines and moni- In each alternative channel, as the Three types of migration-linked micro- tors clients’ “real needs” through business volume grows, so does insurance models are in use covering what it calls a TDUF process (knowing the need for effective and sound family members in the home country, what the clients think, do, use and IT systems to help create technical host country or a hybrid of the two. feel) – by being in the field, in the capacity. Home-based models target migrants’ everyday life of clients, amidst the Linking migration and microinsurance families still living in the home priorities, responsibilities and worries country, and use existing channels they have. What life insurance meant Remittances from migrants play an serving local communities. Host-coun- to clients, it found, was family welfare, increasingly important role in the tries’ insurers cover migrants while medical protection and funeral finance of the poor in developing and they are in the host country, but incur expenses – and the cover desired on transitioning countries. A growing higher costs of distribution through average was MXN 12,000 (US$ 960), number of people living outside licensed brokers and agents. costing around MXN 10 (US$ 0.80) a their country of origin are sending month with the claim paid in cash and increasing amounts of money For premium collection, home-based no complicated contracts with “small home (see Figure 9). According to models are able to tap into migrant print”. Therefore, Compartamos International Fund for Agricultural remittances – although the irregularity delivered life insurance made simple – Development (IFAD) figures from of most remittances and the poten- even, as it claims, “stupidly simple”. 2006, 214 million people lived outside tial for money laundering are issues. their country of origin. Remittance Premium collection in host-based Alternative distribution channels flows to developing countries models is easy if the migrant has a currently in use may also involve amounted to approx. US$ 347bn. bank account in the host country, but “pay when you can” family funeral Most remittances flow from devel- otherwise not. Issuing policies and plans, sale of personal accident and oped to developing countries and are paying claims across borders involve homeowner insurance through utility more likely to pass through formal many logistical difficulties, exacer- companies, using mobile money channels. Remittances predominantly bated by weak cross-border customer and creating disease-based clinics in flow to South Asia, former USSR and service and information-sharing. churches. CIS, Mexico and South America.

Figure 9 Amount of money transferred by migrant workers from and to the different regions. Arrows indicate main direction of flow of remittances. Most remittances to the Near (Middle) East come from Russia and Europe.

E. Europe US$ 51bn

Near East US$ 28bn Asia and Oceania US$ 113bn Africa US$ 39bn

LAC US$ 68bn

Source: IFAD, 2006 (http://www.ifad.org/remittances/maps/index.htm) Report 6th International Microinsurance Conference 2010 37

Microinsurance for migrant PICC – Migrant workers’ Lessons learnt workers in China microinsurance — Expansion of the intermediary Migrant workers have a significant Number of people insured chain may lead to a more expen- presence within China too. They leave 604,532 sive process, but it will be worth- families at home in villages and head while if the final product is more Insured risks for cities to make a better living. They effective and relevant to the end- Accidental death and disability, number some 200 million. Most have user. basic healthcare a low-income, with more than half in — As a delivery channel, take a manufacturing and building industries Premium range proactive role in market research and fewer than one in five covered by US$ 1.85 per year and product design – this should any insurance at work. A hallmark of microinsurance in China not be left to the insurance In March 2009, the People’s Insurance is the intensive use of sales channels provider. Corporation of China (PICC) launched for consumer education – through — To understand the clients’ real a microinsurance programme for media exposure, secondary training, needs, get to know what they think, them through seven branch offices in case studies, “free riding” education, do, use and feel (TDUF) – by being central, northern and southern parts and promotional events in certain in the field, in their shoes. of the country, where most migrant places. The programme is run with workers are located. It now provides significant government support, — Meet and keep track of these needs accidental death and disability along which helps increase efficiency, but with “stupidly simple” products – with basic healthcare cover to roughly is also susceptible to changes in a key to having a sustainable 605,000 migrant workers. government policies which lead to a microinsurance programme. lack of continuity in the programmes. PICC uses part-time agents based — Keeping in mind that the client in four kinds of public organisa- always comes first and that tions – social, health, agricultural and typical insurance products are not commercial – as well as some indi- microinsurance products will be vidual agents and direct sales. a reminder of the importance of being innovative. Other than migrants’ insurance, there are four categories of microin- — For migrants’ microinsurance, surance in China: agricultural, rural more hybrid models with multi- personal accident and health, farmers’ national firms need to be explored household, and “five small vehicles” to provide effective coverage in insurance for lorries, tractors, three- home and host countries. And wheelers and motorcycles, which are greater effort to form partnerships widely used in rural areas. with money transfer agencies (MTAs) is needed to tap into remittance flows.

“Good: Microinsurance is often sprinkled with successful pilots that don’t survive the 'mainstreaming' journey. But there are rare examples of pilots that have worked towards addressing the challenges of reaching scale.

Not so good: I also believe we didn’t ask critical inward- looking questions – on regional trends and enablers.”

Rupalee Ruchismita, Executive Director, CIRM, India Report 6th International Microinsurance Conference 2010 38

Parallel session 6 Protecting the poor against natural disasters

Among microinsurance risks, natural Lessons from Haiti’s earthquake AIC put together a crisis manage- catastrophes are the most chal- ment team, determined procedures AIC lenging. It is hard enough to insure to follow and began the search for its them – let alone microinsure them – Established 2001, launched policyholders. Some 60 % of the dead because microinsurance products in 2007 had been buried in mass graves and AIC had no idea how many of them — they may represent an accumula- Number of people insured had been its policyholders. It had to tion of immense losses in one spot; 60,000+ in microinsurance portfolios contact its clients through a massive — claims management takes time Insured risks operation involving mobile-phone and requires a large number of Current plans for credit life and texts, press releases and phone calls. specialists; funeral Its network of service providers and people on the ground who knew the — it is difficult to spread the risk over Premium range clients was of considerable help in space or time; Average yearly for credit life: reaching them, managing the claims US$ 1.75 (balance of the loan and — low-probability events can have a efficiently and building trust. Word of US$ 125 indemnity) huge intensity and pose a challenge mouth and focus groups at the houses for a microinsurance portfolio. Average monthly for funeral of clients and beneficiaries that AIC US$ 14 (according to the concen could locate also turned out to be The first part of the session had two tration of age bracket) for minimum effective tools in AIC’s search and speakers who have actually dealt with burial service of US$ 1,200 communication. disasters – in Haiti and India – and one with index-insurance experience in When the devastating earthquake China. Another two speakers in the struck Haiti on 12 January 2010, second part explored challenges and Alternative Insurance Company solutions in index insurance. (AIC) had a micro catastrophe cover planned but not in place. Its two existing programmes covering its policyholders were credit life and indemnity, and voluntary base funeral. AIC learnt many lessons from the handling of claims after the earthquake.

39 —Isabelle Delpeche, AIC, Haiti. 40 — Ramakrishnan Devaprakash, CARE, India. 41 —Left to right: Richard Leftley, MicroEnsure, UK; Thomas Mahl, Munich Re of Singapore, Singapore. 42 — Left to right: Thomas Loster, Munich Re 39 40 Foundation, Germany; Su Buda, National Climate Center, China.

41 42 Report 6th International Microinsurance Conference 2010 39

A key lesson learnt was to “know Disaster insurance for the property In November 2008, the coastal villages your customer” (KYC) and for each of the poor in India of Cuddalore and Nagapattinam were policy to have contact details for three badly affected by Cyclone Nisha and A vast majority of the people below family members as well as the benefi- Allianz paid INR 434m (US$ 9.6m) the poverty line and those in commu- ciary. What the earthquake experience to indemnify the losses suffered by nities suffering from social discrimin- also taught AIC was that an insurer 14,405 households. The compensa- ation in India live in low-lying areas must have a robust IT system and tion, considered the largest single prone to flooding. The dwelling units must incorporate flexibility in legal claim event in the history of micro- are elementary with mud walls and documentation in case of large catas- insurance, benefited some 28 % of thatched roofs, but their repair and trophes. the total clients enrolled under the maintenance take a fair amount of the scheme. Local NGO field staff helped As a result of its experience, AIC families’ household income. Natural with the certification of household designed its new Micro Cat Cover disasters and fire pose major threats. ownership, damage assessment and for natural forces and natural In the aftermath of the 2004 tsunami, claims settlement. catastrophes as a mixture of index- the Cooperative for Assistance and based and indemnity-based insur- To spread the risk geographically, Relief Everywhere (CARE), which has ance. It covers the property affected, CARE then expanded the microinsur- assisted vulnerable groups in India pays off the loan balance and includes ance operations beyond the coastal for 60 years, and Allianz of Germany an emergency payment for funeral districts, with the financial assistance introduced microinsurance services in expenses and other needs. Among of the UK Department for International the coastal districts of Tamil Nadu. A factors AIC considers key to this Development (DFID). Covering three study revealed that the most desired programme’s success are proper more adjacent districts and making cover was for property. CARE bundled rating, thorough and prompt loss the programme sustainable involved property insurance with regular acci- assessment, fraud control, and rapid an almost 300 % increase in premium. dental and health insurance policies. and massive communication (“an More than 30,000 insurance policies investment, not an expense”). with the revised pricing have been sold, but renewals are down to 40 %.

Table 6 Significantnatural catastrophes 1980 – 2010: Overall Insured Ten deadliest natural catastrophes losses losses US$ m US$ m original original Period Event Affected area values values Fatalities 12.1.2010 Earthquake Haiti: Port-au-Prince, Petionville, Jacmel, 8,000 200 222,570 Carrefour, Leogane, Petit Goave, Gressier

26.12.2004 Earthquake, Sri Lanka, Indonesia, Thailand, India, 10,000 1,000 220,000 tsunamis Bangladesh, Myanmar, Maldives, Malaysia

2. – 5.5.2008 Cyclone Nargis, Myanmar: Ayeyawaddy, Yangon, Bugalay, Rangun, 4,000 140,000 storm surge Irrawaddy, Bago, Karen, Mon, Laputta, Haing Kyi

29. – 30.04.1991 Tropical cyclone, Bangladesh: Gulf of Bengal, Cox’s Bazar, 3,000 100 139,000 storm surge Chittagong, Bola, Noakhali districts, esp. Kutubdia

8.10.2005 Earthquake Pakistan, India, Afghanistan 5,200 5 88,000

12.5.2008 Earthquake China: Sichuan, Mianyang, Beichuan, Wenchuan, 85,000 300 84,000 Shifang, Chengdu, Guangyuan, Ngawa, Ya’an

July – August 2003 Heatwave, France, Germany, Italy, Portugal, Romania, Spain, 13,800 20 70,000 drought United Kingdom

July – Sept. 2010 Heat wave Russian Federation: Moscow region, Kolomna, 400 56,000 Mokhovoye

20.6.1990 Earthquake Iran: Caspian Sea, Gilan province, Manjil, Rudbar; 7,100 100 40,000 Zanjan, Safid, Qazvin

8. – 19.12.1999 Landslides, Venezuela: Vargas, La Guaira Punta de Mulatos, 3,200 220 30,000 flash floods Miranda, Nueva Esparta, Yaracuy. Colombia

Source: 2011 Munich Re, Geo Risks Research, NatCatSERVICE, as at March 2011 Report 6th International Microinsurance Conference 2010 40

Parallel session 6 Protecting the poor against natural disasters

Apart from the lack of reinsurance Obtaining comprehensive, reliable As a rule, 30 years of data and data support, a dilemma at the core and harmonised loss data to find an density are needed for an index- of the programme is that without acceptable parametric trigger for the based product. In Fujian province, the property cover the microinsurance insurance cover turned out to be the 66 weather stations of the CMA had product becomes less attractive to the main challenge. Though damage been collecting the required data community, but with property cover and loss figures related to weather- since 1961. pricing becomes an issue. Education induced disasters had been recorded Formalising informal risk sharing to make the community aware of by the CMA, they were mostly not the importance of insurance is also broken down by type of loss – agri- In the Philippines, Munich Re, in challenging – for clients find it hard cultural, industrial or others. Further- partnership with GIZ, has developed to distinguish between government more, some information was not avail- an index-based catastrophe protec- relief and an insurance claim once able for national security reasons. tion policy for recovery of loans in a disaster like Nisha has devastated So the data that could be gathered default because of a natural disaster villages. was used to obtain only a general by members of 1,677 primary co- understanding of the trends of losses. operatives insured with CLIMBS. Dealing with data for index insurance Named “Weather Protect”, the policy For trigger estimation, wind speed Losses caused by extreme weather is a meso-level solution formalising and daily precipitation figures were have increased in China – as else- informal risk-sharing among co- overlaid with the economic loss data. where – over the past years and operatives and doing without the Weather data had to be interpolated decades; they now amount to about cost burden of an intermediary between stations of different altitude. 3 % of the annual GDP. To help cope commercial insurer (see Figure 10). To ensure the reliability of weather with these perils, GIZ Germany and stations – in case some failed during China Insurance Regulatory Commis- a typhoon – a back-up station at the sion (CIRC) initiated a project on same altitude was determined for weather-index-based insurance in each, measuring the same trigger on the typhoon-prone Fujian province the same day. in 2008 – with the National Climate Center of the China Meteorological Administration (CMA) providing expertise on meteorological data, analysis and applications. Figure 10 CLIMBS – Catastrophe Protection for Cooperatives

Primary Members cooperative

Primary Members cooperative Munich Re Climbs

Primary Members cooperative

Meso-level Micro-level Scope: Weather Scope: Principles / guidelines portfolio protection to pass on the benefits to coop’s members

Services provided: Loans, insurance (life, non-life) Payments, membership fee, interest, loan repayment

Source: Mahl, Thomas. Presentation “CLIMBS catastrophe protection policy”. 6th International Microinsurance Conference 2010 Report 6th International Microinsurance Conference 2010 41

The policy provides for a payout to GIZ, as a partner, is involved in Dry day concept builds on index be made after extreme rainfall or capacity-building. Confidence and crop insurance strong wind. Surprisingly, in the trust in the product and transparency MicroEnsure, Malawi Philippines both trigger events rarely are viewed as essential to its success. Weather-index crop insurance occur in the same place at the same Every insured cooperative will have time. Typhoons tend to be very rainy an individual code for direct access to Number of people insured or very windy. The cover is based a web-based real-time system moni- 272 (maize), 815 (tobacco) on triggers – one each for the 1,632 toring a storm’s effect on its munici- Insured risks municipalities – developed using pality. Trigger evaluation will be by Drought, excess rain 10-, 15- and 20-year data periods and an outside organisation, the Danish monitored by a satellite system. The Hydraulic Institute (DHI). Premium range immediate cash and liquidity given 8.5% (maize), 5% (tobacco) to the cooperative affected will help MicroEnsure of the UK introduced a its members jointly manage the after- weather-index crop-insurance pilot math of a natural disaster. in Malawi for the 2005–06 growing The annual premium is 3.5 % of the season. It protected farmers against accrued loans. This is a very cheap crop failure caused by drought or product compared to interest rates excess rain. The scheme linked farms in other lending businesses. There is to local weather stations and triggered just one premium rate for the whole an automatic payout; farmers did country: “How often can a co-op not have to file a claim or await loss in a municipality claim – one typhoon verification. a week?”

