Report 9th International Microinsurance Conference 2013 Insurance for emerging consumers

12 –14 November 2013 Jakarta, Indonesia

Edited by Zahid Qureshi and Dirk Reinhard Report 9th International Microinsurance Conference 2013

Contents

1 Acknowledgements 39 Agenda Day 2 afternoon sessions 3 Agenda Day 1 morning sessions 40 Parallel session 5 Pre-conference seminars Microinsurance in Indonesia 4 1st Consultative Forum on 42 Parallel session 6 business models, distribution and Technology their regulatory implications 45 Parallel session 7 8 Pre-conference seminar Health 1 Scientific evaluation methodology 47 Parallel session 8 11 Agenda Academic research 1 Day 1 afternoon sessions 50 Plenary 3 12 Opening and The role of microinsurance in welcome addresses achieving universal health coverage 14 Opening remarks 53 Agenda Day 3 morning sessions 16 Keynote address 54 Parallel session 9 20 Plenary 1 Failures Distribution 56 Parallel session 10 23 Agenda The business case for microinsurance Day 2 morning sessions 59 Parallel session 11 24 Plenary 2 Education The landscape of microinsurance in Asia and Oceania 62 Parallel session 12 Catastrophe risks 28 Parallel session 1 Distribution: selling 64 Parallel session 13 microinsurance profitably Takaful 31 Parallel session 2 68 Parallel session 14 Drivers of scale Life 34 Parallel session 3 71 Parallel session 15 Agriculture Health 2 36 Parallel session 4 74 Parallel session 16 Impact investment Academic research 2 77 Agenda Day 3 afternoon sessions 78 Plenary 4 Business case and client value: the magical balance 81 Conference closure 82 Field trip 84 Countries represented 86 Participating organisations 88 Acronyms

Conference documents and presentations are available online at: www.microinsuranceconference.org / 2013 Links: Munich Re Foundation www.munichre-foundation.org Microinsurance Network www.microinsurancenetwork.org Report 9th International Microinsurance Conference 2013 1

Acknowledgements

New figures on the status of The Financial Services Authority microinsurance in Asia and Oceania of Indonesia (OJK) and the Insurance were presented at the 9th International Council of Indonesia (DAI) provided Microinsurance Conference which outstanding support and guidance to took place from 12–14 November 2013 make this conference an extremely in Jakarta. The good news is that over well-attended event and a true 170 million people today have some success. We would especially like to sort of microinsurance in Asia, and the thank Commissioner of Insurance growth rate is impressive. However, Firdaus Djaelani, Muliaman D. insurance for the poor remains Hadad, Chairman of OJK Board of 1 practically unavailable in many Commissioners, and DAI Chairman countries. Billions of people still lack Kornelius Simanjuntak. It was a access to inclusive financial services – great pleasure to experience the a challenge for development introductory workshop on the day organisations, the insurance industry before the conference began, which and also the regulatory authorities was attended by an additional which, in many countries, are now 250 Indonesian experts, and most willing to take the first steps towards particularly also the launch of the creating an enabling environment for “Indonesian Grand Design for microinsurance. Microinsurance”. The conference 2 dinner was a truly special event 1 — Craig Churchill, Chairman, The conference was therefore proud and the participants also very Microinsurance Network, to launch the “1st Consultative Forum much appreciated the organisation ILO/Microinsurance Innovation on microinsurance business models, of another interesting field trip. Facility, Switzerland. risks and regulatory implications”. We would also like to express our 2 — Dirk Reinhard, In this new format, the International appreciation to Mr. Indra Situmeang Munich Re Foundation, Microinsurance Conference renews its who acted as the key contact between Germany. commitment to provide a key platform the Conference Steering Committee for discussion between regulators and and the local Indonesian organising practitioners. We would therefore like committee, and worked night and to thank the International Association day to make the event a success. of Insurance Supervisors (IAIS), the Without his outstanding support, Access to Insurance Initiative (a2ii), the conference would not have GIZ and the Microinsurance Network been possible. for their ongoing commitment to drive the discussion in the field of A conference of such magnitude regulation. needs a lot of people working behind the scenes. The local organising committee and the Munich Re Foundation conference team – Analisa Gradim Pedro, Paula Jiménez, Petra Hinteramskogler, Christian Barthelt, Torsten Kraus – did an amazing job in organising another exceptional event. A special “thank you” goes to Thomas Loster, Chairman of the Munich Re Foundation, to the Executive Director of the Microinsurance Network, Véronique Faber, and to the entire team of the secretariat of the Microinsurance Network for its great support. Report 9th International Microinsurance Conference 2013 2

Acknowledgements

We would like to especially mention The 2014 International Microinsurance This report is the summary of the this year’s great team of rapporteurs – Conference will take place in Mexico. 9th International Microinsurance Conference that took place in Jakarta, th Laura Budzyna, Shoshana Grossman- It will be the 10 event, a clear sign Indonesia on 12–14 November Crist, Heidi McGowan, Marlene of the continued importance of 2013. The conference was hosted Mueller and Saut Sagala – led by insurance for the poor as a safety by Munich Re Foundation and the Microinsurance Network with Zahid Qureshi, who volunteered to net against diverse risks and as a the support of the Indonesian take on the difficult task of gathering valuable contribution to sustainable Financial Services Authority (OJK), and documenting the key messages development. Although we have the Indonesian Insurance Council (DAI), the Deutsche Gesellschaft and lessons from the various sessions seen substantial growth, many für International Zusammenarbeit of the 2013 conference. challenges still remain, including the (GIZ) on behalf of the German extension of basic financial services Federal Ministry for Economic Our appreciation also goes to the Development and Cooperation to the billions of low-income people over 400 participants from nearly (BMZ), the Georgia State University who still lack access. Together with Center for the Economic Analysis of 60 countries, and especially to the Microinsurance Network and the Risk (CEAR), the World Bank/IFC and the 80 speakers, for sharing their the PharmAccess Foundation. The partners who have supported the knowledge and experience and presentations were made in different conference, Munich Re Foundation styles, and individual summaries making the discussions lively and will continue to play its role in in this collection of reports reflect thought-provoking. On behalf of the that difference. Readers, authors providing a discussion platform to organisers, we would like to thank or organisers may not share all help achieve the goal of inclusive opinions expressed or agree with the 18 members of the conference financial services for all. the recommendations given – which, steering committee. This event would however, reflect the rich diversity of not have been possible without their Dirk Reinhard, Vice-Chairman Munich the discussions. work in identifying suitable speakers Re Foundation, Germany, Chairman of and presentations from the almost the Conference Steering Committee 150 applications submitted during the Craig Churchill, Chairman, preparations for this conference. Microinsurance Network, and Team Leader of the ILO/Microinsurance Innovation Facility Munich, Geneva, April 2014

3 — Over 400 participants from around 60 countries attended the 9th International Microinsurance Conference.

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Agenda Day 1 morning sessions 12 November 2013

1st Consultative Forum on Pre-conference seminar – business models, distribution Scientific evaluation and their regulatory implications methodology

Firdaus Djaelani Behavioural tools for evaluating Commissioner of Insurance, insurance products OJK, Indonesia Glenn Harrison Peter van den Broeke Chair, Risk Management and Member of the Secretariat, Insurance, Georgia State IAIS, Switzerland University, USA Stefanie Zinsmeyer Project Manager, Access to Experimental methods applied Insurance Initiative, Germany to insurance demand Arman Oza Todd Swarthout CEO, VimoSEWA, India Assistant Research Professor, Georgia State University, USA Ferdinand Florendo Deputy Insurance Commissioner, Insurance Commission, Practical lessons for field The Philippines evaluations of insurance products Luc Noubissi Insurance Supervisor, Inter-African Conference on Insurance Markets (CIMA), Gabon Al-Malik Khoja Microinsurance Manager, Jubilee Life Insurance, Pakistan Israel Kamuzora Commissioner of Insurance, Tanzania Tomas Mayoralgo Programme Director, Microinsurance Mapfre, the Philippines Richard Leftley CEO, MicroEnsure, UK Jeremy Leach Director, Bankable Frontier Associates – Cenfri, South Africa Véronique Faber Executive Director, Microinsurance Network, Luxembourg Facilitator Arup Chatterjee Senior Financial Sector Specialist, Asian Development Bank, The Philippines Report 9th International Microinsurance Conference 2013 4

1st Consultative Forum on business models, distribution and their regulatory implications

The Consultative Forum was Business models with a focus The evolving business models are organised by the International on distribution associated with specific consumer Association of Insurance Supervisors protection risks to which the Setting the frame for the discussions, (IAIS) and the Microinsurance supervisors must respond. Each of Stefanie Zinsmeyer of the Access Network in collaboration with the these risks results from a number to Insurance Initiative presented Access to Insurance Initiative (A2ii) of risk drivers. The participation of emerging findings from a synthesis with the support of Munich Re multiple and new types of parties study on microinsurance business Foundation and BMZ/GIZ. in the microinsurance value chain models from 25 jurisdictions around (for example retail, utility, mobile In his welcome address, the globe focusing on the related network operators, cooperative Commissioner Firdaus Djaelani risks and regulatory implications or microfinance institutions) also from the Indonesian supervisory for supervisors1. Eight distinct leads to a number of regulatory authority, OJK, emphasised the microinsurance business models can implications. Many of these parties priority that governments, such as be defined across all the countries: are not traditionally supervised the Indonesian government, are individual sales; proxy sales force; by the insurance supervisor. The giving to the provision of broad- compulsory sales; group decision; representatives of these parties based access to insurance. Peter local self-help; auto-enrolment; that sell insurance may not have van den Broeke, representing passive sales and service-based sales. the traditional set of skills or the the Secretariat of the IAIS and a The type of intermediation drives competence of insurance brokers member of the Governing Council the classification of these business and agents. The incentives of the of the Access to Insurance Initiative, models. The distribution of distribution channel and sales people reiterated the strong focus of the microinsurance plays a crucial role in will also not necessarily be aligned IAIS on instilling regulatory practices achieving the scale required to make with those of the insurer. Moreover, and on supporting its member low-premium business viable. the insurer’s bargaining power is often jurisdictions in the application of reduced vis-à-vis new intermediaries these practices. He underlined in the distribution chain who control the importance of proportionate access to the client. This, along with approaches that serve the low-income the participation of multiple parties, segment most effectively. He sees the can increase distribution costs. It Consultative Forum as an important can also increase the risk for the platform for the exchange of reputation of the insurers. information between the IAIS and the Microinsurance Network. Lastly, the nature of the target market raises consumer protection concerns: ——The insurer is less visible to the client; ——Passive sales techniques or sales conducted by persons with reduced skills or misaligned incentives will exacerbate the risk of misselling 4 — Firdaus Djaelani, where clients have limited Commissioner of Insurance, knowledge and skills; OJK, Indonesia. ——Clients will be less aware of the fact 5 — Peter van der Broeke, that they are covered and of how to IAIS, Switzerland. submit a claim in the case of auto enrolment; ——Where clients have fewer resources for accessing consumer recourse mechanisms, independent or third 4 party recourse mechanisms are less-effective.

1 The terms “Supervisors” and “Regulators” are used interchangeably. They always refer to the authority in charge of supervising the insurance industry. 5 Report 9th International Microinsurance Conference 2013 5

Box 1 Regulatory challenges In difficult geographical settings, such as in Indonesia with its over Background and objective of the The market trends described above 17,000 islands, traditional channels Consultative Forum require supervisors to: do not allow scale and broadly based The IAIS and the Microinsurance ——Coordinate with other supervisory outreach. Cooperatives, merchandise Network have a long tradition authorities responsible for the shops, post-offices or pawn-shops are in bringing regulators, industry regulation of services such as being considered for this purpose. and other MIN members, such as telecommunications; Some providers are trying to combine development partners and academia ——Adapt intermediary entry and traditional channels with technology. together to advance inclusion policies ongoing requirements in line with One of them, Bradesco of Brazil, and regulation. Since 2006, they have new market realities; says: “Technology facilitates delivery been joining hands in drafting issue ——Find the balance between allowing through new distribution channels, papers and guidance on emerging a broader set of intermediaries and but must be carefully combined with topics and in discussing so-called RSP ensuring consumer protection and traditional distribution elements.” (Regulation, Supervision and Policy) product value. Brazil has a legal requirement that a approaches that are significant for Various regulatory responses to broker must be involved in insurance inclusive insurance markets. each identified risk can be observed sales, thus necessitating ways The Consultative Forum intends at international level. In many of reconciling the use of old and to continue the dialogue panel of cases, there may be more than one new channels. the former IAIS-MIN Joint Working appropriate response to a given risk Bradesco recognised that direct Group. The IAIS has integrated the and the response chosen will depend selling points in a low-income drafting panel into its Financial largely on the overarching regulatory community, enabled by technology Inclusion Sub-Committee. approach and other external factors. without face-to-face interaction with Public-private dialogues have Panel facilitator Arup Chatterjee of a broker, would be rejected by the proven to be an effective instrument the Asian Development Bank said that community. Traditional brokers help for inspiring regulatory action that “efficient distribution alone cannot a conservative community to trust pursues a proportionate regulatory sustain a market; effective post-sales a new product. They also facilitate approach. Proportionate regulation services need to be in place”. back-end processes. Bradesco has should foster innovation and abolish had to find the right balance between Snap-shots of the discussion barriers to market development. the use of a call centre and of brokers International dialogues are important The two panels and the plenary for providing information to clients to listen to regulators, industry and discussions between regulators from and responding to their questions or other experts who may stumble over Africa, Asia, industry representatives concerns. While the call centre allows implementation. and experts from all regions focused centralisation, brokers provide a on a wide array of issues. Here are a personal touch and build trust. It is intended to develop the few snap-shots: Consultative Forum into a permanent Technology-based intermediation dialogue format driven jointly by the Scalability is one of the key strengths has limits. It can work with personal IAIS and the MIN with the support of of technology-based distribution. accident policies, but some insurance the Access to Insurance Initiative and Distribution via mobile phones, products such as life insurance require Munich Re Foundation. for example, provides a promising face-to-face interaction. Its role should opportunity of demonstrating value not be over-estimated in mobile and penetrating the markets of phone-based distribution. potential clients who would otherwise not have actively intended to buy insurance. In this case, initial products need to be very easy to understand and claims settlement must be efficient to ensure that the first-time client has a positive experience. After establishing basic insurance literacy by testing the product, a provider might expect clients to be interested in adding products to their personal insurance portfolio. Report 9th International Microinsurance Conference 2013 6

1st Consultative Forum on business models, distribution and their regulatory implications

Effective servicing practices are Mutuals can play an important The value of a policy can be seen, required. Mobile network operators role, either as underwriters or as for example, by looking at the allow insurers to achieve scale. When distributors. They have a huge commission levels and the speed scale and technology replace client advantage due to their naturally of payment. Supervisors have an relationships, a post-sales risk arises close affiliation with the low-income obligation to check these indicators. and needs to be managed. segment. However, their scalability Supervisors should also not might be an issue, as observed Client enrolment requires a sound act in silos. Branching out often in India. technology base to cope with the requires different regulators to massive numbers and the paperless There is an increasing variety consider joint supervision at the approach. When a high number of non-financial distribution intersection of various supervisors of branches are involved, data channels. They take such forms as such as telecommunication and integrity will require the distribution intermediation through retail chains insurance. In the case of Tanzania, partner to have good systems and and shops, trade-unions, mobile the telecommunications regulator adequate skills. network providers, post offices, requires that the insurers are certified. non-banking agents or funeral A change in the power balance New types of partnerships need to service providers. not only offers advantages but be guided by clear up-front rules. also disadvantages. An increasing Innovative distribution needs effective These include a clear exit policy dominance in non-insurance parties post-sales services: distribution which can prevent failures and a providing insurance to their client without adequate models for post- potential devastating situation for base and acting as aggregator can be sales services will not advance the community served in terms of observed. The shift of power from the inclusive insurance. lack of service and eroded trust. insurer to the aggregator increases The partnership agreements with Supervisory know-how is crucial, risk. However, this effect can also aggregators provide a basis for as supervisors need to understand counterbalance the traditionally high supervisors to consider their viability the process of a new intermediation power of underwriters. and consumer protection concerns. channel in detail so as to be able to recognise the associated risks. Making the demand-side more aware and knowledgeable about their Policy approval sometimes took a duties and rights will allow effective long time when supervisors first distribution. Consumer education that began to work with microinsurance. is independent of sales is a task both However, microinsurance product for the authorities and the insurance approvals today are being processed industry alike. more rapidly.

6 — Left to right: Tomas Mayoralgo, MAPFRE, Philippines; Arman Oza, VimoSEWA, India; Richard Leftley, MicroEnsure, UK; Israel Kamuzora, Insurance Regulatory Authority, Tanzania. 7 — Left to right: Facilitator Arup Chatterjee, Asian Development Bank, Philippines, in 6 7 discussion with William Martirez, MicroEnsure, Philippines and Stefanie Zinsmeyer, A2ii, Germany. 8 — Left to right: Jeremy Leach, Bankable Frontier Associates, South Africa; Al-Malik Khoja, Jubilee Life Insurance, Pakistan; Ferdinand Florendo, Insurance Commission, Philippines; Luc Noubissi, CIMA, Gabon. 8 Report 9th International Microinsurance Conference 2013 7

Trust can only develop on the basis A clear exit strategy is imperative Lessons learnt of good experience. The distribution in partnership agreements. When ——The drive for innovation is often partner is frequently the trusted partnering with a third-party related to a disintegration of the interface for a low-income consumer. distributor, it is important to manage microinsurance value chain. This The brand of the distribution partner expectations from both parties brings more players with different is often more important and trusted. and to clearly define roles and motivations into the field. They are Paying claims quickly is an important responsibilities to avoid misaligned sometimes also under different element that instils trust. interests. In the event of the parties regulatory regimes, or not deciding to end the partnership, it is Demand is generally low, as regulated at all. crucial to proceed in a transparent populations have very little insurance manner and to inform the clients. ——Supervisors need to build their awareness. Consumers need to After all, clients’ interests need to capacities for understanding be educated about the potential of be protected to avoid damage to the the various business models insurance and about their rights entire microinsurance industry. and managing the intersection and duties. between the regulatory ambits Veronique Faber, Executive Director Crowding out by subsidised and players in the value chain. of the Microinsurance Network, government schemes is an issue in They also need to strike the right closed the Forum by calling for various countries. The opportunity balance between too much and too more transparency to promote client of scaling up commercial insurance little regulation. confidence and trust and motivate can be hindered by free premiums them in purchasing insurance. ——Distribution partners are and social programmes that increasingly dominating the compete unfairly. business in terms of driving With more players increasingly performance and representing becoming part of the microinsurance brand value to the consumer. value chain, the question arises as to ——When entering into partnerships how the intersection between them for the distribution of can be regulated efficiently. In the microinsurance products, the absence of binding regulations for an rules of engagement need to aggregator partnership, a contract be clearly defined. Innovative between all parties involved could distribution needs to consider be a tool for management of the effective servicing from the outset partnership and the potential risks to minimise the post-sales risk and involved. This contract would serve as instil trust. a guideline for obligations, duties and functions, and would outline what is ——A clear exit strategy needs to expected from each party, in particular be in place. When a product or from the claims management process. partnership is discontinued, it is important to keep clients informed and to foster trust at all times to avoid market damage for future products. Report 9th International Microinsurance Conference 2013 8

Pre-Conference Scientific evaluation seminar methodology

The Center for the Economic Analysis Evaluators of microinsurance of Risk (CEAR) at Georgia State programmes tend to focus on take-up University, USA, studies the topic and profits in order to maximise sales. of risk through diverse lenses of Because it is easy to measure, product disciplines ranging from economics take-up is often used as a proxy for and finance to psychology. In determining whether a product is particular, CEAR seeks to understand “good” or not. This can be misleading; how individuals respond to both for instance, high take-up rates could financial and non-financial risks, be due to misinformation or a soon-to- focusing on less developed countries disappear subsidy. and on poor communities within rich Measuring welfare is decidedly more countries. challenging, and thus much less To answer these complex questions, common. Welfare evaluations can CEAR employs experimental show the distributional effects of an techniques drawn from the field intervention; in other words, they of behavioural economics. In can not just assess average impact this session, CEAR outlined its but also how impact was distributed methodology and demonstrated among “winners” and “losers”. These an actual experiment with the can be used to design better insurance participants. By deepening policies. They can also assess the understanding of individuals’ cost-benefit of allocating resources decision-making processes about risk, toward this intervention against other these experiments can help answer objectives. critical questions about the demand and design of microinsurance in low-income communities.

Figure 1 Results of compensated vs. uncompensated experiments

EVloss 0.15 EVloss 0.30 EVloss 0.60

1 Load 0.8 Load 1 Load 4 Load 0.8 Load 1 Load 4 Load 0.8 Load 1 Load 4

* * 0.8 * * * * *

0.6

0.4

0.2 p = 0.01 p = 0.1 p = 0.01 p = 0.1 p = 0.01 p = 0.1 p = 0.01 p = 0.1 p = 0.01 p = 0.1 p = 0.01 p = 0.1 p = 0.01 p = 0.1 p = 0.01 p = 0.1 p = 0.01 p = 0.1 0

Real *Significant difference at the Hypothetical Five per cent level using a Slovic replication two-sided McNemar’s test

Source: Swarthout, J. Todd. Presentation “An Introduction to Experimental Economics and Insurance Experiments.” 9th International Microinsurance Conference 2013. Report 9th International Microinsurance Conference 2013 9

Both types of evaluation rely on a Subjective beliefs around risk, Behavioural experiments can crucial insight: how do people make uncertainty and ambiguity are the help answer questions about decisions about risk management third major driver of decision-making. these decision-making factors. An and insurance? Three major factors Do clients believe bad things will experiment results in much less bias influence this thinking process: happen to them? Are beliefs revised than approaching the same factors irrationally; for instance, do clients with questions in a hypothetical Risk preferences describe an drop out of a scheme because they do survey. Both lab and field experiments individual’s willingness to take not receive a benefit in the first year? can uncover risk and time preferences risk. This may be influenced by (And if initial beliefs about the payout and beliefs. an aversion to the variability of were false, is take-up a good thing?) outcomes (diminishing marginal As techniques have grown more Do they trust that the insurer will utility), the belief that bad outcomes sophisticated, experimental honour the contract? are more likely than they are in reality economics has achieved acceptance (probability pessimism), and the Answering these questions helps and popularity over the last few willingness to take irrational measures practitioners understand demand decades. Economic experiments to avoid a small loss (loss aversion). and take-up, improve products and are used for a variety of purposes: improve client education. They can to test and refine theories, to elicit Time preferences refer to an also help explain why people might preferences or beliefs, to model individual’s or a household’s level of choose informal risk-management market performance or rational impatience: is a person willing to pay alternatives over microinsurance behaviour, and to teach. a premium now for a benefit that will products, and how the products might come later? Generally, impatience Lab and field experiments are be adapted to incorporate the best is high in poor communities, as two complementary techniques aspects of these other mechanisms. people value the present value of of behavioural economists. Lab premium highly in comparison to the experiments are inexpensive discounted future benefits. If time and avoid the complications and preferences are negatively affecting influences of the field. However, they take-up, spreading out premium do not replace field experiments payments can help mitigate this factor. but rather inform them. Later, a field experiment replicates the core elements but adapts the process to a new context. A lab experiment should be judged by its impact on understanding, not strict adherence to the field or model.

9 — Glenn Harrison, CEAR Georgia State University, USA. 10 — Todd Swarthout, Georgia State University, USA.

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Pre-Conference seminar — Scientific evaluation methodology

Lab experiments are most effective Box 2 when participants are compensated. As part of the seminar, all participants The type and level of compensation took part in an experiment. should adhere to three conditions: (1) Non-satiation (more reward is Firstly, they took a short quiz to better); (2) Saliency (there are pay-off “earn” money. The number of correct differences depending on alternative answers determined the amount of choices); and (3) Dominance (the money they had at the starting point. rewards dominate the costs of Secondly, they were given six participation). scenarios that varied by probability of For example, an oft-cited study loss, the amount of loss and the cost from 1977 found that people were of the premium. For each scenario, more willing to buy insurance as they chose whether or not to buy the probability of loss increased insurance. (holding the expected value Thirdly, one participant was constant). However, rather than being randomly selected to act out one of compensated with salient financial the six scenarios. A dice roll (1–100) rewards, participants were awarded determined whether the loss took hypothetical “points”. place or not. The participant then The Georgia State team conducted received cash, minus the premium (if the same experiment but replaced the choice was to buy the insurance) “points” with monetary rewards. or the loss (if the choice was not to Using this methodology, it got the buy and the loss occurred). opposite findings: as the probability of risk increases, take-up decreases (holding expected value constant). Compensation influences are clearly the result.

Lessons learnt ——Measuring take-up is easy but insufficient, because it (1) ignores welfare effects and (2) masks the decision-making process underlying insurance purchases. ——Three major factors underlie the evaluation of insurance decisions: risk preferences, time preferences, and subjective beliefs. ——Insurance is just one risk management strategy – it must be assessed in relation to existing tools. ——Compensation is crucial to accurately measuring economic behaviour. Compensation should be high and should vary based on decisions and chance. ——Lab and field experiments are complementary – the former can inform the latter. Report 9th International Microinsurance Conference 2013 11

Agenda Day 1 afternoon sessions 12 November 2013

Opening Plenary 1 Welcome addresses Distribution Kornelius Simanjuntak Michael Mandlenkhosi Shezi Chairman, DAI, Indonesia Managing Director, Hollard Life Assurance Company, Firdaus Djaelani South Africa Commissioner of Insurance. Thomas Keller OJK, Indonesia Finance Director, Nestlé, Thomas Loster Indonesia Chairman, Munich Re Eliza Kücükaslan Foundation, Germany Milvik AB (Bima), Sweden Craig Churchill Facilitator Chairman, Microinsurance Brandon Mathews Network, ILO/Microinsurance Managing Director, StoneStep, Innovation Facility, Switzerland Switzerland Keynote Muliaman Hadad Chairman of OJK Board of Commissioners, Indonesia Report 9th International Microinsurance Conference 2013 12

Opening and welcome addresses

In an apparent sign of upward mobility “Are all these motorbikes Two major priorities are emerging: for the low-income segment, 1,100 insured?” was what many of the the creation of interest among the motorbikes and 300 cars are added overseas delegates wondered target population, which lacks an to the streets of Jakarta every day, as they got together in Jakarta understanding of insurance, and the aggravating the massive traffic jams on 12–14 November for the deployment of distribution channels visitors find on their way from the 9th International Microinsurance that could cost-effectively serve airport and elsewhere. Conference. “Not really,” was the low-income households spread across answer they got, “but the government the country’s more than 17,000 islands. The proliferation of motorbikes also has created a third-party insurance reflects a burgeoning middle class. Kornelius Simanjuntak, Chairman, programme that only covers bodily A family of four may start with a car DAI, said, as he welcomed the injuries and is funded by a levy on but, to preserve mobility on roads on participants, that the conference vehicle registration fees.” And so which the average speed of cars is was being held at an opportune time the next thought was unavoidable: estimated to decline from the current for Indonesia, just as a roadmap for “Wouldn’t this be a ready and growing 20 km an hour to 5 km an hour in the microinsurance was unfolding. “It market for a micro auto product that next ten years, the family soon adds provided a rare chance to learn from supplements the mandatory cover?” four motorbikes; one per person. All industry players from other parts of told, Indonesia has some 80 million The timing of a question like that the world and to think about how best motorbikes on the roads. was certainly right. Just the month to move forward with our own plans.” before, Otoritas Jasa Keuangan (OJK), Indonesia’s Financial Services Authority, had unveiled a Grand Design of Microinsurance in concert with Dewan Asuransi Indonesia (DAI), the Insurance Council of Indonesia representing industry players. The Grand Design is expected to help develop and introduce a regulatory framework as well as microinsurance products across Indonesia by 2016. A Microinsurance Task Force has completed a preliminary assessment of the supply and demand situation and plans further research and analysis in 2014.

11 — Left to right: Kornelius Simanjuntak, Chairman, DAI, Indonesia; Thomas Loster, Chairman, Munich Re Foundation, Germany; Firdaus Djaelani, Commissioner of Insurance, OJK, Indonesia; Muliaman Hadad, Chairman of OJK Board of Commissioners, Indonesia; Craig Churchill, Chairman, Microinsurance Network / ILO/Microinsurance Innovation Facility, Switzerland.

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In Indonesia, it has been important The insurance industry in Indonesia “The International Microinsurance to learn and think. Dr. Sukarno, has experienced remarkable Conference has grown substantially Indonesia’s founding president growth in the last five years, Mr. since 2005, when the first one (1945–67), said in a speech in 1961: Djaelani said, with gross premiums was held in Munich attracting 90 “Learning without thinking is useless, rising by 21% annually. Yet overall participants. This year 400 are taking but thinking without learning is penetration at 2.02% is still low. part from a record 60 countries.” dangerous.” And, as the Landscape Study points Thomas Loster, Chairman, Munich Re out, penetration for microinsurance Mr. Simanjuntak noted that with over Foundation, Germany is even lower at 0.56%. Similar to 400 delegates, representing more other emerging countries, Indonesia Thomas Loster, Chairman of Munich than 60 countries, the conference has a low-income population that is Re Foundation, said that this is the reflected a great interest on the part underserved with formal insurance. third time that the International of the participating countries to share Microinsurance can produce a more Microinsurance Conference is knowledge and experiences. inclusive insurance market. being held in Asia (it was held in “This conference is an opportunity for the Philippines in 2011 and in India Mr. Djaelani said that the Financial us in Indonesia to learn from industry in 2007). “It is exciting to be back Services Authority has undertaken players from other parts of the world in a region that is so advanced in a wide set of activities to promote and think about how best to further microinsurance. In Asia, more than microinsurance growth, ranging develop our own microinsurance 170 million people have access to from meetings with key stakeholders program, ultimately better serving microinsurance, and social protection to addressing regulation. “We do low-income people.” schemes exist for over 1.6 billion understand that many steps still have people. It is possible to reach a Kornelius Simanjuntak: Chairman, to be taken further in order to make large scale when the government DAI, Indonesia microinsurance work in Indonesia. We is involved.” need to enact regulation, to conduct Firdaus Djaelani, Commissioner of a national awareness campaign, and Mr. Loster noted that the importance Insurance, OJK, said the conference to improve the capacity of insurance of the International Microinsurance for Indonesia was taking place at players as well as the regulator.” Conference has grown substantially “a perfect time”, coinciding with its over the years. “This year, not only agenda to accelerate the development “Indonesia must undertake a national are a record number of countries of microinsurance in the country. awareness campaign and enact represented, but 25% of the a regulatory framework to take participants are from the insurance microinsurance further.” industry. Their participation shows a Firdaus Djaelani, Commissioner of clear commitment from the industry Insurance, OJK, Indonesia to do what they do best – provide protection against specific risks, where and when it is needed.” Report 9th International Microinsurance Conference 2013 14

Opening remarks Craig Churchill, Chairman, Microinsurance Network

As I welcome you to the 9th Annual With more than 250 members from Indeed, I am constantly surprised by Microinsurance Conference, I want to 60 organisations, the Microinsurance the ways in which insurance can help thank our gracious hosts, Indonesia’s Network generates the synergies of people. Just last week there was an Financial Services Authority (OJK) skill sets and linkages needed for a article in the Economist looking at the and Insurance Council (DAI). They back-to-basics campaign to make issue of girls’ education2. It compares have allowed us to experience and insurance relevant to the poor. rainfall data to school attendance in appreciate this lovely country, a Uganda over more than 20 years and Craig Churchill: Chairman, country that can boast some exciting shows that a 15% decrease in rainfall Microinsurance Network, ILO/ developments in the promotion causes a 5% drop in attendance Microinsurance Innovation Facility, of better insurance services for for 7th grade girls, but not for boys. Switzerland more low-income households. We The logic is that if the household appreciate their showcasing these By shining a spotlight on the knows that their income will be lower accomplishments, and for allowing vulnerability of this target group, we because of the poor rains, the girls, others from across the globe to learn are contributing to the emergence of who, if educated, are presumed to from their experiences. a range of micro, meso and macro have a lower earning potential in the insurance offerings to break the cycle future than the boys, are kept home The Microinsurance Network, with of poverty. to look after younger siblings and take its more than 250 members from care of household responsibilities over 60 organisations, is proud I understand that some insurance while the mother seeks additional to co-sponsor this event with companies became involved in income-generating opportunities. the Munich Re Foundation. The microinsurance after the tsunami on But the boys stay in school. Of course, Network’s strength is its diversity, Boxing Day 2004, another horrific one of the recommendations of the with insurance companies and NGOs, natural disaster in Asia, which resulted article was to promote greater access international agencies and technology in minimal claims for the insurance to weather insurance to improve companies, academics and actuaries industry because the tsunami school attendance for girls. all working together to explore ways primarily devastated low-income of improving the risk management communities that were underinsured. But the article went on to say that this options for those who need this help I would like to believe that because was not a new problem. Apparently, the most. By bringing together the of the efforts of this microinsurance in Victorian England, when working varied backgrounds and skill sets of community in the intervening years, class households experienced a its members, the Network is able to many Filipinos suffering from the drop in income, it was the girls who generate the synergies and linkages effects of this typhoon will receive at suffered the consequences by eating needed to create new approaches to least some solace from an insurance less. The article goes on to say, and protecting the world’s poor. benefit covering lost assets and loved I quote, “This situation gradually ones. I doubt insurance will benefit improved through the growing use The importance of insurance is made the majority of those affected by the of insurance schemes provided by clearly evident by the typhoon that typhoon, but hopefully thousands friendly societies to help smooth ravaged the Philippines this weekend, more have some coverage than out consumption.” leaving behind a wake of death and would have had just a few years ago. destruction from one of the worst Indeed, microinsurance is not new, I believe we are making progress, but natural disasters in Asia in recent it is just a way of getting insurance there remains much more to be done. decades. While you might argue that back to its roots. Microinsurance is for catastrophes such as this, one While natural disasters are the a back-to-basics campaign for the needs macro insurance, not micro, I most blatant example of the need insurance industry, so it can again contend that they are in fact intimately for insurance, this conference will become relevant to the people who related. I believe that our efforts to cover a full range of ways in which need it the most. promote better risk management insurance can benefit the poor, solutions for the world’s poor include including sessions on catastrophe diverse insurance interventions at and agriculture insurance, several the micro and meso levels that ease sessions on health insurance, and one the burden on reinsurance at the each on life and takaful insurance. macro level. A number of the academic sessions also delve into this area of impact, assessing whether low-income households actually benefit from insurance.