Figure 11 Microinsurance value chain

1. Assist in development of non-life micro product tailored to the poor 2. Credit portfolio protection Non-life micro product tailored to the poor Reinsurer

1. Risk carrier CLIMBS 2. Train the trainer 3. Actuary support 1. Risk carrier 4. Risk modelling Cooperatives 2. Product 5. Product development development 1. Sales channel – 3. Training of agents Agents MI products 4. Literacy 2. Credit portfolio awareness 1. Sales channel protection campaign Micro enterprises (trusted by 3. Product the poor) development Consumer requiring 2. Risk awareness risk coverage 3. Cash management

Source: Mahl, Thomas. Presentation “CLIMBS catastrophe protection policy”. 6th International Microinsurance Conference 2010 Report 6th International Microinsurance Conference 2010 42

Parallel session 6 Protecting the poor against natural disasters

Thes pilot’ success led to the scheme’s Lessons learnt extension to Tanzania, Rwanda, India — Quick, efficient and massive and the Philippines. In the process communication is essential after MicroEnsure developed a “dry day a disaster. Immediate focus concept” for the drought cover, taking groups give better results when into account the number of days infrastructure is lacking. crops have not had rain. In the event of severe drought, all farmers receive — Natural disaster products should compensation. be mandatory, and they need reinsurance. The key challenge to dry day weather microinsurance is the lack of ground- — Coverage for property insurance based weather stations, requiring should be bundled with other reliance on data from a satellite such life and non-life related risks to as Meteosat. Other challenges from increase the take-up rate. MicroEnsure’s perspective include: — Expand project operations to — The number of farmers in the areas with less exposure to natural area covered by a weather station disasters. is limited, making scaling-up for — An index-based product should be sustainability difficult. sold not to individuals but to an — Lack of support in the regulatory aggregator. environment as government- — Where satellite technology is in owned crop insurers feel threat- the formative stage, consider a ened by new entrants. hybrid system combining it with — To be acceptable, pricing needs to ground-based stations. range from 3 to 5 % of the — Governments should be lobbied sum insured, while the scheme to encourage a more supportive requires 10 %. regulatory environment for index- — Poor farmers individually are not based schemes. willing to pay premiums as they expect free relief from the government. An aggregator, such as a co-op, can pay for the risk to its portfolio. — Subsidies for farmers in developed countries are generally accepted; why should poor farmers else- where be expected to pay for everything? — Index-based schemes being tested should not be deemed agro insurance; they are microinsurance, producing ready cash for relief immediately after a natural disaster. Report 6th International Microinsurance Conference 2010 43

Parallel session 7 Client education – Insurance literacy

This interactive session comprised Another measure that is proving At a cost of ZAR 54m (US$ 7.3m) three case studies illustrating the helpful is to embark on a long-term over six years, SAIA has undertaken most common difficulties in client process of education, keeping a at least three projects per year in education and a workshop. facilitator available on location for three categories – Inzala community frequent contacts to address the workshops, teacher development Client education is not the same as ongoing questions and concerns – and school leavers’ project, and marketing. For one thing, it concerns of management and union leaders Computanet (IT awareness), reaching insurance in general while marketing as well as workers. Participation and more than 15 million people. The may focus on one or more products. involvement of all the beneficiaries tools used have ranged from work- Education should benefit not only and stakeholders in the educational books, CDs and posters to info kiosks, clients but also institutions, and it has drive will help increase their under- radio and TV infomercials and live to be done in an effective way. There standing of the insurance scheme performances. is no universally applicable standard and bring them closer together to approach as the characteristics, needs In 2008, the ILO conducted an strengthen the organisation. and conditions of each organisation, analysis of SAIA’s financial literacy let alone each country, are different. Reviewing cost and benefit to programme and recommended In general, the tools developed focus enhance impact refining the target audience of on training, games, videos, movies projects, refocusing content from The South African Insurance Associ- and radio. generic to risk management and ation (SAIA), representing 58 property- insurance topics, linking education Undertaking education as a casualty insurers, is implementing more closely to product access, and long-term participative process the findings of a cost-benefit analysis institutionalising the programme and conducting a review of a financial In Cambodia, GRET (Groupe de within SAIA for branding to clients. literacy initiative taken on behalf of Recherche et d’Échanges Tech- the industry since 2004. nologiques) – a solidarity and inter national cooperation association – is addressing complications of health insurance education in HIP, a health insurance programme involving the Garment Manufactures Association of Cambodia (GMAC). The purpose is to pilot the implementation of the Figure 12 compulsory health component of the ILO Study: Overall project spend and reach. The purpose of this National Social Security Fund in 2011. study of South Africa’s financial literacy programme was to HIP offers micro health insurance add to the growing body of insurance education experiences coverage for garment workers, with and to help maximise its impact. 50 % of the premium contributed by employers. Though by September 2010, 4,400 Inzala: 49 % workers in eight factories were Total no of participants: 61,609 covered by HIP, educating them and Total cost per head: ZAR 281 (US$ 37.67) getting them on side turned out to be Intensity of engagement: High more difficult than expected. Apart from limited interest and precon- Teacher development: 30 % ceived ideas about health and cures Total no of participants: 900,000 on the part of workers, the main Total cost per head: ZAR 12 (US$ 1.60) Intensity of engagement: High challenge was a fragile level of trust, both between them and union repre- Comutanet: 19 % sentatives and between the union Total no of participants: 14,612,184 and management. This hurdle was Total cost per head: overcome, at least in part, by involving ZAR 0.44 (US 6 cents) opinion leaders and others whose Intensity of engagement: Low influence and logistical support were Management fee: 2 % needed for effective communication with workers.

Source: Pearson, Viviene. Presentation “Financial education in the low-income market: What works and what does not?”. 6th International Microinsurance Conference 2010 Report 6th International Microinsurance Conference 2010 44

Parallel session 6 Protecting the poor against natural disasters

Making insurance education a part of The majority of clients are daily-wage A lasting impact through preparedness for disaster agricultural workers, with low literacy face-to-face learning and little insurance knowledge. As CARE India described the CARE In India the Microinsurance Academy victims of a natural disaster, they are initiative and indicated that their main (MIA) has been developing innovative familiar with relief provided by govern- problem is the sustainability of client approaches to insurance education, ment and various agencies but not education. Following relief operations like the Treasure Pot Game, which with insurance protection for which in the aftermath of the 2004 tsunami, helps participants understand how they need to pay. With the help of NGO CARE India introduced a microinsur- pooling risks is better than out-of- partners who have earned the trust of ance programme supported by Allianz pocket spending, and a full-length communities, CARE uses a variety of and integrated with community-based Bollywood style “infotainment” group and one-on-one opportunities for disaster preparedness. To carry out movie “Sab Tujhse Hai” (“Everything the ongoing explanation of insurance education activities for potential users depends on you”), which features a to clients. While client education of microinsurance services, CARE India strong message on community-based requires a long-term commitment, identified and trained NGO partners to microinsurance and is available on sustaining it is difficult for a relief organ- act as intermediaries. MIA’s You Tube channel. isation without the help of the insurance industry. A goal of CARE is to generate such an interest and synergy among all sectors involved in vulnerable communities to make insurance education a fundamental part of their agenda rather than something they might attempt after a natural disaster.

43 — Left to right: Viviene Pearson, SAIA, South Africa; Aurore Lambert, GRET, Cambodia; Ralf Radermacher, Microinsurance Academy, India. 44 — Michal Matul, ILO/ Microinsurance Innovation Facility, Switzerland. 45 — Aparna Dalal, 43 44 independent researcher, USA.

45 Report 6th International Microinsurance Conference 2010 45

In Brazil, the insurance confederation Content on insurance should be Lessons learnt Confederação Nacional das Empresas layered with other financial concepts — Distinguish client education de Seguros (CNSeg) has been and deal with what people know about from marketing, and take into conducting a multimedia campaign – insurance, their previous risk expos- account the organisation’s specific including a radio soap opera, a short ure and how they think about risks. characteristics and conditions. film and street theatre – to raise Delivery should mix channels and awareness and educate low-income — Education as a long-term tools to reinforce messages, and make insurance consumers: individuals participative process will have a education participatory, for example, and commercial enterprises in the lasting impact. by using the community to create a formal or informal economy. video or interactive game. — A cost-benefit analysis should be In Kenya, Microfinance Opportunities the centrepiece of monitoring For sustainability and impact, is carrying out a participatory radio and evaluation measures under- leverage existing institutions and pool campaign to give consumers the taken from the start. resources, and incorporate moni- knowledge and skills to move from toring and evaluation activities from — Undertake insurance education reactive to proactive risk management the start. before a loss or disaster forces it strategies such as insurance. on clients. Such experiences in the field point to — Base education on what people the need for a long-term integrated already know and have experienced. approach and a systematic effort to teach risk-management strategies — Involve the community’s self-help and the role of insurance. The focus groups to build trust. should be not only on content and delivery but also on the sustainability and impact of client education.

Figure 13 Hollard’s conversational map

Hollard Insurance Group of South Africa organises three- hour workshops in which participants are introduced to a “conversational map” that represents a community with houses, shops, factories and hospitals. The map features a number of insurable events to participants. The trainer explains the benefits an insurance policy would provide in each event, as well as the rights and responsibilities of both the insurer and the insured.

Source: Hollard Insurance Report 6th International Microinsurance Conference 2010 46

Parallel session 8 Life insurance

While credit-life insurance often SBI Life, a joint venture of the State Box 5 serves as a starting point for an MFI Bank of India and BNP Paribas of Put simply engaging in microinsurance, life France, launched this product in Life insurance pays a specified insurance goes beyond the members’ December 2007 for the weaker amount to the named beneficiary loans. Coupled with savings it can sections of society – people belonging upon the death of the insured. One be an attractive proposition for clients to MFIs and other financial institu- may buy it individually or as part of a (see Box 5). tions, NGOs and self-help groups. group, as a permanent or endowment This session featured three savings- Grameen Shakti (“rural power”) policy including protection plus a life schemes and a rural microinsur- encourages saving and provides life cash value, or as a term policy for ance programme. All four are demon- protection. It is a group insurance a limited period with no cash value. strably aimed at the poor. The three product with a 50 % premium return Credit-life insurance repays a loan savings-life products were introduced after five years, or a 100 % return after upon the insured’s death – “the in India and have a track record in the ten. The group chooses its cover in debt dies with the debtor”. A lender market: SBI Grameen Shakti, Bajaj multiples of INR 5,000 (US$ 110.93), may require this insurance before Allianz’s Sarva Shakti Suraksha, later up to INR 25,000 (US$ 554.63 ). Upon approving a loan. The policy can adapted in Indonesia as Tamadera, reaching a ceiling of INR 50,000 be for life or a term. The difference and Max Vijay. The rural programme (US$ 1,109.25) per group, the policy from regular life insurance is that the is in China. is cancelled and all premiums beneficiary is the lender, not anyone are returned, an event the insurer Group microinsurance with chosen by the insured. considers unlikely. refund of premiums Savings-life insurance is attached In addition to maturity benefits, the SBI Life to the insured’s savings account at a plan provides a surrender value financial institution. Upon death, it Number of people insured and death benefit. There is an age pays a set amount related to savings 1,000,000+ limit for application (minimum 18, to the beneficiary named by the maximum 50). Insured risks insured. Added to savings, this insur- Group life insurance The product has been well received ance is intended to have better value by the market. For a five-year term for the client than a life policy alone. Premium range the premium payable is INR 301 US$ 6.64 per year for (US$ 6.64) per year for a sum assured US$ 550 sum assured of INR 25,000.

46 — Martin Hintz, Allianz Life, Indonesia. 47 — Craig Churchill, ILO/Microinsurance Innovation Facility, Switzerland. 48 — Rob Rusconi, Tres Consulting, South Africa. 49 — Hengxuan Su, China Life, China. 46 47

48 49 Report 6th International Microinsurance Conference 2010 47

Success and scale-up of Figure 14 micro endowment Difficultieswith the geographical expansion of SSS from India to Indonesia. Relatively higher income and literacy levels, a lower Sarva Shakti Suraksha (SSS) appreciation of life coverage and stronger competition from Number of people insured informal saving schemes in Indonesia led Allianz Life Indonesia to 3,300,000 reconsider some key product features while replicating the micro endowment scheme that has taken hold in India. Insured risks Death due to natural causes and accidental death Premium range US$ 11–110 per month Touted as “the 100-million-dollar baby”, Sarva Shakti Suraksha (SSS), Geographical created in April 2008 by Bajaj Allianz expansion Life, has already achieved sales of three million policies. It has generated premiums of US$ 25.4m and 75m in the last two fiscal years. It can now be considered the “biggest microinsurance scheme by a commercial insurer worldwide”.

SSS is distributed as a voluntary India — “SSS” Indonesia — “TAMADERA” group product through a partnership Population — Launched Population — Launched with SKS Microfinance, India’s largest 1.1 billion April 2008 240 million October 2010 MFI with 7.8 million clients, and more HDI #128 — > 3 million HDI #107 — Three-year than 30 other organisations, including policies target: the 365,000-member Punjab State Milk 100,000 policies Producers’ Federation. SSS (meaning “all empowering protection”) was conceived as an endowment plan combining the benefits of life insurance and savings for the financially excluded. Among Example India Indonesia Indonesia vs. India its firsts was to do away with the cumbersome application form and Distribution High number of Fragmented, Harder require no documentation. large partners small number to reach scale (MFIs, RRBs, Coops) of large partners For a minimum premium of US$ 0.40 Poverty level 80.4 % 52.4 % Higher premium- per week, SSS provides a death (US$ 2 / day) payment capacity benefit of US$ 100 and the account Literacy Low (20 % of High (80 % of Easier to value, or US$ 200 plus account value SKS customers) MFI customers) communicate for accidental death. Savings are product features subject to an administration fee and ROSCAs Not pervasive Pervasive Stronger invested in government securities and (“Chit Funds”) (“Arisan Funds”) competition from other secure assets. At maturity after informal savings five years, the policyholder receives the account value – that is, net Life coverage Highly valued Not highly valued Life coverage alone (taboo) not a strong selling premiums plus interest. Surrender is proposition possible after six months and subject to a fee.

Source: Hintz, Martin. Presentation “The 100-million-dollar baby. Successful scale-up of Allianz micro endowments”. 6th International Microinsurance Conference 2010 Report 6th International Microinsurance Conference 2010 48

Parallel session 8 Life insurance

The product has a 13-month persist- Box 6 ency of 82 % (as at July 2010) and Rising to the challenge an expense under-run is expected for In 2001 Max New York Life became The product has not been a financial the fiscal year 2010/2011. one of the first insurance companies success in the short term, as fewer Building on this success, Allianz, the set up after the market in India than 100,000 clients have signed up global partner of Bajaj Group in the was opened to the private sector. so far. The high up-front payment venture, decided to take the product to A separate unit dedicated to the of INR 1,000 and the long duration Indonesia under the label Tamadera. low-income market in 2008 unveiled of ten years appear to be barriers to its flagship product Max Vijay. increasing uptake. Also, subsequent Tamadera has a higher minimum top-ups have not materialised as contribution, US$ 1 per week, and It provides the dual benefit of protec- hoped: savers may not be inclined features a critical illness cover (for tion and savings over ten years for to make regular contributions without cancer, stroke, heart attack, kidney an initial enrolment premium at a contractual obligation. A factor failure and major burns). In the event three levels: INR 1,000, 1,500 and may also be clients’ lack of trust in of death, critical illness or maturity, 2,500 (US$ 22.20, 33.30 and 55.50). mom-and-pop stores. the targeted savings amount is Whilst regular life insurance has fixed returned to customers. renewal premiums and sums assured, Among marketing and other options Max Vijay’s subsequent premiums being proposed to address these Both products target not only the very are completely flexible, subject to a issues are some that would funda- poor, but also clients slightly better minimum of INR 10 (US$ 0.22) and mentally change the product, for off though still low-income. Tama- maximum of INR 2,500 per day per example by making it a compulsory dera has a maximum contribution policy. saving scheme. of US$ 10 per week, which is close to the company’s already existing The death benefit equals five times the Max New York Life has shown a savings plan distributed through its savings contributed up to that point. strong dedication to the product, “non-microinsurance” channels to invested a significant amount of The flexibility of premium payment its regular customers. It thus closes money (US$ 20m) in marketing and frequency is Max Vijay’s key a "gap" in the company’s product efforts and pursued the business innovation: top-ups can be made offering, allowing Allianz to cater for opportunity despite lower-than- whenever convenient for the client, the full range of clients in Indonesia. expected initial sales. using convenient outreach chan- Having not only the very poor, but nels like neighbourhood mom-and- A case study of Max Vijay is available from also lower middle-class clients also the ILO’s Microinsurance Innovation Facility pop stores. In addition, to facilitate increases the financial viability of (www.ilo.org/microinsurance). sales in low-tech environments, the the product. Despite differences in company operates a call centre for the markets, it was possible to adapt back-up support, uses scratch cards the product, as some features, such and has tested other innovative point- as lower policy levels and higher of-sale devices under a grant from premiums in Indonesia, offset the the ILO’s Microinsurance Innovation lower economies of scale compared Facility. to India. Report 6th International Microinsurance Conference 2010 49

Rural small-sum life insurance The independent innovation stage Lessons learnt began in 2008 when the China Insur- China Life’s rural small-sum — A financial literacy drive needs to ance Regulatory Commission issued insurance accompany marketing of products a “pilot plan of rural small sum life aimed at the low-income sector. Number of people insured insurance” to respond to the chal- 11,480,000 lenges in rural and rapidly urbanising — Initial reliance on one partner as areas. China Life then developed nine a major distributor can impede Insured risks exclusive small insurance products growth and create a liability in the Death, accidental disability in 2008 and three more covering product portfolio. Expand partner Premium range additional risks in 2009. These include network. US$ 1.80 per year ordinary and traffic accident insur- — Monitor and upgrade the back- ance, term life insurance and prod- The development and promotion office support and IT system at ucts covering microcredit. Insurance of China Life’s microinsurance prod- partner level. products are renewed automatically, ucts have gone through two stages: without a waiting period, and have — While conventional business spontaneous promotion, and inde- a 60-day grace period. All products are covers the affluent and middle pendent innovation. priced on a non- or low-profit basis classes, microinsurers may focus In its stage of spontaneous promo- to reflect the company’s social respon- on the working poor and helping tion, China Life began to promote sibility. to uplift those too poor to insure. simple life insurance as early as The lower middle class and China Life distributes its products 1983. Originally sold to the popula- “upper poor” class may be the directly through village service tion as a whole, the company later forgotten middle ground where teams, and indirectly through various targeted especially rural people with microinsurers can tap opportuni- group channels. These include public lower income. The product covers ties for growth. medical schemes, banks, the postal death and accidental disability, system and others. The company — Every market is different. Products with a minimum premium of CNY 1 plans to develop further innovative taken from one to another should (US$ 0.15) payable per month. microinsurance products with a focus be adapted rather than duplicated. on the new “Medicare” scheme and — For distribution, push channels on migrant workers. It also intends to (MFIs and other partner groups) explore new distribution channels, are good for initial sales, but pull including grass-roots organisations channels (local retailers where and rural financial institutions. clients shop daily) are better for renewals and savings top-ups. — A product making a footprint in the low-income market can lead to cross-selling opportunities later. Report 6th International Microinsurance Conference 2010 50

Agenda Day 3 morning sessions 11 November 2010

Parallel session 9 Parallel session 10 Parallel session 11 Driving down cost – Process- Developing national Academic track – mapping to increase efficiency microinsurance strategies Impact of microinsurance in microinsurance processes

Roland Steinmann Martina Wiedmaier-Pfister Seyed Hamid Consultant, MicroInsurance Consultant, GIZ, Germany Assistant Professor, University of Centre, USA Access to insurance initiative – Dhaka, Bangladesh Introduction to process-mapping Creating an enabling environ- Evaluating the health effects ment for microinsurance of micro health insurance Hanna Schommer placement – Evidence from Financial Systems Development Lemmy Manje Bangladesh Adviser, GIZ, Ghana Project Coordinator, ILO/Finmark Lessons learnt from providing Trust, Zambia Daniel Stein technical assistance on process Multi-sector stakeholder Researcher, London School of optimisation engagement and local owner- Economics, UK ship – Microinsurance Paying premiums with the Edmund Diamond Addo development strategy and insurer’s money – Insurance Head of Operations, Donewell process in Zambia decisions in a repeated interaction Life, Ghana Experience from the application Christine Hougaard Akhil Behl of the mapping toolkit Consultant, Cenfri, South Africa Analyst, CIRM/IFMR, India A winning strategy? Notes on Impact evaluation of health Facilitator the country experience so far microinsurance through RCT – Michael McCord in developing microinsurance Two interventions targeting President, MicroInsurance better renewal rates and health Centre, USA Facilitator outcomes Doubell Chamberlain Managing Director, Cenfri, Facilitator South Africa Dean Karlan Professor of Economics, Yale University, USA

Parallel session 12 Plenary 3 Social performance indicators Academic track – Do the poor for microinsurance benefit from insurance? Hosted by the Microinsurance Network Performance Indicators Working Group Introduction Discussants Dean Karlan Shailabh Kumar Professor of Economics, General Manager, Uplift India Yale University, USA Assoc., India Impact of microinsurance Brandon Mathews Discussants Head of Microinsurance, Glenn Harrison Zurich Financial Services, Director, CEAR/Georgia State Switzerland University, USA What is the research agenda Matthew Genazzini needed to answer the question? Programme Assistant, ADA, Luxembourg Martin Hintz Consultant, Allianz Life, Facilitator Indonesia Bert Opdebeeck What does the insurance Microinsurance Programme industry need from the Coordinator, Belgian Raiffeisen academics? Foundation, Belgium Facilitator Richard Phillips Chair of the Risk Management and Insurance Department, Georgia State University, USA Report 6th International Microinsurance Conference 2010 51

Parallel session 9 Driving down cost – Process-mapping to increase efficiency in microinsurance processes

“Process optimisation is Reducing the administrative costs Issues a process map may often high- the key issue in evaluation.” involved in providing microinsurance light include the physical transfer of is key to making microinsurance documents, dead time, duplication of Michelle Yang, Actuarial/ Product Department, products more accessible to the end- tasks (e.g. checking for completeness) Product Development user. The session introduced process- and multiple data entries to different Division, PICC, China mapping as a tool for driving down systems. The solutions generally costs, reviewed a case of technical entail optimising existing processes assistance on process optimisa- (removing bottlenecks and redundan- tion and provided the viewpoint of a cies, maintaining adequate controls) provider using a process-mapping and using technology (to improve toolkit. the efficiency of client enrolment, premium collection, client communi- Process-mapping is a technique cation and client identification). used to describe business processes visually, making it easier to analyse Process-mapping – involving could- and improve them (see Figure 15). be and should-be maps as well as an In addition to the sequence of steps, as-is map – is a significant tool as it the analysis focuses on the five key helps reduce operational costs. It can dimensions of the process: time, lead to higher client retention rates, complexity, costs, risks and responsi- lower operational and reputational bilities attached to each stage of the risk and an expansion of the market, process. A process map helps people resulting in economies of scale – all understand clearly how business of particular concern in the context of is done, and serves as a basis for a price-sensitive low-income client. improving service quality. At the same Another impact is on the organisa- time it can highlight which parts of tion’s internal culture. Participating the product design or the service in the exercise and seeing results can process the parties involved need to boost staff morale and job satisfac- understand better. tion. It may even serve as an eye- opener for management.

Figure 15 Screenshot of process map example: Standard signs, figures and arrows are used to represent a process graphically

Source: Steinmann, Roland. Presentation “Efficient business processes. An introduction to process-mapping”. 6th International Microinsurance Conference 2010 Report 6th International Microinsurance Conference 2010 52

Parallel session 9 Driving down cost – Process-mapping to increase efficiency in microinsurance processes

Applying a process-mapping toolkit — Exclusions add to costs and Application of the toolkit resulted processing time in recommendations ranging from The MicroInsurance Centre has simpler product design with limited developed a toolkit to make process- — Delays in claim payment cause exclusions to centralising claims mapping accessible to microinsurance dissatisfaction and increase tracking and eliminating multiple practitioners. The toolkit is being the potential for lapses by other checks. An example was the reduction field-tested in Bangladesh, the Philip- policyholders of 4.5 days in processing by avoiding pines, Kenya and Ghana. — Manual calculations are needed the unnecessary involvement of The test in Ghana was sponsored to deal with software problems the underwriter (see Figure 16 and by GIZ of Germany in collaboration note the use of the process-mapping — Communication gaps between with the MicroInsurance Centre at symbols). head office and branches erode Donewell Life Company. The aim productivity In Donewell’s case, the impact of is to assess Donewell’s processes process-mapping was spread across for premium collection and claims — Low accountability due to lack the five dimensions of a process spot- payment. In the claims part of the test of central claims tracking lighted by the toolkit (see Figure 17). the use of the toolkit identified — Redundancies due to multiple The exercise was rewarding but time- a number of core issues: reviews and signatories consuming as it involved selecting claims, visiting branch offices, — Controls not adjusted for lower workshops with staff and manage- financial levels ment, and training staff to implement — Weak system of performance changes. The dedication and support monitoring and incentives of staff and management were critical to the success of process-mapping.

50 — Left to right: Roland Steinmann, Micro Insurance Centre, USA; Hanna Schommer, GIZ, Ghana. 51 — Edmund Diamond Addo, Donewell Life, Ghana.

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Figure 16 Lessons learnt Screenshot of process-mapping at Donewell Life, Ghana, — Like a good roadmap for driving, revealed an unnecessary step which was adding an extra 4.5 days process-mapping can show a to the claims process. business how to avoid hurdles along the way to a desired end. — Process-mapping involves time and effort – but the time and effort are well worthwhile. Major improvements can come from relatively easy changes in the way business is done. — Cooperation and buy-in of staff and top management are essential to get results – as are training staff and educating clients. — Process and product are often interlinked. A microinsurer’s target market does not understand exclusions. It may be possible to redesign, re-underwrite and re-price the product to accommodate payment for losses that would otherwise have been excluded. Source: Addo, Edmund (Donewell Life Company Limited). Presentation “Claims process- — A microinsurer needs to have mapping for Donewell Life: Recommendations from a mentor and the impact on our business”. simple products and simple 6th International Microinsurance Conference 2010 processes to go with them.

Figure 17 Remarkable impact: Using the process-mapping toolkit produced notable results.

Time Reduction of average claims processing duration from Responsibility Complexity 30.5 days — Clear — Easier tracking to 20.1 days responsibility of claims lodged for staff — Less complaints — Dedicated MI from branch claims officer Process — Simpler documents — Accountability Optimisation required — Better communication

Risk Costs — Higher accuracy — Efficient — Lower procedures reputational risk — Dedicated — Better client staff with clearer service staff terms > less surrender — Less travel to HO

Source: Addo, Edmund (Donewell Life Company Limited). Presentation “Claims process- mapping for Donewell Life: Recommendations from a mentor and the impact on our business”. 6th International Microinsurance Conference 2010 Report 6th International Microinsurance Conference 2010 54

Parallel session 10 Developing national microinsurance strategies

This session addressed the question The diagnostic made in Zambia Here again, it is important to involve of how to develop microinsurance at a showed issues both on the demand all key players. Leadership of the national level. The Access to Insurance side (e.g. understanding of insurance project should be in the hands of the Initiative (a2ii), Cenfri and Finmark among target groups, limited regulators rather than the donors. Trust have developed process guide- exposure to microinsurance, bad A neutral catalyst might be useful lines for country-level microinsurance perception of insurance) and on to coordinate the various players, who development strategies, which were the supply side (e.g. low market have differing interests. applied in the case of Zambia (see knowledge, limited use of dynamic The definition of the goals and Figures 18 and 19). distribution channels, limited product strategy should be realistic. It is no innovation). A significant side-effect Country diagnostic: Make the shoe fit use having disproportionate goals of the diagnostic was that the studies which will never be achieved or to The starting point for the develop- made have stimulated the private rush the process. ment of a national microinsurance sector and helped it to understand the strategy is to understand the market market. A pivotal role: Regulation, supervision and the players. No standard solution and policy Define goalsand develop a strategy can fit all countries. It is important A key element in developing a national to understand the microinsurance The first question to address is microinsurance strategy is regulation, ecosystem: the value chain, stake- defining the goals pursued. This can supervision and policy. To help focus holders, the regulatory and social be to make microinsurance a policy on microinsurance in various markets, environment, the infrastructure, and market priority, to promote a there is a global partnership of insur- the stage of development of the sound insurance sector, to support ance supervisors and development market. All players must be involved the development of alternative agencies, called the a2ii. Its purpose is from the outset, including private distribution channels, etc. The second to contribute to sound, effective and insurers, regulators, government question to answer is whether an proportionate policies, regulation representatives, associations, NGOs, active strategy is actually necessary and supervision of insurance markets donors, research organisations, to achieve the goals. Sometimes the that facilitate the growth of insurance training providers, technical assist- market is already heading in the for low-income clients. ance providers, etc. right direction and taking action would not be beneficial. Six countries now have regulation for microinsurance, at least another three In Zambia, the goal set was to accel- are preparing a microinsurance regu- erate the demand and supply of latory framework, and many more are microinsurance through pure market undertaking similar reviews. The a2ii facilitation. can help a supervisor to assess the situation in its country and define the strategic approach that fits a particular country situation best.

52 — Martina Wiedmaier-Pfister, consultant to GIZ/BMZ, Germany. 53 — Left to right: Lemmy Manje, ILO/Finmark Trust, Zambia, Christine Hougaard, Cenfri, South Africa. 54 — Doubell Chamberlain, Cenfri, South Africa.

52 53

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Figure 18 Key questions underlying the strategy Do you need a formal definition? E.g. for dialogue and alignment, delineating a space in regulation, delineating the target market, facilitating support initiatives, government coordination. If so, how do you go about it? Parameters: benefit/premium limit, simplicity, risk events, etc. Who takes the lead in implementing the process? — Coordination — Who can act as champions? — Is a neutral catalyst needed? Who funds it? How long does it take?

“Ready” “Steady” “Go” Catalysing the debate and Devising the strategy Implementation understanding the market 3 – 6 months 2 years + 6 –12 months

Source: Hougaard, Christine. Presentation “Navigating uncharted waters”. 6th International Microinsurance Conference 2010

Figure 19 Steps involved in designing a strategy

Decision to support MI development

Stage 1: “Ready” Stage 2: “Steady” Stage 3: Catalysing the debate and Devising the strategy “Go” understanding the market

1. ID stake- 2. Understand 3. ID drivers, 4. ID strategic 5. Consider 6. Consider 7. Implement holders and key the market and opportunities goals and engagement coordination strategy individuals regulatory and barriers interventions process platform framework

Outcome: MI development

Source: Hougaard, Christine. Presentation “Navigating uncharted waters”. 6th International Microinsurance Conference 2010 Report 6th International Microinsurance Conference 2010 56

Parallel session 10 Developing national microinsurance strategies

Microinsurance development in A country strategy process based Lessons learnt various markets has faced three on this toolkit provides learning — Regulation, supervision and policy main challenges: opportunities for insurers and other are relevant for market develop- insurance industry stakeholders — Consumer protection issues ment and hence an important through microinsurance pilot projects — Appropriate products, services element in a national strategy. and thematic workshops – on topics and administration such as international and local — Supervisors should drive the — Delivery channels perspectives and best practices in country’s diagnostic and reform Working with the Initiative on microinsurance delivery. process. capacity development and reform, Initial experiences in Zambia demon- — The entire sector in a country supervisors are able to pass experi- strate the following: benefits from the indirect impact ences and lessons on to other of a committed and knowledge- jurisdictions to help determine appro- — While industry-level support is crit- able supervisor that drives sector priate intervention. ical, the individual-company level is learning, an efficient and effective equally important in securing The a2ii has developed a standardised regulatory framework and a a response from the private sector. methodology for country diagnos- sound supervisory system. tics which provides a sound base — In a very weak financial market, — Lack of a conducive regulatory for developing a national strategy with very low consumption of framework for microinsurance (a toolkit will be available in 2011). formal financial services, financial or rules of engagement can Supervisors need to drive the reform education is critical to influence the be a potential barrier to private- and implementation process in collab- financial behaviour and consump- sector responsiveness. oration with other stakeholders in tion patterns of low-income groups. the private and public sectors – — A roadmap for implementation — Private-sector responsiveness can including other levels of the financial of the national strategy at all be very challenging where insurers system. levels is important. are not willing to embrace innova- While the involvement of all stake- tive and non-traditional strategies holders is crucial, the insurance to address market challenges. supervisor needs to take the lead in driving the strategy process, implementing it and later assessing its impact on a continuous basis Table 7 in order to adapt the strategy on the Activities that may be undertaken in the process basis of real experience. from strategy to action