2 “When education dries up: New research hints at a better method to ensure girls in Africa stay in school”, The Economist, 2 November 2013 Report 9th International Microinsurance Conference 2013 15

The insurance industry has in this session will put to rest once assesses the viability or profitability of tremendous potential to support and for all any doubts about the insurance for providers. Of particular equitable economic development viability of microinsurance. I suspect interest is the identification of the in emerging markets, but I would the presenters will show that potential overlap, or the magical argue that it isn’t living up to its microinsurance isn’t easy and isn’t balance, where efforts to enhance potential. We need to dramatically always successful, but in general, if value also improve viability and expand access to better insurance organisations are committed to the vice versa. services to build safety nets market and know what they are doing, The extension of insurance to new and enhance the resilience of if they are willing to stick with it and markets represents a tremendous low-income communities. And the improve their services over time, they opportunity, and a tremendous development impact of insurance can indeed succeed. responsibility. Formal insurance isn’t just seen at the household One of the keys to success is the ability does not come naturally to persons level but also within the economy to collaborate effectively with other who have never had it before. as a whole. By managing and organisations that bring different Consequently, it is absolutely critical diversifying risks, insurance supports skills, assets and motivations. that when we do get an insurance entrepreneurs in making higher-risk Successful partnerships require policy into their hands for the first and higher-return investments, thus mutually beneficial arrangements time, even if it comes via an SMS, that stimulating growth and bolstering where all parties win, where the whole they have a positive experience with economic development. is greater than the sum of its parts. To the product and its benefits. Now, I am not advocating that the that end, the sessions on technology, This reminds me of an old saying, insurance industry support economic distribution and scale will illustrate a “Needing insurance is like needing a development out of goodwill or out number of valuable insights. parachute. If it isn´t there the first time, of some sort of social responsibility. But scratching a bit below the surface chances are you won´t be needing Quite the contrary, I believe that there of the business case, one also finds it again.” are great business opportunities in different results for different business the low-income market for insurance That is to say, if they do not have a lines, with agriculture and health companies if they can figure out how positive experience with insurance, insurance being less profitable on to make themselves relevant. Not only then we may have muddied the a purely market basis, which opens is microinsurance an opportunity for waters and it may take years, the door to a conversation about the insurers to access and establish new perhaps even a generation to have potential role for subsidies and public- markets, but the innovations required another opportunity. This requires a private partnerships. to serve these markets can have a coordinated effort to ensure that this corresponding positive impact on The issue of subsidies will be tackled new market witnesses the benefits their core business. and debated in one of the health that insurance brings. The objective sessions, and the plenary at the end is to create a culture of insurance so To deal with huge volumes of small of the day tomorrow will look at the that low-income households trust the premium insurance, it requires new relationship between microinsurance promise of the insurers and naturally business models that are robust and universal health coverage. This see insurance as part of their risk and efficient, often leveraging new is a somewhat controversial topic, management toolkit. technologies and streamlining but hopefully the session will be processes. We are now beginning I believe in the power of insurance able to illustrate how the efforts of to see companies that have success to change people’s lives, to protect community groups, NGOs, health with these new approaches and their health and their assets, and to mutuals and insurance companies then make similar improvements give them peace of mind to make to provide health insurance to to their mainstream operations investments for the future. Through low-income families can not only as well. I believe several sessions our discussions over the next two and co-exist with, but also reinforce will highlight the experiences of a half days, we can hopefully make and enhance the effectiveness innovative insurance companies a small contribution to enhancing of government efforts to provide that have successfully waded the availability of quality insurance universal health care. into the unchartered waters of services for the working poor, which low-income markets. While advertising the conference will also benefit their communities content, let me also put in a plug and their countries, and play a To that effect, there will be an for the plenary on Day 3 which pivotal role in delivering the promise interesting session on Day 3 of the synthesises some of the key findings of microinsurance. conference that will analyse the of research on two fronts: one stream business case for microinsurance. that analyses whether low-income Hopefully, the evidence presented households actually benefit from insurance, which we refer to as client value; and another stream that Report 9th International Microinsurance Conference 2013 16

Keynote address Muliaman Hadad, Chairman of OJK Board of Commissioners, Indonesia

This 9th International Microinsurance Opportunities and critical issues Product awareness and consumer Conference is an excellent forum protection, which are critical for trust In Indonesia, we recognise that some for accelerating the development of building. They are a pre-requisite insurance players have started to microinsurance not only in Indonesia for financial inclusion, including provide microinsurance. In addition but worldwide as well. Through microinsurance. Poor knowledge of to this, the Financial Services sharing valuable experiences in diverse insurance products, including Authority of Indonesia (OJK) has a both microinsurance challenges and how the products work and their likely strong commitment to supporting innovations, participants will gain costs, may prevent individuals from the development of microinsurance broader knowledge of microinsurance making full use of existing insurance as part of the strategy on financial and how it works in different market products appropriately. Consumer inclusion. situations, from product innovation awareness is about building trust. The to business process and distribution. As we move forward in developing higher the customers’ knowledge of For regulators and supervisors, the microinsurance and unfolding its microinsurance products, the more conference offers the opportunity potential in the national economy, they will trust in the use or purchase of to build greater understanding of at least five critical issues should be microinsurance products. supportive regulation and supervisory considered: Low levels of awareness about approaches. Product design, ensuring simple existing regulation and consumer The role of microinsurance and client-driven design. Products protection may result in a lack of should be valuable (meeting clients’ confidence in the financial services Many academic papers have indicated needs), accessible and efficient. The provider and reduce the demand for the potential impact of microinsurance application of advanced technology financial products. The promotion on insurance markets, in particular is necessary to support these of microinsurance should therefore those of emerging economies. requirements. Some microinsurance include financial literacy programmes In these economies, low-income products are complementary and to address demand-side barriers and people represent a large portion of integrated into other financial help individuals to access and use the population, so an increase in products, such as savings or credit- appropriate financial products. insurance products for them stands to related insurance. Microinsurance have broader significant impacts. Availability of affordable product design should therefore microinsurance products, without It is of particular importance to view consider other financial products to compromising consumer protection. the development of microinsurance serve clients’ needs even further. This should be the key success factor within broader national strategies for Another aspect of product design to for microinsurance development. alleviating poverty and improving be considered is the availability of In many countries, low-income quality of life, especially for data collection features (database people live in communities spread low-income people. Usually, they do building). Data should be available far and wide so that the distribution not have the capabilities to respond for tracking, retrieval and analysis to of insurance products through to shocks such as natural disasters or allow prompt adjustment of pricing traditional delivery channels, such the death of a breadwinner, so that and the product features. as insurance agents, could lead to their protection against these events high costs. This in turn could lead is critical. to high insurance premiums, which Microinsurance further stands to are a barrier on the demand side. improve the productivity of their Therefore, innovations in products, communities. For example, increased delivery and operations are important access to banking and other funding to make microinsurance products not sources allows individuals to only available in the market but also increase their business capacity. It affordable for low-income people. is for this reason that the potential However, insurance premiums role of microinsurance has attracted must be calculated with a clear interest from market players as consideration of the risk, and even well as multilateral organisations, from the start, they must cover the non-governmental organisations and costs of expected claims. development agencies. Report 9th International Microinsurance Conference 2013 17

Claims services, without sacrificing prudential aspects and a necessary level of controls. Claim settlement processes should be as simple and straightforward as possible. Complex claims procedures will only frustrate legitimate beneficiaries. They can make customers reluctant to buy microinsurance products. The whole process of settling claims has to be efficient and simple for beneficiaries while still maintaining the appropriate level of control. I believe that the speed at which claims are paid is a key competitive advantage for microinsurers. Integration of microinsurance development programmes within a broader financial inclusion strategy, where social security, 12 12 — Muliaman Hadad, natural disasters management and Chairman of OJK Board of microentrepreneurship are integrated Commissioners, Indonesia to promote financial inclusion and empower the low-income population. Microinsurance should be complementary to and conducted in the same platform as these empowerment programmes. Moreover, these social programmes could also be used as a vehicle to promote microinsurance. For this reason, effective coordination among key stakeholders should be in place. All in all, the development of microinsurance is not only the responsibility of the insurance regulators, but also of all the stakeholders. Such a mission will be successful as long as all stakeholders concurrently give adequate attention to this work in their respective fields. In closing, I would like to convey my high hopes of the fruits of this conference. I understand that there is a full agenda for this three-day conference and I wish you every success in these deliberations. Report 9th International Microinsurance Conference 2013 18

13

14 Workshop on introduction and pricing for microinsurance

13 — One day before the 9th International Microinsurance Conference, OJK hosted a workshop that provided an introduction 15 on microinsurance and actuarial pricing. Moch Muchlasin, Directorate of Sharia Non-Bank Financial Institutions, OJK and Chairman of the Task Force on Indonesia Microinsurance Development, “Microinsurance continues to be an ever evolving presented the Indonesian “Grand Design of Indonesia Microinsurance”, field embracing innovation in both product design a framework for the next steps in and distribution. For me the biggest ‘take away’ microinsurance of the local market. is that microinsurance is not just about finding 14 — Nearly 250 insurance experts appropriate and affordable premiums and cover, from Indonesia participated in the but is about offering good value for money to workshop. low-income people for any insurance products they purchase — finding the magical balance 15 — Left to right: Nigel Bowman, independent actuarial combining the business case for microinsurance consultant, South Africa; SarahJane with client value.” Phelan, ILO/Microinsurance Facility, Lemmy Manje, ILO/FinMark Trust, Zambia Burkina Faso; Amar Mehta, Milliman, Indonesia. Report 9th International Microinsurance Conference 2013 19

“Fantastic to see evolution of schemes, learnings and the greater availability of evidence of client value and reflection - makes for more honest and realistic conversations.” Aparna Dalal, Consultant at the ILO, USA

Press conference

16 — Left to right: Arman Oza, CEO, National Insurance VimoSEWA Cooperative Ltd. India; Craig Churchill, Chairman, ILO/ Microinsurance Innovation Facility, Switzerland; Kornelius Simanjuntak, Chairman, DAI, Indonesia; Firdaus Djaelani, Commissioner of Insurance OJK, Indonesia; Dirk Reinhard, Munich Re Foundation, Germany. 17 — Around 50 journalists participated in the press conference, here in an interview with the Commissioner of Insurance Firdaus Djaelani. 16

17

18 — Indra Catarya Situmeang, representative of DAI at the Conference Steering Committee and outstanding supporter of the conference organisers. 19 — Munich Re Foundation’s organisation team. Left to right: Chona Habibi, Indonesia Life Insurance Association, Indonesia, Dirk Reinhard, Analisa 18 19 Gradim Pedro, Christian Barthelt, Petra Hinteramskogler, Torsten Kraus. 20 — The exhibition area provided a space for organisations (here the Microinsurance Centre) to present their work and interact with participants. 21 — Participants in parallel session 11 (Education) working 20 21 on the instructions of a game developed by IRI to explain index insurance to farmers. Report 9th International Microinsurance Conference 2013 20

Plenary 1 Distribution

This plenary discussed the distribution Emerging consumers share many Nestle regards emerging consumers of small-scale products and strategies characteristics, beginning with income as those who have risen above to reach the rapidly rising numbers and vulnerability and stretching into subsistence levels and can exercise of emerging consumers in countries access to services and aspirations consumer choice. These consumers such as India, China, Indonesia and for the household. Nonetheless, the want value for money – a good price the Philippines. group is so large that it cannot be too, but extra value. considered as entirely homogeneous. The panel started the discussion by What matters, in Nestlé’s experience, Some people in the group might lack defining “the emerging consumer”. is delivering high quality in the right formal education and have no access Although the definition varies with sizes and locations for convenient to financial services while others may each country’s characteristics, access: emerging consumers work as school teachers and already emerging consumers in general can may want to buy products today have a bank account but no insurance; be categorised as those who can for use today. Nestlé has tailored “one size does not fit all.” Product earn at least US$ 200 per month, its products to meet consumer segmentation is essential, as is the whether they are in formal or informal preferences and purchasing provision of choices to attract wider occupation. By that token, Indonesia power, helping them manage their groups of consumers. has at least 20 million fast-emerging cash flow. Nestle believes that consumers. Tips from the food industry educating the sales force is the key to educating the end-consumer. Nestle has been in Indonesia for 40 Success in dealing with emerging years. It sells its products through two consumers has required an ability million outlets here using 4,000 direct/ to deal with emerging retailers and indirect and 150 direct distributors. emerging distributors. Product categories range from dairy, infant nutrition and health care to confectionary, coffee, beverages and breakfast cereals. Indonesia is one of Nestle’s larger markets and even still fully one-third of all revenue there is earned on products that retail at US$ 0.10 per unit or less.

Figure 2 Integrated value chain of Nestle

Manu- Sales and Farmer Retail Consumer facturing Marketing

Source: Keller, Thomas. Presentation “Nestle Indonesia.” 9th International Microinsurance Conference 2013. Report 9th International Microinsurance Conference 2013 21

To keep products affordable, Nestle Using the distribution channel to BIMA claims to keep customers optimises each step in the value chain keep customers engaged by researching the product – “from the farm to the fork.” Supply impact. Customer feedback on the In the developing countries of Asia chain management is the key to cost- existing product and service is used to and Africa, mobile technology has effective distribution – creating shared design new products. Prompt after- mass appeal and figures prominently value among different stakeholders, sales and claims service is also viewed in microinsurance distribution to from farmers to end-consumers (see as critical. In mobile distribution there emerging consumers. A recent Figure 2). is no room for a long-claim-form service company supporting growth requirement. Nestle always prioritises the needs of in the channel is BIMA, which insures society and integrates environmental low-income people in partnership A low-cost agency force for and social causes in its core with mobile network providers affordable products businesses as well as its charitable (see Figure 3) in seven countries: Hollard (South Africa) is a composite and research efforts. In just one Ghana, Tanzania, Senegal, Mauritius, insurer with six million policyholders example of a partnership with HIVOS Bangladesh, Sri Lanka and Indonesia. and gross premiums of US$ 1.5 billion. (Humanist Institute for Cooperation) In Ghana, it teamed up with operator Its involvement in microinsurance – a Dutch development organisation Tigo and insurer Express Life to is marked by significant low-cost that supports rural innovations – offer insurance free of charge to agency experience across a number of Nestle provides biogas digesters for mobile phone users. To qualify, channels: retail, remote and full-field dairy farmers to mitigate pollution customers must meet a monthly fulfilment, credit-linked, funeral home, through renewable energy. airtime requirement. They can church, branch and sport affinity. choose to double the free coverage by paying a nominal premium. The insurance offer is of interest to mobile operators because it helps them retain customers and earn their loyalty in markets where users frequently juggle phones and SIM cards to get the cheapest rates.

22 — Left to right: Thomas Keller, PT Nestlé, Indonesia; Eliza Kücükaslan, Bima, Sweden; Michael Mandlenkhosi Shezi, Hollard Life Assurance Company, South Africa. 23 — Facilitator: Brandon Mathews, StoneStep, Switzerland.

Figure 3 Insurance through mobile operators

Product Mobile Distribution Insurance development insurance and marketing administration and pricing platform

22 Mobile BIMA Insurance operator Mobile provider insurance provider

Source: Kücükaslan, Eliza. Presentation “Mobile technology for distribution.” 9th International Microinsurance Conference 2013. 23 Report 9th International Microinsurance Conference 2013 22

Plenary 1 Distribution

Hollard describes a member of its LCAM need not replace a call centre Lessons learnt low-cost agency force as: or other channels. Hollard believes ——Emerging consumers want distribution is not about agents and ——Warm blooded, value for money: good price and one channel, it is about integrated ——Servicing the low end of the market, extra value. channel management. Various ——With minimum education channels must complement one ——The segmentation of products qualifications, another (see Figure 4), enabling enables consumers to choose ——Earning a salary that is largely the provider to deliver the value one that suits their needs and variable, proposition not just at the POS but their budget. ——Selling simple affordable products throughout the value chain. in a non-advice mode, ——Recruitment of the right persons ——Unemployed before taking on for the low-cost agency model is this first job as a platform to the crucial; they should feel at home next one. in the agency force and in the low-income market. The low-cost agency model (LCAM) was built up for a number of reasons: ——Educating the sales force is key to educating customers. ——To build trust (face-to-face relationship), ——Integrated value chain ——For tangibility (physical presence), management is crucial, with ——For customer convenience multiple channels complementing (engaged where they are), one another and helping ——For customer education (through create “shared value” among face-to-face interaction), stakeholders. ——Footprint flexibility (agents can ——Bundling the insurance move to identified areas). programme, such as collaboration with mobile communication companies to increase consumer loyalty.

Figure 4 Insurance is both bought and sold Insurance sales through a retailer

Average sales per store 120 Products bought Products sold (blister packs) (agency)

100

80 + 655%

60

40

20

0 Jul 12 Jul 13 Oct 11 Oct 12 Apr 12 Apr 13 Jan 12 Feb 12 Jan 13 Feb 13 Dec 11 Jun 12 Dec 12 Jun 13 Sep 12 Mar 12 Mar 13 Aug 12 Nov 11 Nov 12 May 12 May 13

Source: Shezi, Michael Mandlenkhosi. Presentation “Lessons in Low Cost Field Agency Distribution.” 9th International Microinsurance Conference 2013. Report 9th International Microinsurance Conference 2013 23

Agenda Day 2 morning sessions 13 November 2013

Plenary 2

The landscape of microinsurance Birendra Mohanty in Asia and Oceania Vice President, ICICI Lombard Arman Oza General Insurance, India CEO, National Insurance Vimo Rachel Freeman SEWA Cooperative Ltd., India Regional Manager, Access to Finance, East Asia Pacific, Reuben Summerlin IFC/The World Bank Group, Regional Technical Advisor United States for UNCDF, Pacific Financial Inclusion Programme, Fiji Facilitator Michael J. McCord Emmanuel F. Dooc President, MicroInsurance Insurance Commissioner, Centre, United States Insurance Commissions, Philippines Antonis Malagardis Programme Manager, GIZ, Philippines Richard Leftley CEO, MicroEnsure, United Kingdom

Parallel session 1 Parallel session 2 Parallel session 3 Parallel session 4 Distribution: selling Drivers of scale Agriculture Impact Investment microinsurance profitably Eliza Kücükaslan Improving client desirability Jeremy Leach Leveraging corporate value Global CFO & Country Manager for the weather index contrast: Director, Bankable Frontier chains: a novel, market-based Ghana, Milvik AB (Bima), learning from three interventions Associates, Cenfri, South Africa approach to distributing Sweden Rupalee Ruchismita David Steel microinsurance C. Anbarasu Director, CIRM, India Director of Investments, Asher Hasan Chief Manager R&D, Agriculture Leapfrog, Australia Agricultural insurance and PPP CEO, Naya Jeevan, Pakistan Insurance Company, India to reach the rural, small-scale Facilitator Business case for retailers to Mia Thom producers of Mexico Richard Leftley provide microinsurance Engagement Manager, Cenfri, CEO, MicroEnsure, United Josh Ling South Africa Kingdom Herman Smit Microinsurance Fellow, Senior Research Associate, Freedom Buthelezi AMUCSS, Mexico The Centre for Financial Head of Retail, Hollard, Agricultural microinsurance Regulation and Inclusion South Africa from a reinsurer’s perspective (Cenfri), South Africa Johnathan Batangan Christina Ulardic Microinsurance in Brazil – Latest General Manager, CLIS, Corporate Solutions, Swiss Re, developments in education, Philippines Switzerland distribution and technology Facilitator Facilitator Rodolfo Ern Craig Churchill Oliver Mahul Superintendent, Bradesco Chairman – Microinsurance Programme Manager, The World Seguros, Brazil Network, ILO/Microinsurance Bank, Thailand Innovation Facility, Switzerland Facilitator Brandon Mathews Managing Director, StoneStep, Switzerland Report 9th International Microinsurance Conference 2013 24

Plenary 2 The landscape of microinsurance in Asia and Oceania

This round table explored the state with 19.9 million and 11.9 million lives 3 of microinsurance in the region and covered respectively. For details on the “Landscape of Microinsurance looked at how to further expand access The total number of insured people in Asia and Oceania” see and enhance the development of www.microinsurancelandscape.org as a percentage of the population in microinsurance based on preliminary 4 Asia and Oceania is low at 4.36%; only results from “The Landscape of Informal insurance schemes are four countries have a microinsurance defined as community-managed and Microinsurance in Asia and Oceania” coverage ratio of >5%. The Philippines are not underwritten by any formal/ study published by Munich Re semi-formal institution, whereas social ranks first (21.3%), followed by Foundation and GIZ.3 microinsurance refers to microinsurance Thailand (14.0%), India (9.2%) and programmes where premiums are fully This study completes the “World Map Bangladesh (6.2%). or largely subsidised by the government and underwritten by insurers. of Microinsurance”, following similar Rapid growth landscape studies in Africa, Latin 24 — Arman Oza, National Insurance America and the Caribbean. The final Microinsurance in the region is VimoSEWA Cooperative Ltd., report is expected to be published by growing at an impressive rate. The India,leadauthor of the study July 2014. compounded annual growth rates “The landscape of Microinsurance in from 2010 to 2012 registered a 31% Asia and Oceania”. Outreach, coverage and growth increase in coverage and a 47% 25 — Left to right: The study found that 172.8 million increase in premiums. India alone Emmanuel Dooc, Insurance individuals and properties have contributed 70% to the region’s overall Commission, Philippines; Antonis microinsurance coverage in Asia microinsurance growth. Malaysia Malagardis, GIZ, Philippines; and Oceania, excluding social and Indonesia expanded their own Reuben Summerlin, Pacific Financial Inclusion Programme, Fiji. microinsurance and informal microinsurance coverage by 185% insurance schemes.4 and 103% respectively. Vietnam is the 26 — Left to right: only country in which microinsurance Rachel Freeman IFC / The World Over 99% of the total microinsurance Bank Group, USA; Birendra activities decreased because of coverage in Asia and Oceania comes Mohanty, ICICI Lombard General regulatory matters. from only 10 countries. India leads the Insurance India; Richard Leftley, way with 111.1 million people covered, MicroEnsure, UK; Facilitator: Michael McCord, MicroInsurance followed by the Philippines and China Centre, USA.

Figure 5 Top 10 countries on microinsurance coverage ratio*

21.3 Percent

20 %

24

14.0 15 %

9.2 10 %

6.2

3.5 3.8 5 % 3.1 25 2.1 1.5 1.6

0 % Fiji India Jordan Pakistan Malaysia Thailand East TimorCambodia Bangladesh Philippines * Total number of insured people as a percentage of the total population Source: “The landscape of microinsurance in Asia and Oceania 2013”, briefing note 26 Report 9th International Microinsurance Conference 2013 25

Most of the microinsurance products insurance coverage before. This Box 3 are life, in particular term life/credit model gives the client the opportunity Key numbers life, or accident, followed by health to have a positive experience with and agriculture. Regulated commercial a simple insurance product before 31 countries evaluated insurers are the main providers, yet subscribing to additional coverage. 24 countries with microinsurance the most commonly used distribution The newly launched joint venture 250 respondents channels are insurance agents, between Telenor Pakistan, Jubilee Life member organisations, microfinance Insurance Company and MicroEnsure 216 providers with 500 products institutions and remittance banks. Pakistan Limited sells 100 new policies 172.8 million lives/properties Distribution via employers, retailers per minute. covered by contributory and/or and mobile technology is still marginal co-contributory schemes Regulation of the microinsurance and can be developed further. industry is still in a nascent stage. Life: 83.9 million To complement commercial India’s microinsurance regulation, Health: 27.9 million microinsurance, social microinsurance the first mature regulatory framework Accident: 77.8 million in Asia and Oceania covers in Asia and Oceania, sets a quota for Property: 7.7 million approximately 1.66 billion individuals every insurance company that must be and properties in only 12 of the dedicated to the social and rural sector. Agriculture: 26.2 million countries surveyed. More than 90% A key aim was to encourage insurance Takaful: 4.7 million of the social microinsurance schemes companies to explore new markets provide health coverage and 7.8% and expand their business through cover agricultural risks – two product more inclusive products. In the lines that present major challenges Philippines, a stakeholder approach Source: Briefing note, “The Landscape to the business case for commercial including government and private of Microinsurance in Asia and Oceania.” 9th International Microinsurance Conference 2013 microinsurance. sector representatives emphasised the need for government intervention Roadmap to success and subsidies where the private Lessons learnt Finance-development institutions sector cannot carry all the risk (e.g., ——Traditional products and play a crucial role in the development crop insurance and natural disasters). delivery channels are leading of the market. Organisations such as However, rather than crowding out to more innovative products the International Finance Corporation commercial insurers via subsidies, such as endowment, additional (IFC) focus their efforts on developing government and regulators need benefits insurance and index- the entire insurance industry in to create an enabling environment for based products, as well as more underserved countries. Microinsurance microinsurance growth by granting innovative distribution channels is part of the overall approach. tax incentives. such as retail and mobile To strengthen private sector insurance While focusing on the specific needs technology-based distribution. companies, the IFC provides strategic of certain target groups within a investments and training on financial ——To expand access and product country, the Pacific Financial Inclusion literacy. The main focus, however, is offerings beyond traditional Programme aims to build a regional on product innovation and effective markets, think “outside the box”, market across six Pacific Island distribution channels to reach a broad integrate regional diversity such countries with a total population of ten and inclusive target client base. In the as micro-takaful insurance and million. A major challenge for each Philippines, for example, the IFC works develop mobile microinsurance to individual state is the improvement with the Centre for Agriculture and penetrate markets such as small of access to insurance while making Rural Development (CARD) insurance island states. sure that supervision is effective and agency and Pioneer Insurance and protects policyholders. Building an ——Governments are considering Surety Corporation to design new inclusive regional market needs to go the provision of protection via insurance products to protect Filipino hand-in-hand with sound and prudent social microinsurance schemes, farmers against typhoon-related losses. insurers. This needs to be underpinned particularly for healthcare, To reach economies of scale and prove by a robust and effective supervisory to complement commercial the business case for microinsurance, framework for the six Pacific Island microinsurance. MicroEnsure (UK) has shifted its countries, which is key to attracting the ——To be successful, microinsurance focus from product innovation and risk capital and investments needed needs to be embedded in an financial education to scaling and for insurance market development in enabling environment comprising mass distribution via mobile phones. the region. a conducive business setting This distribution model is suitable combined with a strong push for for simple products such as life and insurance industry development accident and serves as an entry point and financial inclusion. to a client base that has never had Report 9th International Microinsurance Conference 2013 26

Microinsurance coverage in Asia and Oceania

Kazakhstan Mongolia 0 % 0.68 %

Georgia 0 % Uzbekistan 0.05%

Armenia Azerbaijan 0 % 0.02 % Tajikistan 0 %

Afghanistan Lebanon 0 % 0.13 % Palestine Nepal 0.08 % 1.27 % Bhutan Jordan Pakistan 0.10 % 1.50 % Kuwait 3.09 % 0.01 % India 9.22 %

Oman 0.01 % Bangladesh 6.20 %

Yemen 0 %

Sri Lanka 0.34 %

Microinsurance coverage ratio: percentage of the population covered by microinsurance No data < 0.1 % 0.1 – 1 % 1 – 5 % 5 – 10 % > 10 % Report 9th International Microinsurance Conference 2013 27

Figure 6 Mongolia 0.68 % The map displays the microinsurance coverage ratio of each country, indicating the total number of insured people as a percentage of the total population, and the absolute number of lives or properties insured. The darker colours indicate a higher coverage ratio, while the size of the grey circle within the country China represents the absolute number of 0.89 % lives and properties covered.

Total lives and properties covered (in millions) Bhutan 0.10 % 0 – 1 million

1 – 5 million

5 – 10 million

Myanmar 0 % 10 – 100 million Laos 0 %

Thailand Philippines 14.02 % Vietnam 21.35 % 0.18 %

Cambodia > 100 million 2.05 %

Malaysia 3.84 %

Fiji 0.34 %

Indonesia Papua 0.56 % New Guinea 0 %

East Timor 1.58 % Report 9th International Microinsurance Conference 2013 28

Parallel session 1 Distribution: selling microinsurance profitably

This session discussed initiatives Banking correspondents of Brazil Banking correspondents for client to promote and sell microinsurance access are the centrepiece of the In Brazil, “banking correspondents” to people in different settings in distribution model Bradesco is using are not natural persons, as the name three countries: Brazil, South Africa for remote locations such as Autazes, might imply, but rather commercial and Pakistan. with technology and supervision entities – for example, a post office, provided by “multipliers” facilitating In Brazil, a major financial services lottery outlet or small retailer – whose their role (see Figure 7). One hundred provider is enhancing the use of primary business is not financial percent of the municipalities now have technology in an innovative network services. Together they form a access to financial services, compared of distribution points to educate broadly-used distribution channel with 70% in 2000, and 25% are now and deliver microinsurance to in Brazil that has succeeded in served exclusively by correspondents. customers in remote areas such as expanding access to geographically the municipality of Autazes in the remote areas and the poorer Bradesco (Brazil) Amazonas state. In South Africa, a segments. They distribute financial “Primeira Proteção Bradesco” case study has shown what motivates services in underserved areas and 2.6 million policies sold retailers to offer financial services places that are too small for bank (between 2010 and 2013) and help providers design effective branches. partnerships with them. In Pakistan, Insured risks More than 42,000 banking a new health microinsurance model accidental death, funeral assistance correspondents belong to the Banco is aimed at enrolling marginalised Bradesco network, associated with the Premium range low-income workers who do not have country’s biggest insurer, Bradesco starting at US$ 1.5 access to any health care or insurance. Seguros e Previdência, which serves “Bradesco Expresso Premiável” 42 million customers through its call 41700 policies sold centres, the Internet, 374 branches and (between 2012 and 2013) 41,000 brokers. Insured risks accidental death, funeral assistance Premium range US$ 4.49–10.39

Figure 7 Bradesco’s distribution model for remote municipalities

Technology Client access The multiplier

— Point of Sales (POS) — Direct — Similar rule of — Bradesco Bank microcredit agent correspondents — Insurance broker (must network (45,700) be certified by SUSEP) — 100% of Brazilian — Each one takes care municipalities (5,565) of a given number of — Easy operation correspondents (binary) / Easy training — Training the — Good levels of correspondent reliability on data — Same Bradesco transmission rules applied to the — Good VANs quality correspondent support — Close supervision of VAN activities on POS’s — Close supervision of insurance sales

Source: Ern, Rodolfo. Presentation “Microinsurance in Brazil: Latest developments in education, distribution and technology.” 9th International Microinsurance Conference 2013. Report 9th International Microinsurance Conference 2013 29

What draws retailers in South Africa Retailers of fast moveable consumer Furniture stores do not typically to financial services? goods have the most frequent provide transactional products. interaction with clients. Payment This is largely due to the infrequent In the study on retailer motivation is mostly by cash. These retailers interaction with the customer – to offer financial services in South typically provide transactional durable goods are bought only once Africa, Cenfri found 25 retailers products such as bill payments, social in a while. They do, however, mostly operating in the low-income market, grant payments, cash withdrawals and provide credit and insurance. This 29 offering 190 financial services money transfers. Most of them had primarily includes credit life and products, 25 providing insurance as provided a basic insurance offering funeral. Interestingly, only one retailer part of their financial services, and 20 (funeral insurance) but this failed to provided assets insurance. subcategories of insurance offerings achieve significant uptake and was including personal accident, legal Ironically, the more frequent the discontinued. and health (hospital cash plan) – in interaction with the client, the less fact everything but agriculture. The For clothing retailers, interaction with information retailers have about goods they carry, the payment mode customers is traditionally mostly their clients and the weaker the and the frequency of interaction with seasonal. Financial service offerings relationship. the customer influence the types of differ greatly between retailers who Factors motivating retailers to provide financial services offered. primarily sell their goods on credit financial services were identified and those who take cash only. Credit as: increasing direct revenue from retailers have traditionally been more financial services, merchandise sales successful in providing insurance and profitability (see Figure 8). products. It is notable that increasing footfall5 for financial services may cause a destination backfire. It has a negative impact on the shopping experience of other customers while offering high convenience for financial services.

Figure 8 Increased sales and profitability: business case in three broad categories

Increasing Driving more Leveraging existing footfall profitable behaviour investment

— New clients — Increased basket size — Trusted brand — Retain and increase — Higher margin products — Payment infrastructure interactions with — Client data existing clients

Drivers for increased profits

Source: Smit, Herman. Presentation “What motivates retailers to offer financial services: South Africa 5 case study.” 9th International Micrroinsurance Conference 2013. The number of people entering a shop or shopping area in a given time. Report 9th International Microinsurance Conference 2013 30

Parallel session 1 Distribution: selling microinsurance profitably

Recruiting multinationals in Over the past three years, Naya Lessons learnt Pakistan in a health scheme for Jeevan has partnered with over 100 ——To access customers in places too low-income workers organisations to expand this model. remote or too small for branch An example of this collaboration is Naya Jeevan is a health offices, use a network of existing with Unilever for its microretailers microinsurance model in Pakistan providers of non-financial services incentive programme. The 3,000 attempting to establish partnerships who have a track record in the microretailers in the pilot programme with multinational and other community. Technology can include vendors who sell ice-cream on corporations and SMEs to facilitate then facilitate communication, tricycles or carts and have, for the first the enrolment of low-income education as well as distribution. time ever, been enrolled in a health employees and the informal domestic insurance plan. The plan is financed ——A number of factors influence workers of higher-income corporate by Unilever and administered through provision of financial services employees. Its business plan includes Unilever’s vast distribution network. by retailers and their degree of negotiating commercial group health success. Use findings of the South insurance from established insurers This market-based sales incentive Africa case study while designing a at preferential, below-market rates for programme should lead to increased partnership with a retailer or using its clients. The clients benefit from the sales and market development for one as a distribution channel. bulk-purchasing discount and receive Unilever and an empowered and value-added preventive and wellness secure supply chain of potentially ——A good health care and insurance services with the core insurance hundreds of thousands of distributors, plan for domestic staff of a product (see Figure 9). The basic cover retailers and microretailers. corporation’s executives and gives them affordable access to the low-income workers of a insurers’ preferred provider network business can help safeguard their of private hospitals. productivity. Such a pilot scheme is at work in Pakistan and can be replicated.