Trigger or support an Support for policy statement inclusive regulatory process Research to overcome identified barriers

Enforcement/consumer-protection concern

Facilitating industry-supervisor dialogue

Taking part in the international

debate and forums

Supporting further research Trigger or support a Developing industry codes and standards market response Exploring business model options

Capacity-building, workshops Seed funding for innovative pilots Generating quality information Create insurance Design and implement education awareness campaigns Develop common industry terminology Create a call centre

Source: Hougaard, Christine. Presentation “Navigating uncharted waters”. 6th International Microinsurance Conference 2010 Report 6th International Microinsurance Conference 2010 57

Parallel session 11 Academic track – Impact on microinsurance

This session discussed three Improving health awareness and Lessons learnt projects assessing the impact of use of care, but not health — The rainfall-index insurance microinsurance. A study by the Institute of Health market in India is struggling. Can rainfall-index insurance in India Economics, University of Dhaka, Repeat buying is very low, be viable? examines the impact of micro health even after the insured receives insurance placement on the health a payout. Nor do adverse Rainfall-index insurance, introduced awareness, healthcare use and health weather events in themselves to India in 2003, has so far failed to status of microcredit members in rural spur insurance buying. gain much traction with consumers. Bangladesh. It uses data from 329 It could be that they still do not know — Rainfall-index insurance households in the operating areas of enough about this type of insurance, products need to improve if they the Grameen Bank and finds that the but it could also be that the insurance, are to become widely popular. placement increased the members’ as designed and priced, does not health knowledge and use of formal meet their needs. healthcare, but not the state of their A study conducted at the London health. There may be several reasons School of Economics looks at for the last finding: the term of the consumers’ purchasing decisions, study may have been too short, or there specifically whether receiving an may be a shortcoming in the insur- insurance payout induces a greater ance scheme, a lack of proper referral probability of the insured purchasing services or adverse effects of protection insurance again the next year. If it against moral hazard. does and there is a positive spillover to their friends and neighbours, they see value in the insurance and the market will eventually improve. Using three years of data from the MFI BASIX (around 20,000 customers), the study finds that receiving an insurance payout does increase by 10–20 % the probability of the insured Figure 20 purchasing insurance the following After receiving an insurance payout, customers of rainfall year. However, this increase is driven insurance in India are only 10 – 20 % more likely to purchase by people who received large payouts. insurance again the following year. In addition, people living in the same village who did not receive a payout Renewal rate (%) are not more likely to purchase the next year, casting doubt on any spill- 35 over effects. Nor did experiencing a “rainfall shock” (term used in the 30 insurance contract) increase take-up. 25 The study finds “very low” numbers of continuing customers of rainfall 20 insurance. Even among people who received payouts in excess of twice 15 their premium in 2006, the study says, only 18 % bought again in 2007. Such a 10 low proportion of repeat buyers indicates that they are not satisfied with 5 their experience of insurance. The study concludes that some evolu- 0 All villages Marketed villages tion of the product, price or marketing strategy will be needed in order to turn No payout rainfall-index insurance into a viable Received payout product in the long run.

Source: Stein, Daniel. “Paying premiums with the insurer’s money: Insurance decisions in a repeated interaction”. 6th International Microinsurance Conference 2010 Report 6th International Microinsurance Conference 2010 58

Parallel session 11 Academic track – Impact on microinsurance

It is not certain whether the increased CARE has a network of 11 hospitals Lessons learnt awareness is also due to the existence with more than 2,000 beds across five — Micro health insurance helps of healthcare facilities in the commu- states in India. CARE Foundation has increase awareness and use of nities observed, and not solely to the been actively involved in research, healthcare, though its impact placement of insurance. However, the education and technology for making on the insured’s state of health study does provide comprehensive healthcare affordable and accessible needs studying over a long term. evidence of the positive impact of to low-income households. A pilot micro health insurance. scheme has now introduced outpa- — Government should contract tient services (consulting, diagnostics out its poorly functioning health Micro health insurance in Bangladesh, and drugs) through a hub-and-spoke centres to microinsurers. says the study, has mainly operated in model, with the clinic at the back areas where government healthcare — Add-on out-patient services are end and village health workers with facilities are not functioning well. A an incentive for buying and hand-held devices at the front end. possible solution, the study adds, is renewing health insurance. This technology-leveraged delivery for government to contract out its of primary healthcare is financed — Behavioural advice from a commu- poorly functioning health centres to the through micro health insurance. nity health worker improves existing microinsurers. This could save health-related outcomes of low- the costs of new health centres and The study is evaluating the impact of income households. avoid duplication in providing services. add-on preventive and promotional services for the insured and the use — Technology-leveraged quality A value-added service can increase of discount vouchers for insurance. healthcare at the doorstep in take-up and renewals The expected outcome is that the villages will bridge the infrastruc- An ongoing study by the Centre for financing incentive and healthcare ture gap in rural areas. Insurance and Risk Management/ advice will boost insurance take-up Institute for Financial Management and and enhance health-related outcomes Research (CIRM/IFMR) is exploring the of rural households. effects of an add-on outpatient service In both organisations under study – on the take-up and renewal rates of Calcutta Kids and CARE – only the micro health insurance schemes and baseline survey has been completed on health expenditure by low-income and final results will be tabulated households. Using a randomised after another year. controlled trial as an impact evaluation research strategy, the study involves two organisations providing healthcare. Calcutta Kids, an NGO whose community health workers serve urban slums, has been offering micro health insurance since 2009. It has now added an outpatient counselling scheme consisting of simple health-awareness behavioural tips. The study is expected to confirm its initial findings that the add-on service is helping increase renewal and take-up rates, and out-of- pocket expenditure on health.

55 56 55 — Seyed Hamid, University of Dhaka, Bangladesh. 56 — Daniel Stein, London School of Economics, UK. 57 — Akhil Behl, CIRM/IFMR, India. 58 — Dean Karlan, Yale University, USA.

57 58 Report 6th International Microinsurance Conference 2010 59

Parallel session 12 Social performance indicators for microinsurance

“A holistic approach is The session introduced social Input from clients – for example on required to make performance indicators developed their claims experience – is processed, microinsurance viable by the Microinsurance Network split and shared with staff in the field. and sustainable.” Performance Indicators Working The claims ratio has been between Reynaldo Antonio C. Soto, Group, covering the principles behind 60 and 80 %, which for Uplift means Executive Vice-President, them and their relevance from a performing “reasonably well” – Grepalife Financial Inc., practitioner’s perspective. a success it says is due in no small Philippines measure to the importance it attaches Using social indicators as a spring- to social indicators. board to financial performance Measuring social performance: For Uplift India, an association of Key principles organisations involved in community- led health and social-protection ADA, Belgian Raiffeisen Founda- plans, microinsurance is an initiative tion (BRS) and the Microinsurance targeting poor people (and not just Network organised a workshop with one involving small premiums). As 15 microinsurers from Asia, Africa larger insurers report client numbers and Latin America, who identified in the millions, Uplift India ques- key principles that are prerequisites tions whether they actually focus on to assuring the social performance the poor and whether they provide of microinsurance programmes. All real value to low-income clients. It is come with a rationale and with key especially concerned about bundled questions applicable to microinsur- products like credit life where people ance organisations or, in the case of might not even know about the insur- larger insurers, to microinsurance ance they have. portfolios. Combining and sharing technical There are eight key principles resources for mutuals and other (see Table 8) covering various aspects democratically owned groups, of operations. Uplift India uses social indicators Client focus requires a clear, strong as a constant management tool – to and consistent focus on providing direct value towards the insured, who good value and efficient products and are at the same time shareholders. services, while inclusion ensures that Combining community participa- outreach and access are maximised, tion – from product design to claims in terms of pricing, infrastructure management – and controlled access and payment options – with fewer to a multi-layered healthcare network, exclusions, signalling a stronger social Uplift has demonstrated a sustain- focus. able micro health insurance product for poor families at discounted rates. Preventive health forms part of the product, as well as processes and systems that control moral hazard and fraud.

59 — Left to right: Brandon Mathews, Zurich Financial Services, Switzer- land; Matthew Genazzini, ADA, Luxembourg; Bert Opdebeeck, BRS, Belgium. 60 — Shailabh Kumar, Uplift India Association, India.

59 60 Report 6th International Microinsurance Conference 2010 60

Parallel session 12 Social performance indicators for microinsurance

Another principle requires the assess- Making sure that audited standards Key indicators of social performance ment of client risks at the product and policies are aligned with the Eleven indicators are specified to development stage to ensure that the mission and vision of the organisation provide the basis for a quantitative insurers focus on relevant, instead of would promote ethical behaviour assessment of social performance. (only) the easily insurable risks. by staff and reward high standards of customer service. Five of the eleven are already included Similarly, the regular assessment in financial performance indicators of client satisfaction would help And having an environmental policy promoted by the Microinsurance identify client value created and adapt in place would demonstrate the Network (see pages 5 –7 of this report), product and distribution channels to organisation’s social responsibility reflecting the strong interdependence the needs of the clients. towards the environment. of social and financial performance. Protection of client data would For example, the incurred claims involve ensuring that staff members ratio not only indicates the financial respect client confidentiality and stability of microinsurance schemes, that no client data are sold to or but also client value – in terms of shared with any third parties. benefits received by clients compared to the premium paid. On occasion, Transparency would improve proc- when a social indicator may potentially esses and increase credibility. It be at odds with a financial indicator, means that just providing data and it would be advisable to strike a information is not enough; what is “balance” that might help achieve a communicated must be clear, under- financial as well as social objective. standable and relevant. The other six indicators are new, for example the poverty and rural outreach ratios. They indicate the proportion of clients living below the poverty line and in rural areas respectively and can show insurers whether they are successful in offering value to poor clients and to Table 8 those living in remote areas. Key principles and social performance indicators developed by the Microinsurance Network Performance Indicators Working Group

Key principles Social performance indicators 1. Client focus* 1. Incurred claims ratio* 2 Inclusion 2. Claims rejection ratio* 3. Conduct assessment of client 3. Renewal ratio* risks at product development stage 4. Promptness of claims settlement* 4. Conduct regular client 5. Social investment ratio satisfaction surveys 6. Coverage ratio* 5. Protect client data 7. Poverty outreach ratio 6. Transparency* 8. Rural outreach ratio 7. Audited standards and policies are aligned with the mission 9. Complaints ratio and vision of the organisation 10. Transparent sales ratio 8. Environmental policy 11. Staff retention ratio

* Also financial performance principle/indicator Report 6th International Microinsurance Conference 2010 61

Private-sector viewpoint — Another concern is about the rural Lessons learnt and poverty outreach ratios. There Commercial or private-sector insurers — Social performance measure- are large numbers of uninsured as “good corporate citizens” pursue ment as applied by front-runner poor people in urban areas and it is objectives that may generally – though organisations has worked and also difficult to apply a consistent not specifically – be encompassed helped them improve their overall definition of “poor”. by social performance indicators. organisational performance. A presentation in the session, devoted — As for an environmental policy, — Standards like the ones proposed to the private-sector perspective, while there is a strong need for could reduce costs for other reviewed some of the specific indica- “green” strategies, its link to microinsurance providers, and increase tors presented: insurance performance appears the legitimacy of introducing to be weak, although it could be — Microinsurance in some quarters social performance measurement argued that by promoting care for may be perceived “not as a move- for their portfolios. the environment over a long term, ment, but as a business”. From microinsurers would help reduce — It is difficult to define ambiguous that vantage point, client educa- damage causing climate change, indicators – and might be impos- tion expenses are re-brandable as which is increasing the frequency sible in the case of conflicting marketing expenses. Additionally, and severity of natural disasters. perspectives on, or understand- expenses have to be covered out ings of microinsurance. Rural and of premiums. High client education Such concerns notwithstanding, poverty outreach ratios need to expenses might thus be positive private-sector insurers would have be clarified. from a marketing perspective, a strong interest in taking account but can also reduce the amount of business-oriented indicators and — To be widely implemented, available for paying claims or drive principles such as “assessment of social performance measurement up premiums, counteracting any client risks in the product develop- needs to add value for companies residual social gain for the client. ment stage” – one that would help and help them to improve their Individual client value over a short design products that are demanded, microinsurance products and term cannot be measured using and bought, by clients. operations. the claims ratio, but the ratio can Questions to address be a yardstick for collective societal value over the long term. While agreeing that social performance measurement should be framed — While maximising inclusion, one in a way that helps insurers and needs to keep in mind that elimi- their channel partners design better nating exclusions does not neces- products and processes benefiting sarily increase access. Certainty the insurer as well as the insured, the that an event will or will not happen audience posed questions reflecting within a time-frame makes the general discussions in the field on event uninsurable. Accepting social indicators: a known claim is no longer a fair insurance contract between Should a “poverty outreach indicator” parties and exclusions help make really try to cover only the “very the contract fair and more afford- poor” – those who might have diffi- able. By including houses that are culty paying for food and clothing, burning, for example, an insurer let alone insurance? Or should it would price out all houses that include the also often underinsured are not. Nonetheless, client focus lower-middle-class households? – understanding the needs of the Should profit be measured as a goal, customer – is obviously a good idea or as a means to a different end? Does for product design. social performance measurement face the risk of being seen as a tax on microinsurance – holding back investments in the sector, or preventing young organisations from growing sufficiently? Report 6th International Microinsurance Conference 2010 62

Plenary 3 Academic track – Do the poor benefit from insurance?

“The academic side of the This plenary addressed three ques- and a randomised control trial (RCT). economics involved with tions: How can the impact of micro- Many situations make RCT unfeasible, microinsurance is one area insurance be measured? What is but this can be offset by the selection that will be applied when it the research agenda to measure the of an appropriate sample size, suffi- comes to deploying capital impact of microinsurance? What is ciently separable units, the implemen- to this area. While I do see the role of academics? tation of controls over the process there being an opportunity and planning ahead of time. to invest in this industry, it How can the impact of micro- is not without pitfalls and insurance be measured? Combining capital and insurance for farmers makes a difference requires extreme patience. To determine how to measure I will be quite interested to the impact of microinsurance, it is The example of Ghana involved see how this industry makes important to first clarify what one researching constraints to investment its way into the capital means by “impact”. Then, the main for farmers. Is it capital or risk aver- markets as another sector sion? And how do social networks of insurance.” question can be addressed using two examples: Ghana rainfall insurance help spread demand for technology Corey L. Galloway, Legacy and capital, and the Philippines health or innovation? Growth Partners, LLC, USA insurance. The sample taken was 563 farmers Impact should be understood in the for the 2009 growing season and context of a hypothetical comparison: 1,132 farmers for the 2010 season. how have the lives of the people To test whether they do not invest changed in a programme, compared because of capital constraints, a to how their lives would have changed capital grant was offered, and to had the programme not existed? check if it is because of risk aversion, an insurance product was provided The evaluation of impact is essential to take away some of the risks asso- to convince sceptics of the benefits of ciated with farming, applying indi- microinsurance, to attract resources vidual randomisation. Four groups and to provide a sufficient market were formed: for the first group the test of microinsurance. The following insurance product was provided free methodological steps are crucial to during the first year and marketed measuring the impact of microinsur- at six price levels during the second ance: a comparison before and after year, for the second group capital was and between recipients and non- provided and for the third insurance recipients, a randomised evaluation and capital, while the fourth was the control group.

61 — Dean Karlan, Yale University, USA. 62 — Martin Hintz, Allianz Life, Indonesia. 63 — Glenn Harrison, CEAR/Georgia State University, USA. 64 — Richard Phillips, Georgia State University, 61 62 USA.

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Takayua rainfall insurance How health insurance affects low- Research results showed that income clients Number of people insured — voluntary insurance programmes 1,695 The Philippines case analysed attract high-risk clients, with higher whether the product being mandatory usage overall despite lower take-up; Insured risks or voluntary could promote universal — access to health insurance Rainfall index insurance for maize health insurance cover, examined improved the household well-being Premium range the role of MFIs as channels of insur- in mental health; US$ 5.75 ance distribution and aimed to provide — savings went down, perhaps due evidence on the impact of health to a substitution effect; The product, Takayua (rainfall insur- insurance in the developing-country — visits to healthcare facilities ance), is index insurance to protect context. increased, particularly pregnancy- small-scale maize farmers from severe related for the non-poor; drought or excess rain, based on The method used was to provide — out-of-pocket expenditure 37 years of rainfall data and farmers’ voluntary and mandatory health increased because of incomplete conception of drought and excess rain. insurance to borrowers of Green Bank coverage; that were not enrolled with KaSAPI, A combination of capital and insur- — informal safety nets were still used, the national health insurance plan. ance made the difference: with capital even informal cash and in-kind To benefit from KaSAPI, participants and insurance farmers spent more transfer increased; were required to enrol for the entire on fertiliser, increased the proportion — access to health insurance did not duration of the loan term and the of hired labour, increased revenue trigger any increase in high-risk available premium payment options by 43% from bagged crops, culti- behaviour, with no evidence of were cash, deductions from loan and vated more acres and decreased moral hazard; savings. There was an individual the proportion of households with — the MFI’s client retention increased, randomisation in three groups: first, members missing meals, while school but client repayment worsened a group with mandatory enrolment, attendance increased. The role of for compulsory insurance, perhaps second, a group with individual social networks was important. Those because of the cash required to voluntary participation, and third, the with friends who were “lucky” and complete treatments. control group. had received a payout learnt about insurance and were likely to buy it. The problem arises when there is a good rainfall and hence no insurance Figure 21 payouts; the insured will then spread The take-up of rainfall index insurance in Ghana the word and friends would not be showed that price matters: 100 % for free insurance and interested in buying. 40 % for fair value insurance.

100 %

80 %

60 %

40 %

20 %

0 0 1 4 8 9,5 12 14 Price per acre (GH cedis) (Actuarial Fair Premium = 9.5)

Source: Karlan, Dan. Presentation “Impact of microinsurance”. 6th International Microinsurance Conference 2010 Report 6th International Microinsurance Conference 2010 64

Plenary 3 Academic track – do the poor benefit from insurance?

A conclusion to be drawn from both Box 7 Lessons learnt cases is that, in research, design and Warnings for (and about) — Comparison between before and framing matter. People can be incon- researchers. after, between recipients and sistent. The way a choice is laid out Beware of surveys measuring non-recipients, randomised evalu- determines how a choice is made. the big, visible things ation and RCT are crucial meth- A researcher therefore needs to under- odological steps to measure the stand the context in which decisions — Role for complementary data impact of microinsurance. are made. collections — The evaluation of the project Do the poor benefit from insurance? Beware of surveys bearing should be done in partnership What is the research agenda? one data point between the implementer and To find out if the poor benefit from — Role for longer-term longitudinal the researcher. insurance, and how to systematically data collection — It is necessary to address longer- design better insurance products, Beware of behaviourists bearing term questions, such as the need four themes should be taken into anomalies for social learning and longi- account in the research agenda: tudinal studies to measure the — Role for basic critical reading Risk management and insurance long-term impact on consumption skills of the literature cannot be analysed in isolation, smoothing, on incentives as the demand for insurance is a — Normative role for (artifactual) for investment and on growth whole portfolio decision. field experiments rates in household income. It is important to know how to evaluate Beware of randomistas bearing — As price matters, it is important to the welfare and benefits that the average effects analyse how to get costs down. poor are receiving from the prod- — Role for complementary — Design and framing matter. ucts. To do so, it is important to think structural analyses Understand the context in which about the nature of the insurance choices and decisions are made. product, which essentially constitutes Beware of research in intellectual a payment for uncertainty. An analysis bunkers — Encourage a sustained dialogue of the rationality of low take-up is Source: Harrison, Glenn. Presentation “Do the between researchers in several only possible through an in-depth poor benefit from insurance? What is the research fields. analysis of consumers, their risk atti- agenda?”. 6th International Microinsurance Conference 2010 — Conduct structured research tudes and expectations. It is all about programmes into consumer the distribution, not the average. It is behaviour. necessary to bring in the insurance economists for actuarial contract — Carry out laboratory experiments design, cost-effective organisational with rich students, field experi- structure, public regulation and rating, ments with the poor in rich and marketing. countries and field experiments with the poor in poor countries. While the industry may need research to prove that microinsurance is profitable, the main goal from the client’s perspective is to bring cash flow back to the low-income household after an event. A motivating factor for an insurer, and part of its business plan, may be to bring lessons from microinsurance markets back to serve low-income sectors in mainstream markets. From an investment point of view, social capital will be an important part of the microinsurance equation. There is a theoretical basis for a redistribu- tion of profit to a network or community to make the risk acceptable. Report 6th International Microinsurance Conference 2010 65

65 — Participants in parallel “The most important lesson was the session 4 discussing good number of people committed to practice in microinsurance. 66 — G. Prabhakara, IRDA, making microinsurance work effectively India (left), discusses findings for low-income households.” from the sessions. 67 — Left to right: Betty Wilkinson The conference team: Torsten Senior Finance Specialist (Microfinance), East Asia Department, Kraus, Christian Barthelt, Petra Asian Development Bank, Philippines Hinteramskogler, Martina Mayerhofer and Dirk Reinhard. 68, 69 — Interactive discussions were an integral part of parallel session 7 facilitated by the Microinsurance Network Education Working Group.

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Agenda Day 3 afternoon sessions 11 November 2010

Parallel session 13 Parallel session 14 Parallel session 15 Case studies – Health Claims handling Academic track – Contract design issues Shailabh Kumar Tara Sinha Ruth Hill General Manager, Uplift India Coordinator for Knowledge Research Fellow, IFPRI, USA Assoc., India Management, SEWA Social Flexible insurance for heteroge- Why community based health Security, India neous farmers – Results from microinsurance makes better Vimo SEWA’s cashless hospitali- a small-scale pilot in Ethiopia sense – Uplift’s mutual model sation claim settlement system Ingo Outes-Leon Jennifer Hennig Utpal Ray (Presentation held by Ruth Hill) Planning Officer, GIZ, Germany Chairman, Track 4 Infotec, India Oxford University, UK Private companies as distri- Use of technology in claims Insurance training and demand bution channels to strengthen processing for group index-based insurance micro health insurance in rural Ethiopia Dubby Mahalanobis schemes? Chief Product Officer, Discussant Akhil Behl MicroEnsure, Uganda Richard Phillips Analyst, CIRM/IFMR, India Providing service to the poor – Chair of the Risk Management Rashtriya Swasthya Bima How to meet needs and expecta- and Insurance Department, Yojana: The public-private- tions through claims servicing Georgia State University, USA partnership model Facilitator Facilitator Facilitator Dirk Reinhard Richard Leftley Jeanna Holtz Vice-Chairman, Munich Re President and CEO, Senior Grant Officer, ILO/Micro- Foundation, Germany MicroEnsure, UK insurance Innovation Facility, Switzerland

Parallel session 16 Plenary 4

Monitoring microinsurance Round table – Is there profit in

trends globally serving the underserved?

Rupalee Ruchismita Introduction Closing remarks Executive Director, CIRM, India Doug Lacey Véronique Faber Creating a national databank Principal Consultant, Quindiem Secretariat coordinator, of rural and microinsurance Consulting, South Africa Microinsurance Network, products as an online map A business case for microinsu- Luxembourg rance – Findings from a study on Vijaysekar Kalavakonda company experience Maria Elena Bidino Senior Insurance Specialist, CnSeg, Brazil World Bank, USA Discussants Global microinsurance bench- Dirk Reinhard Brandon Mathews mark database Chairman of the Conference Head of Microinsurance, Zurich Steering Committee, Facilitator Financial Services, Switzerland Vice-Chairman, Munich Re Véronique Faber Rakesh Jain Foundation, Germany Secretariat Coordinator, CFO, ICICI Lombard General Microinsurance Network, Insurance, India Luxembourg Helen Dee Chairwoman, Malayan Insurance, Philippines David Ronoh General Manager – Life, CIC, Kenya Sheilesh Devchand COO Foundation Market, Old Mutual, South Africa Facilitator Craig Churchill ILO/Microinsurance Innovation Facility, Switzerland Report 6th International Microinsurance Conference 2010 67

Parallel session 13 Case studies – Health

This session started by looking at the Uplift Mutuals, India The hospitalisation cover pays 100 % differences between health microin- of event-related expenditure in public Uplift Mutuals surance and other types of microin- facilities. Complex maternities are surance. It deserves greater focus to Number of people insured covered up to the first two live births better understand what role it can play 110,000 and there is outpatient support, to support the poor in gaining access prevention guidance and counselling, Insured risks to healthcare services, financing and, and a 24/7 doctor helpline. Pre-existing Hospitalisation, maternity, ultimately, better health. While most conditions are covered after three outpatient care insurance products cover catastrophic years of membership. There are some events of low frequency and high Premium range exclusions such as suicide attempts, severity, healthcare cover is viewed US$ 2.20 per person per year plastic surgery and addictions-related (at least from the client’s perspective) care. Uplift Mutuals is a community health as including preventive services and insurance scheme operating primarily The cost of the family-based enrol- routine out-patient care as well. in Pune and Bombay. The organisa- ment is INR 100 (US$ 2.20) per person Another way in which health micro tion currently has 110,000 members in per year. At Uplift the management insurance (HMI) can be more complex 21 separate risk pools. style is one of community owner- than other types of insurance is ship and understanding, transparent These health mutual funds allow that claims are made for services information and decision-making, urban slum dwellers and the rural consumed, not to compensate for and focus on social impact instead of poor to share the risk through saving losses. Additionally, HMI is chal- the insurance business. The scheme a small amount on the basis of “one lenging because it depends on a members validate the product for all, all for one”, so in times of third party, healthcare providers, premium, coverage and exclusions health crises a lump sum can be made whose numbers, quality and acces- and decide on claims to be paid out. available to meet hospitalisation costs sibility are often insufficient to meet and help absorb the financial shock. The challenges Uplift faces include clients’ needs. Furthermore, health- The risks are not “transferred” to an its mutuals existing in a legal vacuum care providers may have conflicting insurer, but shared under the commu- with no eligibility for a state subsidy interests (e.g. to perform revenue- nity’s responsibility. provided only to market-players and generating services that may not be the limited capacity of members medically necessary) or highly vari- to pay for services. Meanwhile, it able practice patterns which directly continues to focus on winning trust affect the viability of health insurance in the BOP (bottom of the pyramid) schemes, and must be managed. market by building relationships. The session covered three health insurance models currently being implemented.

70 — Shailabh Kumar, Uplift India Association, India. 71 —Jennifer Hennig, GIZ, Germany. 72 — Akhil Behl, CIRM/IFMR, India. 73 — Jeanna Holtz, ILO/Microinsurance Innovation Facility, Switzerland. 70 71

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Parallel session 13 Case studies – Health

RSBY – National health The scheme is funded by a 75 % Among the challenges RSBY faces are: insurance scheme, India premium payment from the central — Who receives coverage depends government, 25 % from the state RSBY, India on the BPL database – which has government, and an annual fee of been criticised as being flawed. Number of people insured INR 30 (US$ 0.66) from the beneficiary. 22.6 million families — Few checks and balances for quality The insurer, selected by the state by of healthcare. Insured risks tender, is paid the premium for each Hospitalisation household insured and evidences — Lack of financial literacy – enrolment by the issue of a smart resulting in low enrolment in many Premium range card. The smart cards, portable and parts of the country. US$ 0.66 registration fee (central and valid in all panelled hospitals any- state governments cover premiums) — Insufficient information provided where in the country, permit cashless to consumers on their rights and Rashtriya Swasthya Bima Yojana and easy-to-understand paperless entitlements. (RSBY), launched in April 2008, transactions. provides health insurance for house- — Abnormally high female hospital- RSBY has so far enrolled 23 million holds below the poverty line (BPL). isation rates in some areas (fraudu- families out of a total of 41 million lent hysterectomies?). It insures a family of five for hospital- classed as BPL families in the country. isation – up to INR 30,000 (US$ 668) a The World Bank recognises the Community Health Funds, Tanzania year. It covers 727 predefined pack- programme as involving the largest In Tanzania, employees in the formal ages including maternity and newborn use of smart cards to provide the poor sector of the economy have a part care and most diseases requiring with nationwide health insurance. of their health insurance premium hospitalisation. It also covers pre- RSBY is also noteworthy for having covered by their employers, but in the existing conditions and has no age successfully rolled out such a large- informal sector workers – targeted limit. The family is defined as the head scale social sector scheme through a by district-based community health of household, spouse and up to three public-private partnership. funds (CHFs) – have to pay the whole dependents. premium themselves (see Figure 22). The informal sector includes 20,182 cocoa producers in the Kyela district Figure 22 of Mbeya region, who are registered Model for social health protection of informal workers in Tanzania with Biolands, Africa’s largest exporter of organic cocoa working with small- holder farmers in some 130 villages. Biolands has now decided to support Income the producers’ contributions to Kyela’s CHF, passing the subsidy on Insurance scheme Insurance Private for to retailers selling its cocoa on the for civil servants scheme for profit European markets. Biolands will employees insurance also help collect contributions and schemes distribute insurance cards through its High 131 buying posts. At the same time, the Centre of Integrated Development and Research (CIDR)and GIZ have both committed to working on the challenges currently facing Kyela’s CHF. Community health funds — District-based micro health insurance schemes Low — One in every district — Supported by government

Formal public Formal private Informal

Source: Hennig, Jennifer (GIZ). Presentation “How can private companies contribute to social health protection for their informal workers?”. 6th International Microinsurance Conference 2010 Report 6th International Microinsurance Conference 2010 69

Drug shortage is one of the main For informal sector workers Lessons learnt challenges the CHFs are facing. An — Access to quality healthcare — Building trust and good relation- innovative measure agreed upon without worrying about the cost ships in the low-income market with the Ministry of Health is to use as treatment and drugs come is important, particularly for some of the CHF drug funding to free of charge, as a part of the CHF community-based insurance buy medications from retailers other membership fee is directed to schemes. than the traditional ones. Another healthcare facilities. portion of CHF funding will be used — Use of technology – such as smart to set up a member-based associa- — An overall improvement in the cards to permit paperless cashless tion, which will act to represent the quality of health services, as the transactions, for example – can purchaser and make provision for expansion of CHF services to other reduce administrative costs and full-time staffing. This will help deal economically active groups in a improve service to clients. with the challenge of the missing district puts more collective pres- — As with other types of insurance, purchaser-provider split. sure on providers. low literacy levels in the target Using private companies as distribu- For the government population must be considered to tion channels for (health) insurance overcome a lack of understanding — Private companies in the formal schemes has several advantages: of what health microinsurance is, sector take responsibility for and how to use it. For the CHF workers in the informal sector. — When a public-private partner- — Not everyone can be reached via — Companies do not need to set up ship helps extend healthcare to MFIs; private companies offer their own systems, adding to a the poor and the unorganised – the opportunity to reach a broader more fragmented risk pool, but through the national scheme in part of the population and strengthen the country’s overall India or community health funds engage with employers willing to healthcare system by using the in Tanzania – not only the insured contribute to the premium. existing CHF structure. can benefit but also the govern- — Efficient distribution process and — Best practices in CHF management ment and the private sector. reduced administration costs and drug supply can be replicated — Engaging with private companies through a private company’s throughout the system as coverage that are willing to contribute to existing system, for example, is extended to members in the insurance coverage beyond payroll Biolands’ buying posts used to informal sector. staff to their informal worker base collect premiums and distribute offers a wealth of untapped poten- cards. tial in ensuring broader healthcare — Lower costs of insurance educa- provision. tion as farmers’ regular meetings — More collaboration among the can be used to raise awareness public sector, private sector and about insurance products. civil society is needed to broaden For companies the outreach of healthcare in countries that do not have a — A healthy and productive work- universal scheme. force, as less sickness means less economic loss, more efficient — Creative solutions and partner- and economical production, and ships including alternative supply increased output. chains can help address the consistent challenge in health — By offering social protection to microinsurance to provide lower- their workforce, companies create cost drugs. a positive image while meeting their corporate social responsi- — At least in India, there may be bility. higher than expected use of health insurance for hysterectomies and other related treatments for women, which warrants further investigation and possible intervention. Report 6th International Microinsurance Conference 2010 70