Figure 9 Naya Jeevan REJUVENATE health plan: an ecosystem of health and wellness

Medical Philanthropic Screening / Emergency Health Risk Rescue Fund Assessment

24/7 Preventive Health and Tele-HealthLine Health Wellness Plan Access to Workshops 27 — Left to right: Health Coach — Cashless ~US$ 30/person/month Asher Hasan, Naya Jeevan, — Annual Coverage limit: Pakistan; Herman Smit, Cenfri, US$ 250,000 South Africa; Rodolfo Ern, — Access to PPO network Bradesco Seguros, Brazil; nationwide Facilitator: Brandon Mathews, StoneStep, Switzerland. FuelBand Virtual Video embedded Clinics eHealth records

e-Pharmacy Benefit Management

Source: Hasan, Asher. Presentation “Leveraging Multinational Corporate Value Chains: How to Design for Scale, Sustainability & Global Replication!”. 9th International Microinsurance Conference 2013. 27 Report 9th International Microinsurance Conference 2013 31

Parallel session 2 Drivers of scale

This session identified factors From this pool of 95 products, that have allowed microinsurance Cenfri (South Africa) constructed schemes around the world to reach eight case studies representing a scale as they strived to achieve variety of regions, product types and profitability. distribution channels, to determine what these successful products had in If one defines “scale” as 1,000,000 common. policies/lives covered in Asia and Latin America and 500,000 in Africa, Drivers of scale were both internal 95 schemes qualify: 53% in Asia, 25% and external. The major internal in Africa and 18% in Latin America. drivers are compulsion, access to Unsurprisingly, life, credit life and voluntary groups, partnerships with funeral products represented half of organisations that already have a these schemes; health represented large footprint, brand and product/ the second largest category. Over half process design. The major external were distributed through microfinance drivers are subsidy and latent demand institutions, banks or other similar (see Figure 10). groups. Surprisingly though, 72% of these schemes had voluntary components, and only 50% had subsidies, dispelling the myth that products must be compulsory and subsidised to achieve scale.

Figure 10 Drivers of scale by stage

1. Growth: target Agents new markets 2. Improve persistence Product and 3. Own the client process design

Brand

Partnership

Growth: target Access to voluntary new markets groups

Compulsion

Stage 1 Stage 2 Stage 3 Compelled groups Voluntary groups Individual Sales

Source: Thom, Mia. Presentation “Thinking Big: Drivers of Scale.” 9th International Microinsurance Conference 2013. Report 9th International Microinsurance Conference 2013 32

Parallel session 2 Drivers of scale

These drivers differ, depending on the Four companies shared factors that BIMA (Sweden) stage of the product’s development: propelled them to scale: Number of people insured Stage 1: Compelled group sales BIMA, a mobile insurance provider over six million in seven countries that enables mobile network At this stage, the key driver is the Insured risks operators (MNOs) to sell insurance compulsion of a group (e.g., MFI life, personal accident, in partnership with insurers in borrowers). With low distribution hospitalisation developing markets, is active in costs and a captive client base, seven countries: Ghana, Tanzania, Premium range this stage allows the insurer to Senegal, Mauritius, Bangladesh, free – US$ 5 per month experiment. However, clients may Sri Lanka and Indonesia. For BIMA, have low awareness of the product partnerships with MNOs are a crucial due to auto-enrolment, and products Hollard (South Africa) part of reaching scale, as they provide may not meet clients’ needs. the customer base, the brand and Number of people insured Stage 2: Voluntary group sales the payment platform. In some seven million (35–45% micro) markets, experimenting with free Achieving scale at this next stage Insured risks trials has been effective: in Ghana, requires access to groups, a life, funeral, cell phone, vehicle, working with Tigo, BIMA launched strong partnership with another hospital cash, legal a free product and invited clients to organisation and a powerful brand convert to a paid product with a higher Premium range name. The group model offers ample level of coverage after one year; US$ 6.65–7.53 for funeral insurance advantages, as group sales keep 80% of the clients converted to the distribution costs low. However, new product. In some countries, the partner remuneration costs can be CLIS (the Philippines) mobile partner has chosen to launch high, and the product design might the offer with a paid product; in those Number of people insured suit the partner better than the client. cases, the product design itself must 15 million Some products may prefer to leapfrog be appealing. Agent-based sales and over the compulsion stage and skip Insured risks automatic premium deduction have directly to voluntary group sales. In personal accident also played a role in outreach and this case, latent demand and subsidy retention. Premium range are helpful to kick-start sales, and a US$ 0.62 for 4 months strong sales push coupled with an affordable product and a convenient sales strategy (such as a tick box) AIC (India) becomes crucial. Number of people insured Stage 3: Individual sales 26 million At this level, product and process Insured risks design becomes even more important, crop failure and agents become central to the Premium range sales strategy. While distribution costs US$ 5.3 per hectare grow considerably in an agent-based strategy, the product is tailored to meet the needs of clients. It is difficult to skip directly to individual sales, especially without a partner. Products that achieve scale tend to do so quite quickly if providers were “thinking big” from the beginning and willing to experiment along the way. Report 9th International Microinsurance Conference 2013 33

Hollard is a self-defined partnership CLIS (Cebuana Lhuillier Insurance Lessons learnt organisation in South Africa with Solutions) sells voluntary personal ——Drivers of scale are different a range of insurance products and accident insurance through a at each stage of a product’s models that vary according to partner. 1,500-branch pawnshop chain in evolution. Compulsion may be Its strategy is to identify a partner with the Philippines. Although it had sold a useful way to kick-start sales; a large customer base, infrastructure sachet microinsurance products afterwards, partnerships, agents, for leverage and aspirations for core for years, sales grew by 1,500% and client-centred product design business with whom it jointly designs after it trained its branch personnel become more important. a product. It maps all the potential as microinsurance agents. The touch points for sales – such as pawnshop network itself is able to ——With each scale strategy, there is client database, call centres, walk-in manage the bulk of the administration a trade-off between distribution outlets – and all contact moments and claims. Recently, the company costs and responsiveness to client when a client might buy or renew launched a “Microinsurance on needs. a product. Monitoring these points Wheels” campaign to increase ——Some products evolve from one and maintaining communications financial literacy through mobile van sales strategy to another, but the with clients has allowed retention offices in low-income rural and urban most successful seem to benefit to remain high. For Hollard, the areas, and is recruiting beneficiaries from a mix of methods. These solution is not an evolution from one as sub-agents. CLIS boasts 60–70% depend on cost, target market, and strategy to another but rather a mix retention rates through SMS (short the partners’ infrastructures. of strategies: compulsory, “tick box”, message service) renewal reminders. sachet and agent-based. It credits ——Retention may be just as important AIC (Agriculture Insurance Company) its integrated approach to sales as new sales: in the words of is a joint effort of India’s Ministry of as one of the major reasons it has Hollard’s Freedom Buthelezi, “As Finance and Ministry of Agriculture achieved scale. we load the bucket, we must make providing crop insurance to small sure the bucket is not leaking.” farmers. Some 60–65% of covers are compulsory and linked to agricultural loans; the remaining 35% are voluntary. At this point, the government subsidy for the premium has grown from 10% to nearly 100% for the poorest farmers. AIC sells insurance through a network of 600,000 government terminals at village level and a supplementary team of sub-agents during the sowing season. Retention is high, as claims payments are frequent and beneficiaries tend to stay on.

28 — Left to right: Mia Thom, Cenfri, South Africa; Eliza Kücükaslan, Bima, Sweden; Freedom Buthelezi, Hollard, South Africa; Jonathan 29 — Facilitator: Batangan, CLIS, Philippines; Craig Churchill, Microinsurance C. Anbarasu, Agriculture Network/ILO/Microinsurance Insurance Company, India. Innovation Facility, Switzerland.

28 29 Report 9th International Microinsurance Conference 2013 34

Parallel session 3 Agriculture

Although poor farmers in developing In the second experiment, CIRM Partnering to reduce coverage gaps countries face a wide array of and its partners allowed farmers in Mexico’s government created self- risks, their uptake of agricultural 110 villages to select the specific insurance agricultural funds to protect microinsurance policies has to crop phase (sowing, growing or farmers against climactic risks in date remained low. Session 3 harvesting) and coverage extent of 1998. However, a vulnerability study examined this phenomenon from agricultural microinsurance policies. conducted recently by the Asociación the perspective of three experiments Here, researchers tested whether Mexicana de Uniones de Credito del in India, a public-private partnership purchasing microinsurance in cheaper Sector Social (AMUCSS) revealed that (PPP) in Mexico, and the experience and more customised “building many low-income farmers were not of reinsurer Swiss Re in sub-Saharan blocks” would raise demand by benefitting because of the financial Africa. It focused on obstacles to increasing transparency, addressing difficulty of insuring smaller plots. (and trade-offs implicit in) achieving farmers’ liquidity issues more scale, the role of subsidies and private effectively and tailoring policies to To extend coverage to these sector actors in increasing coverage, their perceptions of the risks involved. individuals, the AMUCSS and potential steps for dealing with microinsurance unit (Red Solidaria In the third study, Pioneer Seeds emerging factors. de Microseguros Rurales, or RedSol) facilitated the sale of index-based partnered with the government’s Can tinkering improve policy appeal? microinsurance policies while programme to aggregate poorer replacing farmers’ seeds under Proceeding from the premise smallholders into insurable groups in certain conditions. By lowering that small changes can increase a the country’s Chiapas, Veracruz and transaction costs (which in India can product’s desirability, the Design Puebla states. The resulting product, reach up to 40% of premiums) and and Research Labs at India’s Centre named RedSol-Agricola, safeguards providing added value through the for Insurance and Risk Management clients’ incomes and food security seed replacement service, researchers (CIRM) addressed uptake problems against weather and other perils via likewise theorised that intermediation by studying ways in which bundling, the farmers’ investments or the actual would increase uptake. customisation and intermediation crops themselves. Government- might raise consumer demand for Although the first experiment supplied reinsurance and subsidies weather index-based microinsurance succeeded in generating significantly by crop and region guarantee the policies (see Figure 11). higher demand, the second and plan’s financial viability, while RedSol third did not – the second because of capitalises on AMUCSS’ strong To test bundling, CIRM collaborated competition from highly subsidised connections with local financial with several organisations to offer policies, and the third due to services providers to provide the 48-hour advanced weather forecasts administrative problems involving necessary enrolment, training and alongside microinsurance schemes unmanageable paperwork. However, administrative functions. for rice and potato growers in two each study contributed valuable Indian states. As a supplement to information about scaling agricultural coverage for climactic variations, microinsurance programmes while participating farmers paid 50 rupees still providing relevant coverage. The (US$ 0.80) to receive forecasts by text intermediation trial pointed out the message. Researchers hypothesised importance of process in successfully that, by improving farmers’ planning delivering a promising product. The capabilities, weather reports would building-block study demonstrated further reduce their risks and, by the power of subsidies in directing extension, increase uptake rates. customers towards less customised or potentially applicable (but more affordable) solutions for agricultural risk management.

30 — Left to right: Christina Ulardi, Swiss Re, Switzerland; Josh Ling, AMUCSS, Mexico; Rupalee Ruchismita, CIRM Design and Research Labs, India. 31 — Facilitator: Olivier Mahul, The World Bank, Thailand.

30 31 Report 9th International Microinsurance Conference 2013 35

RedSol-Agricola (Mexico) A blunt and distortionary role of though specialised providers do subsidies was observed in the second sell access to certain indices. Other Number insured CIRM experiment. However, the new and increasingly popular data 1,985 producers (as of March, 2013) RedSol-Agricola experience shows sources include the market prices Covered risks that, when used appropriately, of covered crops, which determine drought, flood, hail, fire, extreme subsidies can facilitate the uptake farmers’ incomes and the amount temperatures, frost, hurricane, of properly designed products by of microinsurance protection they cyclone, tornado, wind, plague, otherwise financially excluded require. plant diseases populations – such as low-income Providers are likewise offering smallholders concentrated in Premium range more complex, sophisticated and Mexico’s disproportionately poorer, MXN160.16 (US$ 12.47) – MXN customisable policies. These include rural and more indigenous south. It 913.13 (US$ 71.08) per hectare per policies that bundle protection for likewise demonstrates the benefits annum (for the 2013–2014 growing multiple risks, triangulate between of stakeholder cooperation and season) not including subsidies several data sources, cover different making use of each collaborator’s growth phases and insure varying strengths. RedSol-Agricola lived up to combinations of inputs, outputs and its promise as a result of rate-setting, other costs. reinsurance and subsidies provided by the government enhancing Alongside these advances, RedSol’s on-the-ground outreach and stakeholders are becoming cognisant administrative work. Furthermore, of other vulnerable actors in the by reinvesting unused reserves agricultural value chain: input each year into the communities suppliers and providers of storage, involved (for example, purchasing transportation and processing for farming equipment they need), services. By expanding the definition Figure 11 RedSol-Agricola creates goodwill. of potential clients to include these When farmers indicate It has helped achieve the AMCUSS players, agricultural microinsurance that it’s important to receive development objectives while can increase its market size, uptake, weather forecasts inculcating an insurance culture and chances of success. among participants. A reinsurer’s perspective Lessons learnt Although the value of collected ——Subsidies are a double-edged premiums keeps growing, agricultural sword and must be applied microinsurance penetration remains judiciously. low because of the difficulty of ——Product standardisation allows scaling non-compulsory products. For scale achievement but can cause microinsurers and reinsurers, this line unintentional exclusions or is hardly profitable because of high the provision of less-relevant loss levels. coverage. Swiss Re currently covers about ——Partnerships facilitate the 250,000 farmers (or an extremely achievement of scale by lowering small percentage of the smallholder transaction costs and increasing populations) across 20 African volumes through intermediation nations. But innovations in data and aggregation. sourcing, policy design and clients’ Sowing 40 % eligibility criteria are potentially ——In a partnership, participating Tilling 23 % poised to reverse these trends. organisations should focus on Before harvest 16 % their fields of strength. Before planting 14 % Agricultural microinsurance After planting 6 % previously depended largely on ——High transaction costs make After harvest 1 % information generated by weather microinsurance unattractive to Other 0 % stations. The emergence of satellite clients and unsustainable for data is enabling microinsurers to providers. price less expensively and service Source: Ruchismita, Rupalee. Presentation: products. This is because satellites “The truth in tinkering: improving client provide wider coverage over longer desirability for agricultural index insurance experiments.” 9th International Microinsurance timeframes – statistical information Conference 2013 and content that are typically free, Report 9th International Microinsurance Conference 2013 36

Parallel session 4 Impact investment

Warren Buffet and Bill Gates have Microinsurance investment landscape Donors are well-suited to provide both touted impact investing as technical assistance and grants to Bankable Frontier Associates (South a promising way of putting one’s support the microinsurer in preparing Africa) commissioned a landscape wealth into service – to both do for these larger investments. study on impact investing in the good and make money. The Global Regulation may also be modified microinsurance industry. The study Impact Investing Network (GIIN) to permit innovative models that identified 25 such investments from defines impact investments as allow for efficient investments at a variety of investors, ranging from “investments made into companies, smaller levels. development finance institutions organisations and funds with the and private development investors Africa leads in the number of intention of generating a measurable, to investment funds and strategic investments but with smaller ticket beneficial social and environmental investors, among others. The principal size. A growing number of global impact alongside a financial return.” investor in this group is International deals can be observed. Investments There is a notable interest of impact Finance Corporation. in Africa, Latin America and the investors in microinsurance, but Caribbean see investors backing limited knowledge of how to invest in Investments were found to typically insurers, while investments in India it and what the opportunities are. This fall into the US$ 8–15 million deal typically revolve around distribution session tried to fill the gap. size. At the same time, deals so far and brokerage. Investments tend to be bifurcated between early- in technical service providers, stage and late-stage funding with understandably, have a global focus. little in between. This indicates a The study found that the expected mismatch between the deal size that return on investment was generally microinsurers are seeking and the low for private equity. larger sums investors are looking to invest (see Figure 12).

Figure 12 Birfurcation of microinsurance deals between early-stage and late-stage funding

Revenues

Seed Early Mid expansion Late / mezzanine Exit

Shiram, Mahindra, MicroEnsure, APA BIMA, MFS Africa, Express Life

Mezzanine financing

Break-even point Debt investments Growth or expansion Private equity capital Para Life

Venture capital Creative Turnaround innovation capital Angel investors

Time

Source: Leach, Jeremy. Presentation “Exploring new frontiers: The potential of microinsurance investments.“ 9th International Microinsurance Conference 2013. Report 9th International Microinsurance Conference 2013 37

Key characteristics of microinsurance Investors in microinsurance, A number of actions are needed to investments therefore, are strengthening advisory support investors, such as: models to include engagement in The drivers of microinsurance ——Addressing the currently small building the business (seen in the role investment are split between primary ticket size of investments; taken by Leapfrog Labs), courting needs surrounding capital, and ——Developing advisory capacities to distribution businesses from which to secondary needs often surrounding support investors; leverage off investments and utilising networks and business development. ——Adopting investment principles or insurance as an enabler for the standards; The study also found that there are existing core business (as in mobile ——Developing infrastructure to five primary deal options for investors, insurance models). support investments; and each incorporating unique risks (see Future outlook for microinsurance ——Identifying gaps in microinsurance Figure 13). impact investing for investor focus. Challenges for investors There also exists a variety of The low penetration rates in these There remain considerable challenges opportunities around microinsurance markets demonstrate that there is an which investors will need to navigate. investments. These include: incredibly large amount of room in Insurance is already a demanding the area of microinsurance impact ——Enactment of microinsurance model for private equity because investing. legislation recognising a class of of the high liquidity and regulatory microinsurers, which may create a requirements. There are few need for their capitalisation; opportunities for leveraging and the ——Increasing capital requirements; move to profitability is typically slow ——Downscaling models which require and long-term. Additionally, profitable capital and technical assistance; models take longer to appear than is ——Leveraging existing financial typically expected by investors, even inclusion investments and efforts with strong growth. True commercial such as microfinance; viability is also not yet proven on a ——Investing in the private branches of large scale across multiple products. public-private partnerships.