Parallel session 14 Claims handling

How an insurer handles a claim and For many years, Vimo SEWA required Besides strong management and serves the claimant demonstrates how claimants to pay out of pocket at the control, the system requires an able it lives up to the promise of insur- time of hospitalisation and receive extension worker who can commu- ance. Processes and procedures being reimbursement later. This was difficult nicate with doctors and a responsive used and developed are increasingly for poorer members who lacked claim scrutiny process that quickly reflecting the customer’s needs, funds, struggled with documents decides on admissibility. Advantages expectations and capacities. This required for claims approval and had for members are reduced indebted- session presented four examples. to wait before being reimbursed. ness and immediate reimbursement. For Vimo SEWA the advantages A caring worker to cut the red tape In January 2006, Vimo SEWA intro- are greater efficiency and quality of of hospitalisation duced a Prospective Reimbursement service, which offsets the expense of or Cashless Reimbursement System Vimo SEWA the extension worker needed for the in Gujarat. Under this system, the system to function. Number of people insured member’s family has to inform Vimo 103,362 SEWA as soon as she is hospitalised. Vimo SEWA refers to this as a “modi- An extension worker from Vimo SEWA fied cashless” system. It differs from Insured risks immediately visits the hospitalised a “pure” cashless system because Life, accident, asset loss, person and confirms her eligibility. hospitals generally do not agree to be hospitalisation She also meets the doctor and gets an paid directly. In addition, members Premium range estimate of the expected expenses. are sometimes paid in more than US$ 4 to US$ 22 per year On completion of 24 hours in hospital, one instalment when they leave the the hospitalised member is reim- hospital without informing the exten- The insurance programme of the Self bursed for all the expenses incurred sion worker. Employed Women’s Association up to that point. The remaining (Vimo SEWA) began operations in 1992 In Vimo SEWA’s experience it takes expenses are paid at the time of and, since 2009, it has been registered members time – as long as a couple discharge. The extension worker as a cooperative. In September 2010, of years – to successfully move to a collects and submits the required it had 103,362 members. In addition to cashless system. In the meantime, the documents. life, accident and asset loss, it offers system itself can evolve and improve. hospitalisation insurance that is volun- This facility is available at panelled The claim rejection rate also goes tary and costs around US$ 4 per year. hospitals, chosen on the basis of down, in part because fraud and moral members’ preference and the quality hazard are reduced. The cashless and cost of care. Vimo SEWA negoti- system thus has a direct impact on ates “fair” rates with these hospitals the financial sustainability of a micro and monitors quality of care. health insurance programme.

74 — Left to right: Dubby Mahalanobis, MicroEnsure, Uganda; Dirk Reinhard, Munich Re Foundation, Germany. 75 — Tara Sinha, SEWA Social Security, India. 76 — Utpal Ray, Track 4 Infotec, India.

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Using technology to integrate the Providers are a key link in the delivery Use of smart cards and a biometric three Ps of healthcare chain. They interact with members system of managing data are critical regularly and can give feedback of in ensuring that fraud is reduced to Micro health insurers must facilitate value to both the insurer and payer. a negligible level and that insurers of relationships among care-givers, It is critical to expand the provider liabilities are notified promptly as they benefit payers and users of schemes connectivity for improved results and arise. to deliver quality services. A claims integrate all players of the health- system that starts to function only India’s national health insurance care ecosystem online in real time. at the point of loss cannot help the scheme RSBY uses a smart card with All providers must have pre-agreed insurer monitor and control the direct connectivity. It guarantees terms on conditions to be treated customer experience or the quality reliable identity management, a under the cover and the cost of each and cost of treatment. secure visual and electronic policy service rendered. This will reduce record, biometric features with Technology is important to integrate disagreements on what should have embedded photo and image of the the three Ps of the medical system – been treated and what should be policyholder’s left thumb, and a health patients, providers and payers. The charged. Capitation models should be card registering encounters and system’s efficiency is governed by the pursued to manage the more common transactions as well as medical thoroughness exercised at the insur- ailments and allow providers flexibility expenses and limits – all elements ance scheme’s inception. The care of treatment. critical for the claims settlement taken can drive information-gathering The coding of diseases is vital to an process. More than 22 million cards for activation and enrolment, card efficient claims process. Each region have been issued and over 7,600 issuance, appointment of providers in the network must standardise hospitals are online across India. and member education on how and coding and make it simple and quick. where to access care. The RSBY system also uses tech- Technology can then assist in aggre- nology for prevention purposes – for gating data, analysing costs and example storing information in recommending best practices. different languages on immunisation schedules and antenatal reminders for the prevention of maternal and foetal mortality and morbidity. This system costs less than US$ 5m and is Figure 23 cost-effective because of the number Automated, protocol-driven and standardised processing of claims of policyholders.

Claim — Rule-driven policy conditions — Automated removal of exclusions — Removal of • Prescription and bill without Underwriting proper signature and stamp filter • Drug not prescribed • Investigation not prescribed

Accounting — Balance (Sum insured + bonus) filter — Sublimit and capping calculation — Excess deduction — Balance due calculation — Drug excess billing calculation

Additional filter Medical — Disease – Drug mapping enabled by disease filter — Procedure – ICD mapping protocol database — Investigation – ICD mapping — Inadmissible medical sundries

Admissible claim

Source: Ray, Utpal. Presentation “The microinsurance health sector. Use of technology”. 6th International Microinsurance Conference 2010 Report 6th International Microinsurance Conference 2010 72

Parallel session 14 Claims handling

The automated, protocol-driven and Designing products to permit A case in point involved an insur- standardised processing of claims prompt claims payment ance company in Uganda, which had is composed of three filters: under- concluded an agency agreement MicroEnsure, an intermediary now writing, where the claims are adjudi- with MicroEnsure in 2007, and the serving the poor in nine countries, cated according to policy conditions; way it dealt with claims arising out has managed to increase the speed accounts, where the balance is calcu- of the devastating Owino market of claims payment to within 14 days lated; and medical, where diseases, fire in February 2009. MicroEnsure in Africa and Asia since 2001. Having procedures or medical interventions reported 243 claims to the insurance not only worked on best practices in are checked according to specific company. Suddenly the company claims handling on the part of insurers disease codes. switched to the investigation mode, but also on what may well be its taking one whole year to complete worst case, MicroEnsure draws a key the process. During that period the conclusion from its experience: consequences were devastating for the way products are structured in policyholders’ assets and business. terms of their wordings can ensure In addition, often they could not that the cover itself enables claims qualify for other loans. This also to be paid quickly. Claims workflow tarnished the image of microinsurance. processes can then be built to The insurance company lost a lot minimise time taken and reduce of renewal business and MicroEnsure claims rejection rates. lost the account and its credibility, A claim paid within a reasonable to the point that it ceased operating time with minimal fuss is what makes in Uganda in July 2010. the promise of insurance real for the customer. Underwriting has to be at source and not at the point of a loss, and an insurer must not hide behind exclusions.

Figure 24 Cebu – Life and funeral claims Measures introduced by MicroEnsure in the Philippines to track claims workflow and speed up settlement showed results in four months.

349 209 209 139 30 19

Documents Documents Documents Submitted to Cheque Branch told to MIAAPH validated complete underwriter Approved released

4 5 6 7 8a 9

3.7 41 334 6.3 11 35 12 MFI/Client Micro- Micro- U/W #1 Micro- Faxed notice Funeral Ensure Ensure Ensure of claim approved MFI Loss 1 2 3 8b

8.5 0.4 32 10 Client MFI Micro- U/W #2 Ensure 10

104 Claim throughput N-days measure Measure point Optional

Source: Mahalanobis, Dipankar, Pettifor, Mark. Presentation “Proactive claims servicing. Claims payment – The litmus test for microinsurance!”. 6th International Microinsurance Conference 2010 Report 6th International Microinsurance Conference 2010 73

Another case involving MicroEnsure Lessons learnt illustrates that continuous claim — Claims payment, demonstrating service monitoring is a key preventa- how the lives of poor people tive and curative method in improving are affected, is the litmus test of the image of insurance. MicroEnsure microinsurance. began operations in the Philippines in 2007. As at June 2010, it had — Underwriting-related investigation received 4,653 claims, for a total of should be done when insurance is US$ 6.6m. Of these, 90 % had reached applied for, not when a loss occurs. various insurers and 55% had been — Cashless hospitalisation in micro fully settled. Claims servicing was health insurance can work if it assessed as slow but was difficult to has strong controls and competent measure using the existing system, so field staff. new TAT (turn-around time) measures were introduced. Underwriting — Technology can integrate the considerations were simplified to three Ps of the medical system – remove the complexity of adjudica- patients, providers and payers – tion. MicroEnsure as intermediary and facilitate relationships among took responsibility for the end-to-end them. tracking of claims. Figure 24 shows — By aggregating data and coding the sample of throughput after four diseases, IT systems can help months. deliver efficient claims service – but they may be too costly for microinsurance if the programme lacks scale. — A smart card with direct connectivity can gain acceptance in a broadly based healthcare programme where members lack financial literacy. — Microinsurance clients do not understand legalese and exclusions; products should be structured in such a way that the cover itself permits early claim payment and minimises rejections. Report 6th International Microinsurance Conference 2010 74

Parallel session 15 Academic track – Contract design issues

Weather is a substantial source of Use of securities to address the The theoretical model used in the uninsured risk for rural households. heterogeneity of farmers study is a modified version of a The covariate nature of shocks makes standard neo-classical partial equi- While a standard index might be it difficult to manage this risk entirely librium model. It was developed to able to fit homogeneous farmers’ through sharing networks or the identify conditions in which weather needs, the use of one single product use of assets. Weather-index-based securities could outperform crop- is not beneficial for heterogeneous products may be a solution: they are specific weather-index-based insur- farmers. The International Food cheaper, they substantially reduce ance policies and to provide predic- Policy Research Institute (IFPRI) moral hazard and adverse selec- tions on determinants of demand. conducted a study in Ethiopia on tion, and they are more transparent. the impact of heterogeneousness of The main challenge of index-based However, the take-up of index-based farmers on take-up of index-based insurance is that the payout is not products is generally very poor. securities. It concludes that multiple related to the loss. The insured still This session considered how the weather securities are more effective bears a basis risk, which makes the take-up of index-based insurance in meeting demand than a single products less attractive. The take-up might be increased if products were index insurance policy scheme. They could be improved by differenti- better designed. accommodate different pay-offs if ating the triggers by geographical characteristics and profiles of farmers areas, which can be made as small are heterogeneous – including crop as possible (for example, in Florida type, soil characteristics and produc- weather insurance can be traded tion practices. at zip-code level). Each trigger can then be exactly tailor-made to the area The study defines different weather and best fit the local farmers’ needs. events and for each one it creates a weather security that pays a fixed payout only if the corresponding event happens, otherwise there is zero payout. Weather events are defined as different monthly rainfall inter- vals at a nearby weather station. Customers are free to buy different combinations of securities in order to insure themselves against weather events. The proposed weather securities have three characteristics – simplicity, flexibility and inclusivity – that can encourage stronger take-up rates than the ones observed for current weather-index-based insurance policies.

77 — Left to right: Ruth Hill, IFPRI, USA; Richard Phillips, Georgia State University, USA. 78 — Richard Leftley, MicroEnsure, UK.

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Better take-up within groups? Box 8 Lessons learnt Product design for a pilot study Another study, by a research team — Product design plays an important in Ethiopia which concludes that representing Oxford University, the part in increasing demand. sharing policies can solve some Ethiopian Development Research of the problems of index-based — When farmers’ characteristics Institute (EDRI) and IFPRI, tests the insurance products and generate determine how weather outcomes assumption that groups can help higher take-up: affect production, a multiple increase take-up, since they pool the weather securities approach is basis risk, have a certain level of In collaboration with Nyala Insurance, likely to be preferred to a single financial education and increase the index-based rainfall insurance insurance policy scheme. level of trust in insurance. products were introduced in Susceptibility to rainfall risk varies 17 kebeles (smallest administrative As part of a small pilot scheme in among farmers and purchases unit in Ethiopia). rural Ethiopia, the study introduced of securities are heterogeneous index-based rainfall insurance prod- The policies took the form of monthly as a result. ucts marketed to Iddir groups – pre- coupons whereby a fixed payout — The downside of a basic risk in existing local informal funeral insur- would be due if the monthly rainfall index insurance could be dealt ance societies – while at the same fell short of a particular precipitation with by varying triggers geograph- time carrying out insurance training target. ically to fit the local farmers’ exercises for farmers. One finding is Policies were calibrated using the profiles, but it may involve trade- that training farmers in the benefits historic data from the local rainfall offs with other problems such as of sharing policies in groups gener- station. availability of required data. ates additional demand for insurance. Of a total of 1,000 trained individuals Eight policies were introduced: — Insurance training exercises from 100 Iddirs, about 500 farmers increase the demand for insurance. — Two policies for each of the belonging to 25 Iddirs expressed an rainy season months: June, July, — Index-based insurance products interest in signing up for the policies. August and September. could be improved by linking them Still in progress, the study is exploring to pre-existing groups. — Severe shortfall: for a premium of group insurance as a promising ETB 100 (US$ 6), the farmer could — Group insurance may be a prom- product-design solution to low take-up receive a payment of ETB 500 ising product-design solution to rates of index-based products. Group (US$ 30) with a chance of 1/5. low take-up rates of index-based insurance can reduce the underlying products. basis risk as aggregate group losses — Very severe shortfall: for a are likely to more closely follow the premium of ETB 50 (US$ 3), the index than losses experienced by any farmer could receive a payment of single member of the group. Another ETB 500 with a chance of 1/10. important aspect of group insurance Policies could only be purchased by contracts is that the responsibility for members of pre-existing Iddirs. disbursement to individual claimants is transferred to the group. Source: Outes-Leon, Ingo. Presentation “Rainfall insurance and informal groups – Evidence from a field experiment with funeral societies in Ethiopia”. The presentation was held by Ruth Hill. 6th International Microinsurance Conference 2010 Report 6th International Microinsurance Conference 2010 76

Parallel session 16 Monitoring microinsurance trends globally

The session showcased two online Mapping microinsurance in India The risk side deals mainly with database projects to monitor agriculture and health, supplying The MIM provides both market and microinsurance trends with easily information such as agricultural risk data. CIRM developed it with the navigable and updatable information. productivity, cattle valuations and assistance of the ILO’s Microinsurance They build on previous efforts, like hospitalisation rates. On a map-based Innovation Facility. the microinsurance landscape study solution, insurers can get regional of the 100 poorest countries and the On the market side, the databank information on crop varieties, growing landscape study of Africa presented contains information on current seasons and meteorological, pest at the 2009 International Microinsur- product offerings in microinsurance – and practice-related risks, livestock ance Conference in Senegal. However, including premiums collected, claims breeds and mortality rates and, in these new database projects want experience, gender ratio and detailed March 2011, key health morbidity. to go beyond “snapshot” pictures to product data. While one goal is to Plans also include a premium calcu- monitor trends over time, increase reduce search costs for households lator for risks displayed. transparency and foster profession- or organisations seeking to link up The databank is already online, and alism in the sector. with an insurer, the databank will also first results are available. These can help insurers themselves in bench- One is India’s Microinsurance Map be used to track product launches over marking products and identifying (MIM), created by the Centre for time (with 2007 as the starting year), “best practices” that have actually Insurance and Risk Management (CIRM) premiums collected or the perform- found market acceptance. to serve as a publicly available sectoral ance of insurance programmes like data warehouse, and the other the CIRM has gathered data from a range the national health insurance scheme World Bank’s Global Microinsurance of insurers in India, combining inputs RSBY in different regions. Benchmark Database covering from insurers with that of the industry 161 providers in six countries in its associations, the regulator, MFIs, NGOs first phase. and other channel partners. The overview covers both public and private schemes and will be regionally de-aggregated and maintained over time to allow detailed analyses.