Figure 13 Primary deal options for investors

Distribution business e.g. Mainstream Dedicated Technical service Broker/ retailer, MFI, Mobile insurer – going Option micro–insurer providers Intermediary operator downstream

Risks / concerns Business case still Thin margins and Value added in the Insurance may not Lack of interest in broadly unproven often exposed part case of low advice/ be a core priority. micro-insurance for mono-line of the value chain / no advice models Limited to the size of – keen on own business Risk of being may be limited the client base. comfort zone crowded out

Examples of Para Life (various) BIMA (LeapFrog) Mahindra (Leapfrog) FINO (IFC) Crystal Life investment deals Covision South MicroEnsure (various) Shiriam (Leapfrog) (LeapFrog) Africa (Hollard) MFS Africa (Angel APA (Leapfrog) investor)

Source: Leach, Jeremy. Presentation “Exploring new frontiers: The potential of microinsurance investments.” 9th International Microinsurance Conference 2013. Report 9th International Microinsurance Conference 2013 38

Parallel session 4 Impact investment

Measuring impact: what are investors Lessons learnt looking for? ——There is still substantial room At LeapFrog Investments it is for expansion in the area of considered important to measure microinsurance impact investing. the impact of investments on an ——A range of deal options exist investment-by-investment basis, for investors, each posing rather than utilising one universal unique risks. approach. This recognises the vastly different impact each investment ——There is a mismatch between the can have, such as an investment in deal size microinsurers are seeking technology versus an investment and the larger sums investors are in a distribution channel or in an looking to invest. insurer itself. In this context, synergy ——New opportunities for investment is critical and investors who not only are emerging as a result of value financial but also social returns microinsurance legislation must be identified. Concurrently, creating a class of microinsurers, LeapFrog hopes to pave the way for increasing capital requirements, further investment by demonstrating downscaling models and the healthy financial returns of developing public-private microinsurance. partnerships. Platforms connecting investors and ——Support for investors is needed in microinsurers will also be important the form of investment standards, for the industry to move forward. In infrastructure to support the meantime, alternative strategies investments and opportunities to will be critical such as the one utilised connect with microinsurers. by LeapFrog. The investor chose to begin in those markets in which it was already familiar with insurance providers, and expanded to other markets once high-profile deals gave it visibility there.

32 — Left to right: Jeremy Leach, Cenfri, South Africa; David Steel, Leapfrog, Australia; Facilitator: Richard Leftley, MicroEnsure, United Kingdom.

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Agenda Day 2 afternoon sessions 13 November 2013

Parallel session 5 Parallel session 6 Parallel session 7 Parallel session 8 Microinsurance in Indonesia Technology Health 1 Academic research 1 Kornelius Simanjuntak Mobile technology for enrolment The role of subsidies in Price and information type in Chairman, DAI, Indonesia and claim in cattle insurance prompting microinsurance: the demand for life insurance the case of community health in Mexico Alok Shukla Firdaus Djaelani insurance in Kwara Senior Manager, Tata AIG Jonathan Bauchet Commissioner of Insurance, General Insurance Company Olapeju Adenusi PhD student, New York OJK, Indonesia Ltd., India Managing Director, Hyegia University, United States Facilitator Community Health Care, Nigeria Mastering the convergence of A spatial econometric approach Ngalim Sawega micro- and small-ticket insurance Comprehensive vs. ‘sliced’ to scalable index insurance OJK, Indonesia microinsurance through health microinsurance: the value design against drought-related differentiation, innovation and of subsidy livestock mortality in Kenya partnership Barbara Magnoni Apurba Shee Thomas D. Meyer Project Manager, Client Value, Scientist, International Livestock Insurance Industry Lead Europe, MicroInsurance Centre, United Research Institute, Kenya Africa and Latin America, States Microinsurance pricing under Accenture AG, Switzerland Cashless out-patient department the microscope Insuring the uninsured cover (OPD) for Rashtriya Sachi Prucal SAP – Helping the world Swasthya Bima Yojna (RSBY) Senior Lecturer, Macquire run better beneficiaries University, Australia Guruprasad Gaonkar Birendra Mohanty Facilitator Head of Financial Services Vice President, ICICI Lombard Richard D. Phillips Industry, SAP South East Asia General Insurance, India C.V. Starr Professor of Risk Facilitator Facilitator Management and Insurance, Richard Leftley Thierry van Bastalaer Georgia State University, CEO, MicroEnsure, Principal Associate, United States United Kingdom Abt Associates, United States

Plenary 3 The role of microinsurance in achieving universal health coverage Caroline Phily Microinsurance Officer, ILO Microinsurance Innovation Facility, Switzerland Hernan Luis Fuenzalida Senior Associate, Health Investment & Finance, United States Prof. Dr. Ghufron Mukti Vice Minister, Ministry of Health, Indonesia Facilitator Denis Garand President, Denis Garand and Assoc., Canada Report 9th International Microinsurance Conference 2013 40

Parallel session 5 Microinsurance in Indonesia

Indonesia has a large population but OJK realises that microinsurance Insurance doing well, microinsurance a low level of financial literacy which is distinct and therefore requires a set to follow is reflected in lower financial inclusion specific approach. It cannot be offered In the five years from 2008 to 2012, than in neighboring countries. in the same way as commercial the total assets of all insurance According to central bank data (Bank insurance products. With the Grand companies rose from IDR 243.6 trillion Indonesia), as of 2011, the financial Design providing a roadmap to (US$ 24 billion) to IDR 556.2 trillion inclusion index of Indonesia is 19.6% develop the microinsurance industry, (US$ 550 billion), an average of compared to 98%6 in Singapore, 73% the presence of a legal basis will growth of 25.7% per year. In the in Thailand, 66% in Malaysia and 35% provide certainty for players and same period, total gross premiums in India. customers alike, in this case people grew from IDR 89.99 trillion to with limited financial capability for Regulatory framework IDR 171.62 trillion (US$ 17 billion), purchasing microinsurance. at an average annual rate of 18.1%. The current Insurance Law in The characteristics of a Insurance penetration (the ratio Indonesia does not specifically microinsurance product should be: of total premium to the GDP) regulate microinsurance, and so far simple features and administration, increased from 1.9% to 2.08%, and there has been no legal foundation easy to access, economical, fast density (the ratio of total premium on which to build microinsurance. To claim settlement and payment. As to the total population) rose from increase financial literacy, Indonesia’s for microinsurance policy limits, the IDR 393.01 thousand (US$ 39) to Financial Services Authority (Otoritas current thinking in Indonesia is to have IDR 703.37 thousand (US$ 70), Jasa Keuangan – OJK) plans to work a maximum premium of IDR 50,000 almost doubling. However, Indonesia with industry players and other (less than US$ 5) with the maximum still ranks18th in Asia and 76th in stakeholders to design awareness total sum insured of IDR 50,000,000 the world. campaign tools. (US$ 5,000) per life or per insured Meanwhile, although insurance The Grand Design of Indonesia object for non-life. seems to have successfully taken Microinsurance launched in October off, microinsurance is barely getting 2013 includes the development of off the ground. Despite the absence a regulatory framework for drafting of a specific law or regulation specific legislation and guidelines for on microinsurance, certain legal microinsurance. OJK has commenced entities have started offering some the process of obtaining input from all microinsurance products: personal stakeholders to shape the framework. accident, savings, fire insurance, life Working with the Coordinating insurance credit, and takaful or shariah Ministry for Economic Affairs, OJK microinsurance. The distribution of set up a Task Force on Microinsurance microinsurance products takes place Development in July 2013, consisting through third parties such as rural of OJK staff and industry association banks and cooperatives. An example representatives (life, non-life of microinsurance distribution and shariah). through a cooperative is the Ukabima Saving and Lending Programme in Cilacap, Central Java.

33 — Left to right: Kornelius Simanjuntak, Chairman, DAI , Indonesia; Firdaus Djaelani Commissioner of Insurance, OJK, Indonesia; Facilitator: Ngalim Sawega, OJK, Indonesia.

33 Report 9th International Microinsurance Conference 2013 41

A number of insurance companies The main challenge for the insurance Lessons learnt also offer microinsurance products companies and other legal entities ——Microinsurance is needed in such as Asuransi Central Asia, is how to market microinsurance Indonesia as there are millions Charties Insurance Indonesia, products. To a certain extent, of people living in rural areas, Asuransi Allianz Life Indonesia and microinsurance is not very attractive working in the informal sector such Asuransi Jiwasraya (Persero). In for insurance companies because it as farmers, fishermen and other addition to this, microinsurance is expensive from the administrative low-earning workers. products are also offered by certain point of view. It requires extensive entities that serve low-income groups human resources and information ——One of the main challenges is as well as their own members. These technology support. Technology to increase financial literacy include MFI Koperasi Mitra Dhuafa is expensive while revenue from and people’s access to financial which serves hundreds of thousands microinsurance may not suffice to services. of its members, and Credit Union cover the expenses of developing the ——To begin with, Indonesia requires Central Inkopdit which serves millions technology support. This goes against a strong legal foundation on of its members. the characteristic of microinsurance which to build microinsurance. that it should be low in administrative Aside from members of these affinity Microinsurance products currently costs. This would be but one of the groups, microinsurance products in available in Indonesia are: many difficult issues to be resolved Indonesia are aimed at people living personal accident, savings, fire by stakeholders as they proceed in rural areas, working in the informal insurance, life insurance credit and on the Grand Design roadmap (see sector, farmers, fishermen and low shariah microinsurance. Figure 14). earners. For effective distribution, ——Stakeholders have begun their microinsurance requires a technology four-year (2013-16) journey breakthrough to serve a massive on the roadmap unfolded by customer base spread out in rural the Grand Design of Indonesia areas across the country. Microinsurance.

Figure 14 Roadmap of microinsurance development in Indonesia

Activity 2013 2014 2015 2016 Regulation Launch Grand Design Enact Microinsurance Regulation

Capacity Building Regulatory Aspect Product Development Products Distribuition

Education and Public Awareness Launch Miicroinsurance Program Develop Financial Literacy Tools Education and Piblic Awareness Program

Source: Djaelani, Firdaus. Presentation “Microinsurance in Indonesia: Development and Role of Regulator.” 9th International Microinsurance Conference 2013. Report 9th International Microinsurance Conference 2013 42

Parallel session 6 Technology

This session looked at the use Microinsurance providers are now The platform aims to increase the of technology as a catalyst for investing a lot of resources in training, consistency, effectiveness and quality profitability and scale. motivating and deploying sales staff of design, operation and reporting in rural areas. Mass-market insurance of future micro health insurance Addressing profitability explores disintegrated innovative schemes. Such a technology-based There has been much discussion platforms to master intermediation solution is a key element in providing about the business case for and sales. A cost-efficient technology a flexible, scalable and growth- microinsurance products. Insurers are platform enables the insurer to supporting insurance solution which placing more emphasis on expanding leverage mobile technology and builds the foundation for profitability their business into the low-income integrate operations and management and a sustainable business case. market and investing in building across the value chain, thus helping Scaling inclusive financial services capacity. Despite these efforts, to achieve economies of scale. many of these initiatives struggle to An example of such a technology In Southeast Asia, 60% of the adult generate profits and penetrate their platform is the PharmAccess population are unbanked. In stark target markets. consolidated operating model and contrast to this, 600 million mobile information management platform, subscriptions have a more than 100% Obstacles in reaching profitability which links the PharmAccess health penetration rate in the same region. include high acquisition costs and insurance programme with a future Technology providers recognise this administrative expenses (20–30%), micro health insurance scheme. opportunity and leverage the existing particularly in the microinsurance mobile network to reach scale through context of lower premium levels. more inclusive financial services (see Profitability depends significantly on Figure 16). Early in the process, they the scale of the business, distribution seek support and approval for such channels and policy servicing. To ventures from financial institutions reach a critical mass and achieve and regulators in Asia. economies of scale, insurance companies could consider converging micro- and mass-market insurance. Although micro- and mass-market insurance do not target the same customer groups, the sales and Figure 15 operational challenges are similar. Convergence of micro- and mass-market insurance solutions Both aim to offer simple and affordable products which are easily accessible to the clients. The key challenges include distribution, sales management and administration (see Figure 15). To create an Provide the capabilities of insurance platform for product innovation and Objective improving company Benefit quick access to market distribution capabilities with minimal impact in the insurer processes

Plug & Play Variable cost Connected to consumer

Multi-Access Best-of-breed Reduce time to market with Multi-Channel technology agile approach

No upfront investment Growth Company Digitalisation

Complexity reduction Improve data Product testing quality in current in real market systems

Source: Meyer, Thomas D. Presentation “Small-ticket Insurance Technology – from microinsurance to mass-market insurance.” 9th International Microinsurance Conference 2013. Report 9th International Microinsurance Conference 2013 43

Inclusive finance aims to deliver Case study: leveraging mobile The first livestock insurance scheme financial services such as mobile technology for enrolment and was launched four decades ago but payments, fund transfers and mobile claims settlement the current penetration is still less savings to a new customer group – than 2%. Tata AIG entered the market In India, more than 100 million the low-income population – at in 2005 and by 2013 covered 300,000 families depend on livestock as their an affordable cost. The mobile animals. Initially, Tata AIG partnered primary livelihood source. According technology platform enables the with dairies, microfinance institutions to the latest census, the livestock financial service provider to reach a and non-governmental organisations population is 485 million, of which large number of clients. The success to increase the outreach. The insured 283 million are cattle. At an average of microinsurance programmes animals received a polyurethane tag premium of US$ 10, cattle insurance in Asia can be accelerated by and photos were taken for verification. has a potential market of more than integrating them into the existing All claims could be reported on a US$ 2.8 billion in premiums. financial inclusion ecosystem and 24-hour hotline and were surveyed infrastructure. Tata AIG Cattle Insurance, India before a payout could take place. One example of such a partnership Number of cattle insured The initial challenge was the vast is the Talkshawk Mohafiz Zindagi 30,000 geographical dispersion and Beema offered by Telenor Pakistan unreliable postal services in rural Insured risk in collaboration with Jubilee Life areas. Moreover, fraud, moral hazard Death of cattle Insurance Company and MicroEnsure and adverse selection significantly Pakistan (Pvt.) Limited. Talkshawk Premium increased the loss ratio, which the low allows Telenor Talkshawk subscribers US$ 10 per animal premium of US$ 10 could not cover. with a balance consumption of at least US$ 2 per month to avail themselves of life insurance for the next month. Talkshawk subscribers can get this free service by simply dialling a service code from their mobile phones. Immediately after the launch, Telenor Talkshawk disseminated 100 new polices per minute. Figure 16 Providing inclusive financial services via mobile phones

Rural Financial Services Domestic Remittance

International Remittance Transfer

Source: Gaonkar, Grurprasad. Presentation “SAP – Helping the world run better.” 9th International Microinsurance Conference 2013. Report 9th International Microinsurance Conference 2013 44

Parallel session 6 Technology

To improve the product offering, Tata Lessons learnt AIG opted for a mobile technology ——Technology-based platforms can solution. With 929 million mobile be a key element in providing subscribers and GPRS (general packet cost-effective and scalable radio service) data services available insurance solutions. To reach a in rural areas, the system was able critical mass and justify the high to speed up data management by initial investment, microinsurance instantly sending data from the field and mass-market insurance can to the central server, issuing policies, be combined, since they need settling claims as well as verifying to address similar sales and carcasses and validating claims on operational challenges within their the spot. A high upfront investment respective target markets. in the software, integration into the core insurance system and training of ——Integrating microinsurance field agents were the main barriers to programmes into the existing rolling out the mobile platform. financial inclusion ecosystem and infrastructure can accelerate However, with all the necessary market penetration. Start with information about the cattle and simple, easy-to-understand owner in one system, claims can products to introduce the concept be approved within one day and of insurance, build trust and show payments can be directly transferred the client value by settling claims to the beneficiary. As a result, the time quickly. More complex products needed to issue a policy decreased can then be added over time. by more than 50%, claims settlement time decreased by 40% and the clients ——To ensure regulatory conformity were more satisfied. on the technology and insurance side, engage regulators early in the In the next step, Tata AIG will expand process and educate them about this offering to new districts and the latest market developments launch the application in the local and needs and how they can be language to better meet the local adequately addressed needs and enrol more animals in their cattle insurance programme.

34 — Left to right: Facilitator: Richard Leftley, MicroEnsure, United Kingdom; Alok Shukla, Tata AIG General Insurance Company Ltd., India; Guruprasad Gaonkar, SAP, Singapore; Thomas D. Meyer, Accenture AG, Switzerland.