Figure 25 Screenshot of India’s Microinsurance Map (MiM) showing market and risk data, including specific crops in different regions.

Source: www.microinsurancemap.com Report 6th International Microinsurance Conference 2010 77

Taking a global reading The current datasets contain key For analysis, some of the hypothesis measures like premiums written and questions are: The Global Microinsurance Bench- claims, and allow comparisons by mark Database being developed by — If providers offer products at a product type, risk carrier, distribution the World Bank covers 161 schemes, lower price than average, is the channel and type of sales transaction formal and informal, in six countries – take-up better? (mandatory/voluntary). For example, with data collected from aggregators — Do providers have higher growth insurance companies tend to have like industry associations (in Colombia in outreach if the gross claims paid a significantly lower share of rural and Bangladesh), directly from insur- to gross premiums ratio is higher? business than other insurance carriers ance companies and delivery channels — Are products delivered by MFIs like MFIs or NGOs in Bangladesh. In (Peru and Mexico) or through mixed priced lower than the average addition, they sell higher-value prod- channels (India and the Philippines). premium and do they have a higher ucts compared to their counterparts. claims ratio? Two criteria are used to define micro- For benchmarking purposes, three — Is the value or volume of business insurance: products specifically steps are followed: higher if the product is sold by designed for low-income clients and many channels rather than only annual premiums as a portion of — Identify peer groups such as age, one? the GNI PPP (gross national income, delivery channel, institutional purchasing power parity) of less than type, premium volume, product 4 % for health, 2 % for life, and 1 % diversity and outreach. for property insurance. The objective — List the categories and define of the database is to collect, analyse criteria under peer groups and report data with no bias towards (e.g. for age: market entrant, young, any model, methodology, risk carrier, experienced). delivery channel, or product. — List financial and outreach indicators for comparison across peer groups.

Figure 26 Screenshot of the World Bank’s Global Microinsurance Benchmark Database (www.microinsurancedatabase.org)

Source: Kalavakonda, Vijaysekar. Presentation “Monitoring microinsurance trends globally. Global microinsurance database”. 6th International Microinsurance Conference 2010 Report 6th International Microinsurance Conference 2010 78

Parallel session 16 Monitoring microinsurance trends globally

The microfinance sector has benefited Lessons learnt greatly from its global web-based — An online databank can serve as information platform, the Micro- a one-stop shop allowing spatial finance Information Exchange (MiX) representation of microinsur- Market, which has standardised ance penetration data to track data on the basis of international and identify “white spaces” for accounting principles. Microinsurance focused interventions. It provides databanks being developed now can panel data and more than a one-off also demonstrate the value of data snapshot of the market. sharing and its catalytic impact on transparency in the market, enabling — A global database benefits all it to grow. actors in microinsurance, as it improves the understanding of quality and value of outreach, gaps and challenges. It has a low maintenance cost and high usability for many stakeholders. — The microinsurance industry is in a phase of rapid innovation and expansion – making data collection a difficult exercise, but even more meaningful and necessary.

79 80

79 — Rupalee Ruchismita, CIRM, India. 80 — Vijaysekar Kalavakonda, World Bank, USA. 81 — Véronique Faber, Micro insurance Network, Luxembourg. 81 Report 6th International Microinsurance Conference 2010 79

Plenary 4 Round table – Is there profit in serving the underserved?

This plenary session dealt with the A business case for microinsurance Old Mutual South Africa sells funeral financial viability of microinsurance insurance called “Burial Society Under what circumstances micro- for insurers: is there a profit to be Support Cover” through salaried insurance can be profitable for made in serving the underserved and, agents to members of burial societies traditional insurers was the key if yes, how can insurers realise this and funeral parlour schemes. It question for another study conducted profit by overcoming internal barriers formalises the insurance mechanisms by the ILO’s Microinsurance Innova- that might have held them back so far? already developed by low-income tion Facility. It covered schemes in people themselves that seek social A macro involvement in South Africa, Kenya, India and the cohesion and support in times of microinsurance Philippines – in different product trouble – based on the cultural under- categories like funeral, health and Research by the Microinsurance pinning “you are, therefore I am”. crop. While a quantitative analysis is Network shows that of the world’s The scheme made significant losses difficult – insurers are at very different 50 largest insurance companies in 2006 and 2007 because of high stages of their development – first 30 are involved in microinsurance. claims costs and the failure to achieve insights from interviews with the While the most important reason sufficient scale – the groups targeted organisations are notable. named was “to expand in new as distribution channels were smaller markets”, the second most mentioned than estimated. Old Mutual therefore was corporate social responsibility decided to improve the quality of (CSR). This points to a potential the book, which resulted in lower underlying tension in motivations – growth and a decline in the number are companies using CSR money to of policyholders, but enabled Old experiment, before investing for finan- Mutual to realise a profit for the first cial reasons? A global ranking of time in 2009. insurance companies yielded first insights into the volumes currently generated by the sector and the companies currently leading, even though lack of data could make comparisons difficult. Several companies have achieved seven-digit client numbers, with the six million Figure 27 microinsured reported by Allianz Framework for assessing the profitability being one of the highest counts so of microinsurance initiatives far. The full report was due to be published in early 2011. Profitability Creating value for shareholders

Scale Claims costs Other costs

Defining and Pricing for risk Distribution and accessing market administration costs

Valued benefits and Anti-selection and Working with groups affordability claims fraud feedback Servicing and Reinsurance, Leverage off existing and

customer satisfaction claims volatility and infrastructure covariant risk

management Incentivisation of Simplicity

distribution channels Risk Monitoring

Structure of insurer and market context

Source: Lacey, Doug. Presentation “A Business case for microinsurance”. 6th International Microinsurance Conference 2010 Report 6th International Microinsurance Conference 2010 80

Plenary 4 Round table – Is there profit in serving the underserved?

Co-operative Insurance Company In India, Industrial Credit and Invest- In most of these cases though, indica- (CIC) Kenya sells both a credit-life ment Corporation of India (ICICI) tions of early promise were not fully and a voluntary cover called Bima Lombard’s microinsurance offers realised. A stronger evolution was ya Jamii bundling accidental death to include an index-based weather needed from the initial set-up – often and disability, funeral expenses and cover and a group health plan called based on imperfect existing know- health. CIC Kenya’s target market for Manipal Arogya Suraksha, providing ledge – into working models that these includes members of saving a cashless benefit through partner achieve sufficient scale to cover costs and credit cooperatives (SACCOs) and providers. While weather insurance and make schemes financially viable. MFIs – though, with 40 % of Kenya’s is expectedly volatile in its profit- Often such an evolution involves wealth in the hands of the top 10 % ability and relies on reinsurance, the lengthy and iterative fine-tuning, and of its population, the broader market health insurance scheme has suffered repeated revisions. In several cases, holds a huge potential. While credit considerable losses with a combined partners play a key role in making life has been considerably profitable, ratio of 130 %. The two schemes have models work – also through providing covering 260,000 lives, the bundled 260,000 and 275,000 policyholders feedback during the search-and-adap- policy has required cross-subsidi- respectively, but both need to reach tation process. sation from the credit-life profits as scale to be commercially viable. The well as donor funding for the start-up weather product lacks geographical phase. The initiative, structured within spread and the health product, with the insurer at the outset, was later a targeted region, needs to increase moved into a separate business unit – enrolment. which improved results. It now covers In the Philippines, Malayan Insurance some 19,000 clients. distributes microinsurance products ranging from personal accident and fire to weather-index crop insurance. Its personal-accident scheme has three main channels with widely differing outreach: five million through pawnshops, 390,000 through rural banks, and 17,000 through NGOs and cooperatives (starting in 2009 only). The product is hugely profitable – with a stable combined ratio slightly above 50 % for the past two years.

82 — Left to right: Doug Lacey, Quindiem Consulting, South Africa; Brandon Mathews, Zurich Financial Services, Switzer- land; Rakesh Jain, ICICI Lombard General Insurance, India; Craig Churchill, ILO/Microinsurance Innovation Facility, Switzerland. 83 — Helen Dee, Malayan Insurance, Philippines. 82 83 84 — Left to right: David Ronoh, CIC, Kenya; Shailesh Devchand, Old Mutual, South Africa.

84 Report 6th International Microinsurance Conference 2010 81

The importance of having Lessons learnt a dedicated microinsurance unit — Profitability of insurance – One key issue addressed was how to and thus microinsurance – organise microinsurance activities. In varies across schemes. a number of cases, moving the micro- — Insurance has high capital insurance operations into separate requirements and start-up costs business units has helped “fix” the and the return on investment business and create a conscious focus is not immediate. Insurers face on the targeted low-income market. the task of increasing client Having dedicated underwriters and numbers and premiums to achieve marketing staff in a distinct unit has economies of scale, and learning facilitated the development and how to reduce claims and adminis- growth of the microinsurance busi- trative costs. ness without distracting from the core business units. Still, most of these — Establishing dedicated depart- units must rely on some support from ments, business units or even the parent company – be it cross- companies for microinsurance subsidies for product starts, stra- can help insurers to focus on the tegic supervision with an interest in special requirements of the busi- managing the “social value” created ness, and better meet profitability in the sector, or specific support from requirements over the long term. other business functions. — Support from central businesses Another conclusion based on experi- or group holding companies is ence is that time is required to make important to allow for starting microinsurance profitable. A few lines new schemes, or testing innova- may be profitable from the start, and tive distribution mechanisms. one of these is credit life. In others, significant expenditure needs to be incurred to establish the business and increase customer numbers. As most insurers are initially unfamiliar with the sector, microinsurance required a certain amount of “learning on the job” – about the clients, the channels required to reach them and the right approach to managing them, and the profits that can reasonably be expected. Many businesses exclude their microinsurance business from the profit expectations of the mainstream businesses or subsidise start-up phases and experiments – but normally only for a limited amount of time. In the longer term, profit expectations are similar to those in normal business lines – and meeting them a precondition for significantly expanding coverage of poor people. Report 6th International Microinsurance Conference 2010 82

Field trips

While the conference aimed to go CARD MBA offers life insurance Lessons learnt from the field trip to over the microinsurance experiences and integrated credit life and disability CARD MBA of various organisations from around insurance, including an accidental — CARD MBA not only pioneered the world, a field study the day before death cover and a motor vehicle the mutual approach to micro- gave a number of participants a first- accident hospitalisation benefit. It insurance in the Philippines, but hand look at the practice of providing has a provident fund for members was also the country’s first micro- safe and affordable products and to build up long-term savings that finance-affiliated MBA organised services by microinsurance MBAs. are paid out on retirement. As CARD and managed by women from This preview of microinsurance at MBA is a member-based organisation, low-income groups. work was provided by two field trips any surplus from the programme is co-organised by RIMANSI Organiza- re-distributed to members. — The CARD MRI family of tion for Asia and the Pacific. companies – principally CARD CARD MRI is the largest group in the Bank, CARD Inc. and CARD MBA Field trip to CARD MBA partnership programme of Philip- – are linked through products Laguna, 8 November 2010 pine Health Insurance Corporation and services; their coordination (PhilHealth) to increase member- CARD MBA improves efficiency and integrates ship in the informal sector. Called delivery of financial services. Number of members Kalusugan ay Sigurado at Abot Kaya 1.17 million sa PhilHealth Insurance (KaSAPI), — The MBA’s link to sister companies the programme is also designed to helps ensure portfolio stability, Assets help limit adverse selection through control moral hazard and adverse PHP 2.4bn (US$ 54.3m) organised groups. CARD MRI’s link selection, and reduce marketing Features with the national healthcare scheme is costs through existing delivery — Savings component a mutually beneficial way to provide networks. — Parallel offer of national health affordable micro health insurance. — CARD MBA’s experience in insurance cover Members that take up the offer receive successfully insuring the poor the so-called Ang Inyong Kalusugan Insured risks has served as a challenge to Ay Pangangalagaan ng Card (AKAP Death, disability, and a motor social development organisations Card) with which they can access both vehicle accident hospitalisation and even commercial insurance in-patient and outpatient services. benefit companies. Another product that has gained Premium acceptance among CARD MBA PHP 20 (US$ 0.45)/week members is its Package Assistance CARD MBA, based in Laguna, south In case of Disaster (PAID) plan. As a of Makati City, is a part of CARD MRI 3-in-1 package, it combines personal (Mutually Reinforcing Institutions) accident cover up to PHP 100,000 providing financial and non-financial (US$ 2,262), funeral benefits of services related to microfinance and PHP 20,000 (US$ 452) and a residen- microenterprise development. tial house reconstruction capital of PHP 10,000 (US$ 226) maximum in In 1999, CARD MBA pioneered the the event of fire and natural catastro- mutual approach to microinsurance phes such as floods, earthquakes and in the Philippines by providing life typhoons. insurance through self-help groups. It is organised and managed by women To complement the offer by CARD from low-income groups, and builds MBA, CARD founded the CARD MRI on CARD activities in microfinance. Insurance Agency (CaMIA) in 2007. 85 — A young woman proudly In September 2010, CARD MBA had a CaMIA distributes non-life products of presents her health insurance card. total of 102 staff members in its main private insurance companies through She is well covered for less than one and provincial offices, and 643 MBA the network of CARD MRI. US dollar a week. coordinators visiting microfinance The success of CARD MBA has been meetings on behalf of CARD MBA. received well internationally, and Membership reached 1.17 million in inspired the formation of RIMANSI. 2010, up from 970,000 the year before. It serves as a regional resource to promote the concept of mutual benefit associations.

85 Report 6th International Microinsurance Conference 2010 83

Field trip to Kasagana-Ka MBA The microcredits covered are for Lessons learnt from the field trip to Quezon City, 8 November 2010 15, 25 or 35 weeks. The interest rate Kasagana-KA MBA is 9 % for 15-week credits, 16 % for Kasagana-Ka MBA — Kasagana-KA MBA, registered 25-week credits and 21 % for 35-week with the Securities and Exchange Number of members credits. On expiry of the loan term, Commission in 2006 and licensed 19,305 an evaluation of the member is by the Insurance Commission in performed by the MBA’s loan officer Insured individuals 2007, targets the urban poor and on attendance, regular payments, 96,525 is the only RIMANSI partner to growing business, attitude and have started as an MBA without Assets co-signatory payments. The evalua- going through an in-house scheme PHP 35m (US$ 790,425) tion serves as the basis for setting the or the partner-agent model. amount and duration of the next loan Net income for the member. Loans are granted — It insures both members and their PHP 6m (US$ 135,500) for up to PHP 5,000 (US$ 113). Above dependents, who may be spouses Features this amount, the member must and biological or adopted children — Community-based provide security. not more than 21 years old. — Weekly payments The scheme has a savings component, — Each member contributes PHP 20 — Co-signatory guarantor which can be withdrawn in part (US$ 0.45) a week: PHP 15 pays for — Maximum amount of credit is after six months. The interest rate paid life insurance premiums while PHP 5,000 (US$ 113) on these savings is 5 %. PHP 5 goes to the member’s retire- — Savings component ment savings. Kasagana-Ka has now launched a Insured risks new health initiative: an offer to its — Life insurance benefits increase Credit life members and their families of a the longer a member keeps paying Premium complete health check-up for PHP 980 the premium. PHP 20 (US$ 0.45) / week (US$ 22). This amount can be paid — Members’ retirement savings are out of the savings of the member or Kasagana-Ka is a medium-sized returned when they reach age 65. in other ways. The benefit enables microinsurance MBA for the urban members to find out about their health poor, based in Quezon City with and take preventive measures. Indeed, members also in Caloocan City and if a member became ill and could no the Bulacan and Rizal provinces. longer work she would not be able to Kasagana-Ka MBA was founded in continue with repayment of the loan 2002 by the NGO Foundation for and premium payments, affecting Development Alternatives. It has Kasagana-Ka MBA’s sustainability. 140 employees and 17 branches in As a community-based organisa- Manila and in other provinces of tion, Kasagana-Ka MBA is owned and the Philippines. managed by members. Two member The microinsurance product offered representatives are on the executive by Kasagana-Ka MBA is a compul- board. Kasagana-Ka MBA plans to sory life insurance scheme covering open five new branches in 2011 and credits. It is a community-based extend its current schemes to non- scheme. To become a member, credit holders. The intention is to offer the applicant has to appoint a life insurance to other communities co-signatory to serve as a guarantor such as factory workers and NGOs. for payments. All members of the The participants in the field trip were community are required to make introduced to Kasagana-Ka MBA’s weekly payments equating to the claims payment process. The loan repayment instalments for the loan, officer responsible for the commu- the weekly premium and the funding nity comes to the member’s house to of savings. All members are women. check the claim. Documents needed to process the claim are a police report (in the event of an accident) and a death certificate. Payments are made within a maximum of five days of submission of the claim report. Report 6th International Microinsurance Conference 2010 84