34 Report 9th International Microinsurance Conference 2013 45

Parallel session 7 Health 1

The session featured perspectives To subsidise or not to subsidise? In Kwara, HCHC clients currently from: Hygeia Community Health Care pay just US$ 2 of a US$ 30 annual The advantages of subsidising client (HCHC), a non-profit health insurance premium. This subsidy is gradually premiums are many, especially if scheme in Nigeria, RSBY, a large- being transferred from the Dutch equity and improved outcomes are scale public-private health insurance Health Insurance Fund to the state the priority. Low-cost premiums make scheme in India, and the MILK Project6, government of Kwara, which will healthcare more affordable, protecting a research study uncovering the cover the bulk of the premium cost more people from high out-of- client value of seven health insurance starting in 2014. The government’s pocket costs and difficult financing schemes in five countries. enthusiastic take-up can be seen as mechanisms. They also encourage an important step toward universal In addition to highlighting the salient mass participation for a wide pool of health coverage in the region. achievements of each group, – people, reducing adverse selection. HCHC’s successful partnership with In many cases, products launch with a However, the question was raised the Kwara state government, RSBY’s high subsidy to give clients a “taste” as to whether public dollars would fraud-proof biometric SmartCard, of the product, and then remove the be better directed toward the public and MILK’s client math methodology – subsidy once they have earned the health system, rather than subsidising presenters debated the value of loyalty of a large client base. a parallel system (see Figure 17). subsidies, benefits and challenges of On the other hand, subsidies can Inpatient or outpatient care? different types of health products and jeopardise the financial sustainability strategies to address the supply-side It is difficult to separate the question of a product. If targeting is done issues of health quality. of subsidy from the goals and design poorly, it may extend cheap coverage of the product itself. Is the goal to save HCHC (Nigeria) to those who could afford to pay the clients money in the event of a more. It also carries the risk of moral Number of people insured financial shock, or is it to encourage hazard and overutilisation. Heavy 100,000 behaviour that will lead to better attrition may result after the removal health outcomes? MILK has studied a Insured risks of a subsidy. variety of inpatient-only, outpatient- Inpatient and outpatient health Both products reviewed have some only, mixed and vertical disease-based Premium range form of subsidy. For RSBY, a public- products, and it has found that each US$ 2–3 per annum (Kwara, private partnership, clients pay product type offers different kinds of subsidised) just US$ 0.50 for their outpatient value for clients. care, while the central and state RSBY (India) governments subsidise the remainder. Number of people insured This subsidy has allowed RSBY to 34.4 million inpatient, 250,000 achieve tremendous scale in India. outpatient (pilot) Insured risks Inpatient and outpatient health Premium range US$ 0.50 per annum for inpatient, to be determined for Figure 17 outpatient care Transferring the subsidy to the Kwara state government Premium, co-premium and subsidy are in Naira (NGN)

2014 2011 – 2018 2010 % – 2013 % (Indicative) % Premium 4000 100 4400 100 4300 100 Co-premium 300 7. 5 300 6.8 500 11.6 Subsidy HIF 2900 72.5 1900 43.2 790 18.4 Subsidy KSG 800 20 2200 50 3010 70 >>300 naira=US$ 2.00

Source: Olapeju Adenusi. Presentation “Hygeia Community Health Care. The role of subsidies in 6 promoting microinsurance: the case of community health insurance in Kwara.” 9th International www.microinsurancecentre.org/ Microinsurance Conference 2013. milk-project.html Report 9th International Microinsurance Conference 2013 46

Parallel session 7 Health 1

In many ways, inpatient health Comprehensive outpatient insurance, What about the supply side? insurance is much simpler than however, is a much more powerful When aiming for better health outpatient insurance. Many products, lever for health behaviour change. outcomes, lowering barriers to such as RSBY, choose to launch The “use it or lose it” mentality demand through health insurance with outpatient coverage only encourages patients to use services is only half the battle. Presenters and gradually add other services. that they feel they have already paid discussed both active and passive Incidence is low – just 5% in the case for, when they otherwise might have roles of microinsurance schemes in of RSBY – and this helps maintain forgone these “skippable” services. ensuring the quality of care at their low administrative costs and This translates to higher and earlier in-network facilities. premium. Insured clients who are utilisation of preventative care – hospitalised see enormous financial observed by Hygeia and in several HCHC partners with SafeCare, a value compared with their uninsured MILK studies – which has widespread certification programme making counterparts. The cost of even an implications both in improved health targeted investments in the unsubsidised premium is well worth outcomes and lower secondary care infrastructure, skills and processes the savings on hospital bills. costs (see Figure 18). This, then, offers of the clinics in its network. To another argument for subsidising: participate in the HCHC provider In comparison, comprehensive subsidies can encourage take-up of network, facilities receive grant and outpatient care is much messier. otherwise unaffordable products, loan support to undergo this process Incidence is higher – RSBY’s pilot thus improving health behaviour and of quality improvement. RSBY, on the indicates 24% – which makes it outcomes. other hand, sees itself as a business difficult to keep premiums affordable opportunity for facilities. As its clients without an external subsidy. Both products are undergoing design can choose from among 800 health Unsubsidised products may have transitions: HCHC now covers a facilities, competition is the main difficulty convincing clients of the comprehensive range of inpatient and driver for quality improvement. product’s financial value. Overuse outpatient services, but is considering is common, and an extensive the addition of a more limited, administrative system is needed to lower-cost product. Previously, RSBY manage claims. offered only inpatient coverage, but is now piloting a more complex outpatient product. 35 — Left to right: Olapeju Adenusi, Hygeia Figure 18 Lessons learnt Community Health Care, Timing matters: delayed payouts Nigeria; Birendra Mohanty, ——Subsidies play a role in lowering ICICI Lombard General costs, promoting equity, achieving Insurance, India; Barbara scale and educating first-time Magnoni, MicroInsurance clients about insurance. But Centre, United States. they run the risk of financial 36 — Facilitator: unsustainability, moral hazard and Thierry van Bastelaer, poor targeting. Abt Associates, United States. ——Schemes face a trade-off between financial value and behaviour change. Simple, cheap inpatient products offer large savings but only small behavioural incentives; complex outpatient products are — Were not available for funeral — People had to borrow more expensive, but have much — Erodes tangibility, trust greater power to change health behaviour and outcomes. But... ——Insurance companies can play 35 — May reduce temptation for “bigger box” either an active or passive role in — Promotes saving/investment ensuring the quality of care for — Helps family recover from the providers in their network. loss of a breadwinner

Source: Barbara Magnoni, Presentation “Comprehensive vs. ‘sliced’ health microinsurance: the value of subsidy.” 9th International Microinsurance Conference 2013. 36 Report 9th International Microinsurance Conference 2013 47

Parallel session 8 Academic research 1

This session discussed customer Compartamos (Mexico) A Microinsurance Learning and purchasing decisions in Mexico, Knowledge (MILK) randomised Number of people insured microinsurance pricing in the control trial (RCT) sheds light on 1.8 million individuals Philippines and an innovative index- why this is so, measuring the impact based livestock insurance approach in Insured risks of price and marketing on term life East Africa. Life insurance purchase for Compartamos’ female borrowers. This product is sold Pricing and marketing for Premium range in modules, where the first module is purchasing decision MXN 57 (US$ 4.5) per module provided for free as a form of subsidy. of MXN 15,000 (US$ 1,175) of The loss of a loved one can lead to The RCT price intervention eliminated coverage for the 16-week loan cycle enormous stress, both emotional the subsidised module of coverage for and financial. In Mexico, for example, some clients but not for others. When funeral costs represent half the annual subsidised coverage was removed, income of many of Compartamos clients purchased more coverage, Banco’s microfinance borrowers. although not enough to achieve Yet, despite the potential of life their previously subsidised coverage microinsurance to alleviate some of level. The Compartamos experience this pressure, take-up remains low on supports the use of subsidies in the average around the world. form of providing a limited amount of coverage at no charge to the clients to develop trust and build an insurance culture (see Figure 19a + 19b).

Figure 19a Figure 19b Impact of increasing price Impact of increasing price on coverage and sales on coverage and sales Change in the % borrowers Change in modules of covered by any insurance insurance coverage

Number of insurance % modules 37 — Left to right: Jonathan Bauchet, New York 0 0.4 University, United States; Facilitator: Richard D. Phillips, 0.2 Georgia State University, United States. Not shown – 5 0 in this photograph: Apurba Shee, International Livestock – 0.2 Research Institute, Kenya; Sachi Purcal, Macquarie University, Australia were also speakers in – 10 – 0.4 the session. – 0.6

– 15 – 0.8

Low price (no change in price) Low price (no change in price) High price High price

Source: Bauchet, Jonathan. Presentation Source: Bauchet, Jonathan. Presentation “Price and information type in the demand for “Price and information type in the demand for life microinsurance in Mexico.” 9th International life microinsurance in Mexico.” 9th International Microinsurance Conference 2013. Microinsurance Conference 2013. 37 Report 9th International Microinsurance Conference 2013 48

Parallel session 8 Academic research 1

The marketing intervention measured Pricing under the microscope Among findings of low take-up and high the impact on demand of two different lapse rates coupled with high profitability Microinsurance pricing is pivotal marketing approaches, one emotional from low claims frequency, it was in achieving outreach and financial and one financial. While the study learnt that traditional, simple actuarial sustainability. If microinsurance did not find a significant difference in microinsurance pricing was inadequate. institutions are not able to accurately up-take between the two messages, Instead, a simple duration-oriented evaluate and price risks, loadings the averages hide important pricing model based on continuous-time for uncertainty have to be included differences in the way the messages Markov chains that allows actuarially in risk premiums that may well interacted with the elimination fair pricing using empirical transition exceed the norm and sacrifice social of the subsidy. When the subsidy probabilities proved to be more objectives. PAKISAMA Mutual Benefit was eliminated, sales of additional appropriate. This approach captures Inc., a Philippine microinsurance modules only increased among competing risks that are contingent on institution, offered a voluntary, Compartamos borrowers who were fundamental risk factors, covariates, individual microinsurance product presented with the financial poster, and duration. The model showed that to small farmers and rural workers. with variations by age group (see PAKISAMA Mutual had an opportunity Struggling after eight years, it Figure 20a + 20b). This indicates that to reduce premium over time as adverse looked to understand the mortality the timing of information delivery and selection challenges diminished. experience and, based on the pricing ensurance that the message is tailored Given that microinsurance institutions approach, determine if the scheme to the target audience is at least as face complex population-specific and was profitable. important as the simple provision of duration-contingent risk patterns, information. traditional actuarial pricing may result in overpricing. Models such as the one proposed here offer an opportunity to derive more actuarially fair premiums. A spatial econometric approach to livestock cover Despite livestock being a key productive asset globally, accounting for 20–40% of agricultural GDP, the vulnerability of Figure 20a Figure 20b pastoralist systems to severe droughts Eliminating subsidy increased sales Eliminating subsidy increased sales can lead to persistent poverty. Change in % borrowers who Change in number of modules Index insurance offers an opportunity of purchase any module purchased providing loss compensation based on a well-defined index while avoiding such +% issues as moral hazard. However, it faces 20 0.6 the challenges of basis risk. In response, +18.5 work is being done in Kenya and Ethiopia by the International Livestock Research 0.5 Institute (ILRI) in cooperation with local 15 +0.44 insurers and global reinsurers to design +13.3 0.4 index-based livestock insurance (IBLI) that reduces this basis risk.

10 0.3 +0.29 Considering the high correlation between forage loss and livestock mortality, IBLI insures livestock mortality by 0.2 compensating for area average livestock 5 mortality predicted by remotely sensed 0.1 vegetation data. Using a composite of scarce government livestock mortality data and remote sensing data over a 0 0 10-year period, ILRI developed an area- Low price (no change in price) Low price (no change in price) specific optimal response function that High price High price models the relationship between the vegetation data and livestock mortality Source: Bauchet, Jonathan. Presentation “Price Source: Bauchet, Jonathan. Presentation “Price (see Figure 21). and information type in the demand for life and information type in the demand for life microinsurance in Mexico.” 9th International microinsurance in Mexico.” 9th International Microinsurance Conference 2013. Microinsurance Conference 2013. Report 9th International Microinsurance Conference 2013 49

Z-indexes were used to measure IBLI has gained popularity in pastoral Lessons learnt deviations from “normal” for areas and there is tremendous ——Smart subsidies may serve each season, and variables were potential for expanding such to develop trust and build an constructed that allowed for pricing insurance. ILRI is working at insurance culture if the right premiums based on both initial improving the product design to product value components are forage conditions and forage make it more effective and technically evident to clients. conditions during the season. scalable to larger areas in the arid and Then, an estimation of the Mortality semi-arid lands of Africa. ——The impact of marketing Index Response Function and the information depends on when it is IBLI (Kenya and Ethiopia) development of spatial panel models delivered and the way in which it is produced the predicted mortality Number of people insured adapted to the target audience. index readings (see Figure 22). over 2500 households ——Pricing models that account for This methodology facilitates the Insured risks complex population-specific scaling up of index products in Livestock and duration-contingent risk the presence of missing data and patterns may allow for actuarially Premium range cross-sectional spatial dependence, fairer pricing than the traditional US$ 100 for 6–8 animals per annum which is particularly effective given actuarial pricing. New index-based the spatial dependence of drought livestock insurance methodologies impact. Information from mortality stand to reduce basis risk and data in neighboring locations can facilitate the scaling up of index be formally utilised for predicting products. mortality where there are missing observations, as well as determining the optimal degree of contract design aggregation. Not only is this approach actuarially more reliable and efficient, but it provides a natural framework for scalability in index construction and market development.

Figure 21 Figure 22 Satellite imagery solves the data challenges SRSD (short rain short dry) rate summary at 10% trigger

Normalized difference vegetation index (NDVI) 1 – 3% High value = better vegetation 3 – 6% 0 – 0.05 0.15 – 0.20 0.30 – 0.35 6 – 11% 0.05 – 0.10 0.20 – 0.25 0.35 – 0.40 11 – 16% 0.10 – 0.15 0.25 – 0.30 0.40 – 0.90 16 – 26%

1 – 10 May 2010 good vegetation 1 – 10 May 2011 bad vegetation

100 km Source: Shee, Apurba. Presentation “A spatial econometric approach to scalable index insurance design against drought related livestock mortality Source: Shee, Apurba. Presentation “A spatial econometric approach to scalable index insurance design in Kenya.” 9th International Microinsurance against drought related livestock mortality in Kenya.” 9th International Microinsurance Conference 2013. Conference 2013. Report 9th International Microinsurance Conference 2013 50

Plenary 3 The role of microinsurance in achieving universal health coverage

Government-sponsored programmes Privately provided microinsurance Box 4 for universal health coverage and government-sponsored plans No silver bullet (UHC) and private-sector health share objectives: to provide needed microinsurance (HMI) schemes have a benefits, improved health outcomes There are many opportunities for lot in common. This session reviewed and financial protection (see Figure leveraging HMI schemes and private how the two could work together 23). Each have strengths and actors in government initiatives, but toward providing coverage to sectors weaknesses that they can address by there is no silver bullet to expand of population that are doing without it. working together. While governments coverage. Achieving UHC takes time frequently aim to provide inclusive and resources. Countries that have Leveraging health microinsurance to coverage, they typically have difficulty significantly expanded coverage, promote UHC in reaching informal sector workers particularly to individuals in the In collaboration with the Results and other historically excluded informal economy, have extended for Development Institute, the ILO/ groups that private microinsurance benefits, increased subsidies and Microinsurance Innovation Facility schemes serve. While microinsurers enacted compulsory enrolment, recently released a paper entitled often struggle to sell affordable (and while at the same time improving “Leveraging health microinsurance to especially comprehensive) products at health-care infrastructure. Such promote universal health coverage.” volumes needed for viable risk pools, policy decisions and the associated It explores ways in which private governments can generate scale and mobilisation of resources are microinsurance and government- use resources such as subsidies and extremely challenging for most sponsored health plans complement regulations to achieve these goals. governments. The capacity of HMI each other, and how private health And while governments generally schemes also varies. As a result, their insurance schemes provided by are set in their ways, microinsurers ability to perform as government communities, insurers and other are nimble and more capable of partners also differs. institutions can assist governments innovation. A critical success factor of any type of to expand coverage more quickly The paper’s framework envisions collaboration between governments and easily. microinsurance initially substituting and HMI schemes consists of government-sponsored coverage. transparent, ongoing dialogue As reforms are implemented and among all stakeholders to align the public sector builds capacity, interests and raise awareness of each microinsurance can then transition party’s strengths and weaknesses. to offering supplementary products (such as coverage for opportunity costs) that augment government benefits. In the process, microinsurance can additionally Source: “Leveraging health microinsurance provide information about the to promote universal health coverage” low-income market and determine the Microinsurance Paper No. 23. Results for overall feasibility of particular product Development Institute and ILO/Microinsurance Innovation Facility. September 20137 features or procedures.

38 — Left to right: Facilitator: Denis Garand, Denis Garand and Assoc., Canada; Prof. Dr. Ghufron Mukti, Vice Minister, Ministry of Health, Indonesia; Caroline Phily, ILO/ Microinsurance Innovation Facility, Switzerland; Hernan Luis Fuenzalida, Health Investment & Finance, United States.