Countries represented

Norway

Canada United Kingdom Netherlands Germany Belgium Luxembourg Switzerland France Italy

Spain USA

Mexico

Haiti

El Salvador

Nigeria Ivory Coast Ghana

Cameroon

Brazil

Bolivia

< 5 participants 5 –10 participants 10 – 50 participants > 50 participants Report 6th International Microinsurance Conference 2010 85

Mongolia

Tajikistan

Lebanon China

Jordan Pakistan

Bangladesh Taiwan India

Thailand Philippines

Sudan Cambodia Vietnam

Ethiopia Sri Lanka

Malaysia Uganda Singapore Kenya

Indonesia Papua New Tanzania Guinea

Zambia Fiji

Mozambique

Australia

South Africa Report 6th International Microinsurance Conference 2010 86

Participating organisations

Australia El Salvador India Lebanon Philippines Innovation for Poverty Leapfrog Investments Seguros Futuro Birla Institute of Commercial Insurance ABS-CBN Broadcasting Action Macquarie University Management Corp. Insurance Commission Ethiopia Luxembourg Technology ABS-CNN Insurance Institute Bangladesh ILO ADA C2L BIZ Solutions Actuarial Society of the for Asia and the Pacific Dhaka University Oromia Insurance Microinsurance Network Private Ltd Philippines (IIAP) GIZ Company S.C Calcutta Kids Malaysia Ad Jesum MBA Insurance Philippines INAFI Fiji CARE Central Bank of Malaysia Ahon SA Hirap Inc. International RADOL FijiCare Insurance CIRM/IFMR Hannover Re Asian Development Broadcasting Cup Belgium Limited DHAN Foundation Bank (ADB) Kasagana-ka MBA Mexico BRS Home Finance Company GIZ Asian Institute of Katipunan Bank-MBAI Banco Compartamos Solvay Brussels School Limited (HFC) HDFC ERGO General Management KCCDFI of Economics and UNDP Insurance Mongolia ASKI MBA LIGA ng mag Management ICICI Lombard General Capacity Development Association of Broadkaster France Insurance Company for the Microinsurance Development Malayan Insurance Bolivia Hannover Re Limited Market Financing Institutions Company Aon Bolivia S.A. ILO Iffco Tokio General Financial Regulatory in Asia and the Pacific Mapfre Insular Profin Foundation MACIF Insurance Commission Business Daily Mirror Maxicare Healthcare Paris Dauphine Brazil ILO Mongol Daatgal LLC Publishing MICRA Philippines PlaNet Guarantee Bradesco Auto/Re Cia. IRDA Prime General Insurance BusinessWorld Foundation De Seguros Germany Micro Insurance UNDP Mongolia Publishing Corp. MicroEnsure Confederation of BaFin Academy CARD MBA Microfinance Council of Mozambique Brazilian Insurance EPOS Health SEWA CARD MRI the Philippines IGS/GIZ (CNSeg) Management Swasth India Services Cebuana Lhuillier MLA-Newswatch Superintendência de Federal Ministry Pvt Ltd Netherlands Insurance Solutions MWIMPC Seguros Privados for Economic Swayam Shikshan Berende Consulting Center for Economic NBN-4 Cooperation and Prayog FMO Policy Research Pagasa ng Masang Cambodia Development (BMZ) Track 4 Infotec Nyenrode Business Chartis Philippines Pinoy Foundation, Inc. CHC MEADA Program German Insurance Uplift India Association Universiteit Insurance, Inc. Peoples Bank of Caraga GRET Association (GDV e.V) University of Groningen CLIMBS – MBA GIZ Indonesia GIZ University of Twente Cooperative Insurance Phil- Information Agency Ministry of Economy Allianz Life Hannover Re WorldGranny System of the Phil. Prudential Life and Finance Avrist Assurance KfW Philippines Insurance Co., Inc. Ministry of Health GIZ Nigeria MISEREOR Country Bankers Philamlife Seilanithih Limited Koperasi Nusantara International Centre for Munich Re Insurance Group Philippine American PT Asuransi Jiwasraya Energy Environment Cameroon Munich Re Foundation Country Bankers Life Life and General (Persero) and Development Ministry of Finance Roland Berger Strategy Insurance Corporation Insurance Pt Lippo General Consultants Norway De La Salle University Philippine Crop Canada Insurance Tbk University of Mannheim Interance Holding Denis Garand and Insurance Corporation Canadian Co-operative Italy Associates Philippine Daily Inquirer Association Ghana Pakistan IFAD Department of Finance Philippine Health Denis Garand and Donewell Life First Microinsurance UN World Food Developing Micro Insurance Corporation Associates GIZ Agency Programme insurance Project Philippine Information ID&CS National Insurance Naya Jeevan diaryongtagalog.com Agency Interance Holding Commission Ivory Coast Papua New Guinea DLXQ/DWBL Philippine Insurers and University of Guelph SIC LIFE Company ILO/UNACOOPEC Office of Insurance DWBL/LIGA NG MAG Reinsurers Association University of Manitoba Limited Jordan Commissioner Broadcasters Philippines Free Press Vanguard Life Assurance China Microfund for Women Pacific Assurance Group DWDD/Peoples Philippines News China Life Haiti Monitor/DWAD Agency Kenya China Meteorological AIC DZAR 1026 kHz Pinas Global Newspaper Association of Kenya Administration Sonshine Radio PinoyME Foundation Insurers GIZ FICCO-MBA Pioneer Insurance Surety CIC Munich Re Fortune General Pioneer Intercon ILO PICC P&C Insurance Insurance Insurance Regulatory Swiss Re GrepaLife Financial Inc. Pioneer Life Authority Unirisx GIZ Quidan Pag- International Livestock IBC-13 Inupdanay-MBA Research Institute (ILRI) INAFI JUMUIA Fund For Development National Hospital Insurance Fund Pioneer Assurance Swedish Cooperative Centre Report 6th International Microinsurance Conference 2010 87

Radyo Ng Bayan Switzerland USA Figure 28 RBAP-MABS Program AKAM Barnert Global Ltd. RBT-MBA Bamboo Finance CGAP Number of participants Reuters ETH Zurich Columbia Business by continent RIMANSI Fair Trade Insurance School SEDP MBA Initiative EA Consultants Simbag sa Emerhensya IAIS Freedom from Hunger Asin Dagdag Paseguro ILO GA Department of (SEDP)-MBA MicroInsurance Centre Insurance Sonshine Media UN Environment Georgia State University Network International Programme Finance Global Insurance (Pinas Newspaper) Initiative Consulting Sonshine Media University of St.Gallen Guy Carpenter Network International Zurich Financial Services Harvard Kennedy School (TV 39) ICS Insurance Solutions Taiwan St. Jude Multi-Purpose IFPRI Financial Supervisory Cooperative Institute of International Commission The Karis Retreat House Education Tagaytay Foundation Tajikstan Legacy Growth Partners Inc. GIZ Microfinance The Manila Times Opportunities Tanzania Publishing Corp. MicroInsurance Centre Financial Sector TSPI Development RMS Deepening Trust Corporation Spes Nova GIZ TSPI Mutual Benefit The World Bank Asia 60 % Association Thailand Thrivent Financial for Europe 16 % Urban Program for Office of Insurance Lutherans Africa 12 % Livelihood Finance Commission University of California and Training United Nations Capital at Berkeley North America 8 % Development Fund University of Missouri Central and South America 2 % Singapore USAID Oceania 2 % Allianz SE Uganda Women's World Banking Aon Benfield Asia Pte Ltd Microcare Ltd Yale University DHI Water and Uganda Insurance CFRC Environment Commission ILO Vietnam United Kingdom Moris Rasik German Cooperative Development Fund Munich Re and Raiffeisen GSMA Confederation South Africa ICMIF Ministry of Finance Cenfri LeapFrog Labs SNV – Netherlands Financial Services Board London School of Development FinMark Trust Economics Figure 29 Organisation Hollard Insurance Group MicroEnsure Type of representatives TYM Fund – Vietnam Lombard Insurance Sa-Dhan Women's Union Group University of Oxford FinScope Zambia Mutual and Federal Abt Associates Insurance Zambia New Markets, Mutual ILO/FinMark Trust and Federal Centre Insurance Brokers Old Mutual Association Quindiem Consulting Insurers’ Association SAIA Pensions and Insurance Tres Consulting Authority Savanna Insurance Spain Brokers ILO Technical Advisory Sri Lanka Group Mercy Corps Sudan Shiekan Insurance and Reinsurance

Insurance and finance industry 28 % Donor agencies, development and international organisations 21 % Microfinance and microinsurance providers 21 % Academics 8 % Government and regulatory bodies 8 % Media 7 % Others 4 % Consultants 3 % Report 6th International Microinsurance Conference 2010 88

Acronyms

ADA CGAP GIZ (former GTZ) MBA SACCO Appui au Consultative Group to Deutsche Gesellschaft Mutually Beneficial Savings and credit développement Assist the Poor für Internationale Association cooperative autonome Zusammenarbeit CHF MCPI SAIA (Luxembourg) (German Society Community health fund Microfinance Council of South African Insurance for International ADB the Philippines Inc. Association CIC Cooperation) Asian Development Cooperative Insurance MI SBI Bank GMAC Company of Kenya Microinsurance State Bank of India Garment Manufacturers AIC CICS Association of MFI SEC Alternative Insurance Claims in course of Cambodia Microfinance Institution Securities and Company (Haiti) settlement Exchange Commission GNI PPP MIA AIG (now Chartis) CIDR Gross national income, Micro Insurance SSS American International Centre of Integrated purchasing power Academy Sarva Shakti Suraksha Group (Uganda) Development and parity (India) MIM AKAP Card Research GRET Microinsurance Map SUSEP Ang Inyong Kalusugan CIRC Solidarity and Superintendência de Ay Pangangalagaan MIPSS China Insurance International Seguros Privados ng Card Microinsurance Regulatory Commission Cooperation Innovations Program TAT a2ii Association (France) CIRM/IFMR for Social Security Turn-around time Access to Insurance Centre for Insurance HDI measures Initiative MiX and Risk Management/ Human Development Microfinance TDUF process APEC Institute for Financial Index Information Exchange “Knowing what the Asia-Pacific Economic Management and HIP clients think, do, use Cooperation Research MRI Health insurance and feel” Mutually Reinforcing ASKI CLIMBS programme Institutions US$ Alalay sa Kaunlaran Inc. Co-op Life Insurance HMI United States dollar and Mutual Benefit MTA AssEF Health Microinsurance Services Money transfer Vimo SEWA Association d’Entraide IAIS agencies Insurance programme des Femmes (Benin) CMA International of the Self Employed China Meteorological MXN BASIX Association of Women’s Association Administration Mexican pesos Microfinance branch of Insurance Supervisors (India) Bharatiya Samruddhi CNSeg NGO IBNR WRSI Investment and Confederação Nacional Non-governmental Incurred but not Water Requirement Consulting Services Ltd. das Empresas de organisation reported Satisfaction Index (BASICS LTD) Seguros (Brazil) NHIP ICICI WFP BMZ CSR National Health Industrial Credit and World Food Programme Federal Ministry for Corporate social Insurance Program Investment Corporation Economic Development responsibility WRMF of India NIC and Cooperation Weather Risk DFID National Insurance (Germany) IFAD Management Facility Department for Commission Ghana International Fund BoP International ZAR for Agricultural PAID Bottom of the pyramid Development (UK) South African rand Development Package Assistance In (Population) DHI case of Disaster IFPRI BPL Danish Hydraulic International Food PHP Below the poverty line Institute Policy Research Philippines pesos BRS EDRI Institute PICC Belgian Raiffeisen Ethiopian Development ILO People’s Insurance Foundation Research Institute International Labour Corporation of China CaMIA ENEF Organization PIRA CARD MRI Insurance National Strategy for INR Philippine Insurers and Agency Financial Education Indian rupees Reinsurers Association (Brazil) CARD MBA IRDA PLIA Centre for Agriculture ETB Insurance Regulatory Philippine Life and Rural Development Ethiopian birr and Development Insurance Association Mutual Benefit FAO Authority (India) Association RCT Food and Agriculture KaSAPI Randomised control CARD MRI Organisation Kalusugan ay Sigurado trial Centre for Agriculture FMCG at Abot Kaya sa and Rural Development RIMANSI Fast-moving PhilHealth Insurance Mutually Reinforcing Risk Management consumable good Institutions KYC Solutions Inc. GDP “Know your customer” CARE ROE Gross domestic product Cooperative for LEAP Return on equity Assistance and Relief Livelihoods, Early ROSCA Everywhere, Inc. Assessment and Rotating Savings and Protection Cenfri Credit Association Centre for Financial LLC RSBY Regulation and Limited liability Rashtriya Swasthya Inclusion (South Africa) company Bima Yojana (India) Report 6th International Microinsurance Conference 2010 89

Outlook on Brazil, the host country of the 7th International Microinsurance Conference 2011

Over the past few years, the Brazilian Challenges going forward © 2011 insurance industry has grown strongly Munich Re Foundation Scope fiscal impact of special Königinstrasse 107 as a sense of transformation and tax regime 80802 München, Germany new-found prosperity has swept Letters: 80791 München, Germany across Brazil. The mainstream insur- — Develop scenarios Telephone +49 (0)89 38 91-88 88 Fax +49 (0)89 38 91-7 88 88 ance products cover about 15 % of — Undertake broader regulatory [email protected] the population, 29 million people (see impact assessment www.munichre-foundation.org Figure 30). Microinsurance has a huge Order number Review/develop subordinate potential market of nearly 130 million 302-06931 legislation to implement MI regime people and so far only 33 million Contact people have any insurance protection. — Develop parameters Dirk Reinhard [email protected] by product line However, for broader acceptance Design — Microinsurance broker regime and expansion of microinsurance, Keller Maurer Design, Munich — Microinsurance building a sound information and Lithography correspondent regime awareness base is crucial. People in Gold, Munich Brazil generally are passionate about Consider the regulation of Printed by Druckerei Fritz Kriechbaumer life and do not want to think about funeral assistance Wettersteinstrasse 12 insurance which reminds them of 82024 Taufkirchen, Germany Build a sound information base death. Changing this cultural mindset Picture credits is as big a challenge as introducing Overall, microinsurance in Brazil is in Figure 7 – People carrying a house: a special regulatory measure. Insur- its starting phase and both govern- Christer Youth Ministry of the Church of Christ in Dulangan, ance education is part of a broad ment and the industry are very inter- Digos City, Davao del Sur, programme entitled the National ested in finding solutions for the Philippines Strategy for Financial Education large number of people that still have Picture 85: Thomas Loster, (ENEF) that Brazil’s government has no access to insurance. Munich Re Foundation already approved. The first initiative began in 2009 in high schools.

Figure 30 Who is the target market?

Income > 3 minimum salaries* per person: 15 % of the population (29 million)

Income < 3 minimum salaries* MI target per person: market Approx. 67 % of the population (128 million)

Income < approx. US$ 470 per family. Entitled to financial aid from the government (Bolsa Familia). 18 % of the population (35 million)

* Minimum salary: approx. US$ 320 per month. Source: Bester, H. et al. “Microinsurance in Brazil”. Cenfri, South Africa. 2010 After all, breaking the cycle of poverty will be the true measure of success of any government, improving the lives of its people.

Cesar V. Purisima, Secretary of Finance, Philippines

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