7 www.microinsurancefacility.org/ publications 38 Report 9th International Microinsurance Conference 2013 51

In Cambodia, this “demonstration Regardless of the approach chosen, The resulting product will ultimately effect” underpins the government- the paper says, it is important to have provide promotional, preventative, sponsored UHC plan set to launch in stakeholder buy-in, clearly defined curative and rehabilitative services 2014. Based on pilots conducted by roles and responsibilities avoiding with both medical and non-medical community-based health insurers duplication, ongoing dialogue, components (including transportation (CBHIs) in 11 garment factories, it is transparency, and flexibility. and accommodation) in public and the government’s first foray into health private sector settings. Designated The Indonesian example coverage for Cambodians. “contribution beneficiaries” will To achieve UHC by 2019, Indonesia’s have their premiums almost In some countries, including government is applying many of completely subsidised, while others Rwanda and Ghana, governments the framework’s principles via the pay according to government- have extended this approach roadmap illustrated in Figure 24. established rates. further by scaling up and exerting Over the next six years, it will expand regulatory authority over existing While various task forces – ranging coverage beyond the 70.82% of CBHIs – a tactic the paper calls the from health infrastructure and currently insured Indonesians by “foundation model.” In contrast, a financing to regulation and consolidating and integrating four “partnership model” used by India socialisation – prepare for the major CBHIs with the country’s and the Philippines, among others, scheme’s launch, the government commercial insurance schemes and recognises and outsources gaps in envisages several ongoing roles for provincial and district programmes for UHC programmes to microinsurers microinsurance. These include the low-income people. which are better able to fill them. extension of benefits to still-excluded The outsourced tasks range from people, preparing customers for the marketing, enrolment and premium transition to public provision and collection to claims processing, developing supplementary policies provider management and even to complement the government’s underwriting risk. offerings once operational.

Figure 23 UHC HMI UHC and HMI: A system in which every- A tool to protect low- dimensions to consider ­one can get the health income people against care they need without health perils in exchange financial hardship for a premium

Reduce cost sharing and fees Extend to Direct costs: non-covered Proportion of the costs covered Include other services

Current

pooled funds Population: Who is covered?

Services: Which services are covered?

Source: Phily, Caroline. Presentation “Leveraging health micro-insurance to promote universal health coverage.” 9th International Microinsurance Conference 2013. Report 9th International Microinsurance Conference 2013 52

Plenary 3 The role of microinsurance in achieving universal health coverage

The roadmap’s implementation has Lessons learnt faced several challenges, including ——Microinsurance and government- ——Solid plans are characterised the difficulty of achieving consensus sponsored UHC schemes often by stakeholder buy-in, among stakeholders. Regarding have shared objectives and clearly delineated roles and “contribution beneficiaries,” for complementary capacities. responsibilities, mechanisms example, one point of contention has for maintaining dialogue and been the determination of individuals’ ——Health microinsurance schemes transparency and the flexibility eligibility for subsidised premiums, can facilitate the design, to evolve based on changing with different players having vested implementation and strengthening conditions. political interests in setting particular of government programmes. thresholds. However, Indonesia ——A critical success factor in the ——Well-crafted plans are essential remains on track to inaugurate its first partnership is to align interests for establishing productive UHC programme in 2019. and be aware of each partner’s partnerships between strengths and weaknesses. microinsurers and governments.

Figure 24 Indonesia’s roadmap 86.4 m for achieving UHC poor people not able to pay

111.6 m 257,5 m Activities: Transformation, Integration, Expansion covered (all Indonesian by BPJS people Kesehatan covered Enterprises 2014 2015 2016 2017 2018 2019 by BPJS Coverage of various existing 60.07 m Big 20% 50% 75% 100% Kesehatan schemes 148.2 m covered by Middle 20% 50% 75% 100% other schemes Small 10% 30% 50% 70% 100% Micro 10% 25% 40% 60% 80% 100% Uninsured people 90,4 m 73.8 m Level of uninsured satisfaction people 85%

2012 2013 2014 2015 2016 2017 2018 2019

Transformation from four existing schemes to Integration of Jamkesda and commercial insurance into BPJS Kesehatan BPJS Kesehatan (JPK Jamsostek, Jamkesmas, (Healthcare and Social Security Agency) Askes PNS, TNI Polri)

Presidential decree on operational Transfer of membership Army / support for Army/Police Police to BPJS Kesehatan

Proceedure Company Membership expansion to big, middle, small and micro enterprises setting on mapping and membership socialization Big 20% 50% 75% 100% and Middle 20% 50% 75% 100% contribution Small 10% 30% 50% 70% 100% 100%

Synchronisation membership Consumer satisfaction measurement every six months data: JPK Jamsostek, Jamkesmas dan Askes PNS/ Benefit package and services reviewed annually Social single identity number

Source: Mukti, Ali Ghufron. Presentation “The role of microinsurance in achieving universal health coverage.” 9th International Microinsurance Conference, 2013. Report 9th International Microinsurance Conference 2013 53

Agenda Day 3 morning sessions 14 November 2013

Parallel session 9 Parallel session 10 Parallel session 11 Parallel session 12 Failures Business Case for Education Catastrophe Risks Microinsurance M-Insurance: ensuring take-off A case study of tablet technology Is there a business case for CAT whilst doing no harm Business case for micro health and its application to educate microinsurance? insurance: examples from Kenya consumers on health insurance Jeremy Leach Clémence Tatin-Jaleran and India in rural Tanzania Director, Bankable Frontier Actuary – MI consultant. Associates-Cenfri, South Africa Richard Koven John Mugo Microinsurance Centre, Canada Project Manager, Business Head of Operation, MicroEnsure, ADB’s pilot support for emerging Using satellites to make index Case, MicroInsurance Centre, Tanzania microinsurance in Vietnam insurance scalable United States Developing a framework for Hiroyuki Aoki Daniel Osgood How health microinsurance can capacity building in weather Senior Financial Sector Lead Scientist, Financial achieve sustainability index insurance based on farmer Specialist, Asian Development Instruments, Columbia and stakeholder engagement Bank, Philippines Michael Weilant University, United States Principal & Consulting Actuary, Risaldi Boer The challenge of achieving Microinsurance against Milliman, United States Executive director, CCROM, global scale and replication earthquake risk Bogor Agricultural University, Business case for Brandon Mathews Indonesia Teddy Hailamsah microinsurance: case studies Managing Director, StoneStep, President Director, ACA, update Financial literacy road show: a Switzerland Indonesia vehicle for stakeholder-tailored Janice Angrove Facilitator education in inclusive risk Lecturer, University of Thierry van Bastelaer protection Witwatersrand, South Africa Facilitator Principal Associate, Abt Antonis Malagardis Vijaysekar Kalavakondra Associate, United States Facilitator Programme Director, GIZ, Global Product Specialist Herman Smit Philippines Insurance, IFC, Indonesia Research Associate, Cenfri, South Africa Facilitator Véronique Faber Executive Director, Microinsurance Network, Luxembourg

Parallel session 13 Parallel session 14 Parallel session 15 Parallel session 16 Takaful Life Health 2 Academic research 2 Landscape of microinsurance in From rural areas to urban areas: Understanding hospitalisation Performance trends and Bangladesh and need for micro China Life microinsurance for fever among insured women policy recommendations. takaful insurance covers the lowest income groups An evaluation of the mass Tara Sinha in China health insurance scheme of Kazi Mohammad Mortuza Ali Researcher, SEWA, India government of India Managing Director, Prime Hengxuan Su Provider-driven health plans Islami Life Insurance Limited, Vice President, China Life, China Rupalee Ruchismita in sub-Saharan Africa: (re-) Bangladesh Director, CIRM Design and The value of claim speed in enrolment, health care Research Labs, India Micro-takaful – managing microinsurance: not always what utilisation, cost effectiveness, uncertainty together we think and customer satisfaction Health insurance coverage for low-income household: Zainal Abidin Mohd Kassim Barbara Magnoni Doriane Nzorubara consumption smoothing, Senior Partner, Actuarial Project Manager, Client Value, Senior Project Manager, investment and private transfers Partners Consulting Sdn Bhdi, MicroInsurance Centre, United PharmAccess, Kenya Malaysia States Kai Liu Drivers of claims in health Assistant Professor, Norwegian Case Study: micro takaful Micro saving solutions – India microinsurance School of Economics, Norway in Pakistan case study Jeanna Holtz The impact of shocks on poor Capt. M. Jamil Akhtar Khan Yogesh Gupta Chief Project Manager, ILO/ households – Evidence from Takaful Professional, Senior Vice President, Baja Microinsurance Innovation health financial diaries in rural Consultant, Pakistan Allianz Life Insurance Co. Ltd. Facility, Switzerland Nigeria India Facilitator Facilitator Lukasz Marc Sabbir Patel Facilitator Thomas Wiechers PhD student, VU University CFO and Vice President, ICMIF, Craig Churchill Policy Adviser, GIZ, Germany Amsterdam and Tinbergen United Kingdom ILO/Microinsurance Innovation Institute, Netherlands Facility, Switzerland Facilitator Richard D. Phillips C.V. Starr professor of Risk Management and Insurance, Georgia State University, United States Report 9th International Microinsurance Conference 2013 54

Parallel session 9 Failures

As development interventions go, separate microcredit component Additionally, this failure underscores microinsurance is relatively nascent. was formalised first through a the value of establishing national Much remains to be learnt about parallel process (and was bound by plans and development strategies that how to design, implement and central bank requirements to only consult with, and facilitate dialogue administer effective microinsurance transact with licensed insurers), the between, multiple stakeholders across products and processes under microinsurer was legally barred the formal and informal sectors. different circumstances. A reluctance from continuing to serve the union’s By encouraging communication to discuss what doesn’t work is clients. As a result, the development and providing a foundation for the understandable, but failures provide bank’s technical assistance was not government’s flexible and helpful important lessons and information completed on schedule. response, the case illustrates how necessary for the sector’s evolution – collaborative processes can formalise This failure illustrates the problems and ultimately increased capacity to the provision of financial services to that can occur in diverse help beneficiaries manage risks. With protect consumers. microinsurance markets with different that thought, the session began to applicable rules and fragmented M-insurance disappointments explore three different microinsurance ministerial oversight (after failures. Panellists first described what Although m-insurance (or formalisation, the union’s micro‑ happened and how, in retrospect, they microinsurance sold through mobile credit supplier was subject to the would act differently; participants phone platforms) seems promising central bank’s guidelines, while the then collectively parsed the lessons for accessing and serving low-income microinsurer remained under learned, shared other examples consumers, its track record has been the jurisdiction of the Ministry of and contemplated failure in the mixed. In one African country, for Finance). microinsurance and wider economic example, a consortium including a development realms. Fortunately, the situation convinced telecommunications provider, several the Ministry of Finance to expedite insurers, a microinsurer and a cell Regulatory roadblocks the draft of a national microinsurance phone services company launched To help a Southeast Asian nation’s framework and prepare interim a mobile life-related microinsurance women’s union comply with regulations that would enable the product in 2011. the country’s 2011 Microfinance microinsurer to resume operation Despite encouraging initial take-up Development Strategy, a multilateral alongside the union’s microcredit rates, sales languished however, development bank implemented division. In this way, one project’s causing internal frustration and a two-year US$ 250,000 technical failure precipitated important friction among partners and delayed assistance project to formalise strides for the country’s entire investment into the project’s next the organisation’s microinsurer. microinsurance sector. phase. In another African country, However, because the union’s stakeholders had similarly high hopes for a loyalty-scheme-based initiative Figure 25 by a mobile company, an insurer and a Impact8 of product’s cancellation among uninformed policyholders technical services provider. Although 1.6 million people subscribed within six months, the product was discontinued when the technical services provider cancelled its participation. Some 62% of the customers weren’t notified Ruled out use of similar of the change, however, causing 63% products in fugure them to develop negative attitudes about microinsurance as presented in Figure 25. These situations imparted several lessons and, as in the development bank’s case, also Dissatisfied precipitated the creation of something with insurance Ultimately the failure 42% potentially impedes more valuable to the microinsurance the growth of the sector. insurance market Participating organisations learned the significance of conducting due diligence, Better ways to protect against especially with respect to highly future problems than insurance 30% 8 Cited in Africa Corporate Advisors Source: Leach, Jeremy. Presentation “Understanding the impact of m-insurance failures.” (Private) Limited, 2013, Survey of the 9th International Microinsurance Conference 2013. microinsurance sector in Zimbabwe. Commissioned by FinMark Trust. Report 9th International Microinsurance Conference 2013 55

publicised but untested new products Box 5 Lessons learnt and distribution channels. This includes Forthcoming draft principles for ——Time and place-related factors initially pilot-testing policies (and the m-insurance matter. Getting the timing and relationships between participating the place right often, if not partners) outside the spotlight and with What do we need to do differently? always, determines success. But clearly defined objectives for obtaining ‘Slow and steady’ may sometimes be whether one has got them right is relevant information before launching. better as one tests the models, and, something that dawns on people Consortium members realised the more importantly, the partnerships, after the fact in hindsight. importance of managing problems before one scales up: appropriately and, in essence, the ——Shifting paradigms is difficult, possibility (and indeed desirability) of — Mpesa was a pilot for 2 years takes time and requires the buy-in “failing well”. before it was scaled up and promotion of an organisation’s — Insurers (& MNOs) should be established and politically- To facilitate future forays into “impatient for profit, but patient influential “champions.” m-insurance, two organisations have for growth” (Christensen). capitalised on these experiences to ——Dialogue in the face of failure develop forthcoming draft principles If one fails, one should fail well – among those affected is key to on effectively creating and regulating regulators need to be engaged and salvaging the good from the bad. m-insurance products (see Box 5). establish rules to enable but also ——Besides imparting lessons, failures By increasing stakeholder cognisance, protect against the fallout if things frequently provide opportunities these guidelines will prevent similar go wrong. for making beneficial and mistakes while facilitating the Draft principles for m-insurance potentially even more valuable development of more impactful and (Cenfri, forthcoming) contributions. commercially successful m-insurance policies. 1. Define the m-insurance product clearly One man moving a mountain 2. Clarify the policyholder (master The third case involved a person who, policy vs individual) for various reasons (including executive 3. Define the nature of the resistance at one firm and internal legal relationship and the restructuring at another), failed to responsibilities pertaining to establish lasting global microinsurance all parties (inter-regulatory divisions at two major insurance coordination) companies (while nonetheless rooting 4. Clarifying incidence of premium the techniques and strategy at both). and ensuring accountability across all m-insurance models As a result, he confirmed lessons 5. Clarifying consumer recourse well known to other innovators and options available “intrapreneurs.” These include the 6. Create a living will (fail well) recognition of longer time horizons, identification of internal and external challenges, securing colleagues’ buy-in at all levels and the quid pro quos Source: Leach, Jeremy. Presentation “Understanding the impact of m-insurance necessary to get things done in a large failures.” 9th International Microinsurance 39 — Left to right: organisation. Conference 2013. Facilitator: Thierry van Bastelaer, Abt Associates, United States; In yet another silver lining, this Jeremy Leach, Cenfri, South individual subsequently founded his Africa; Hiroyuki Aoki, Asian own venture development organisation Development Bank, Philippines; which, he reported, is enjoying an Brandon Mathews, StoneStep, excellent first year. Switzerland. The session discussed different kinds of failures but several common themes emerged. Together with the teachings from each particular case, they collectively highlight the role of failure in providing instruction that facilitates the improvement of products and processes, ultimately advancing the field’s progress. 39 Report 9th International Microinsurance Conference 2013 56

Parallel session 10 The business case for microinsurance

A strong business case is critical Scale is critical to the collection of Insurers’ full portfolios tend not for microinsurance viability and sufficient premiums to cover both to demonstrate this same product the sustained interest of insurance claims and operating costs and also movement from loss-making to companies. An understanding to generate profit. The rapid initial profit-making over time, as insurers of its drivers is important for all growth of many schemes shows continue to introduce new products stakeholders; the purpose of a latent demand in the market. and experiment with innovative this session was to provide this Nevertheless, policy volumes still approaches which tend initially to be understanding. tend to be low compared to the less profitable. potential market size (see Figure 26), Drivers of profitability Partnership arrangements are indicating the promise of continued designed for success. But even a A series of six case studies across growth, even in respect to such strong partnership requires effort to Asia, Latin America and Africa government programmes as RSBY in sustain high growth levels. Starting found three primary components of India. For voluntary and compulsory with “easy win” products such as profitability: products alike, a significant amount credit life is an effective strategy of resources is being dedicated to 1. Achieving scale; for learning about the market and achieving scale. 2. Keeping acquisition and concurrently generating profits that administrative costs low; A profitability analysis of the schemes allow for expansion into other markets 3. Managing claims costs. demonstrates the strong viability of or products. When these “easy win” credit-life business. In the funeral and products have added benefits that health insurance business, in contrast, increase the likelihood of a payout, higher loss ratios are seen; however, they ensure a positive first experience these ratios have improved as for the clients. All of this requires companies implement such strategies monitoring and making adaptations as fraud management and client over time to move towards greater segmentation to manage loss ratios. profitability. Other strategies have included setting up systems to lower management costs while increasing service or bringing in partners.

Figure 26 Scale is critical to profitability

Achievement of Scale Growth in Gross Written Premiums

Product Covered Lives % Credit life (CIC) 150 000 200 Group funeral (OM) 500 000 W&A Health (ICICI Lombard) 6 400 000 RSBY Health (ICICI Lombard) 13 700 000 150 Microinsurance (MICO) 3 000 000 Life cover (ASR) 190 000 Passenger cover (ASR) 130 000 Credit life (LP) 40 000 100 WB Life cover (LP) 1 700 Policy volumes are low compared to potential market size 50

0

– 50 2007 – 2008 – 2009 – 2010 – 2011 – 2008 2009 2010 2011 2012

Source: Angove, Janice. Presentation “Business Case for Microinsurance II.” 9th International Microinsurance Conference 2013. Report 9th International Microinsurance Conference 2013 57

A lens on health microinsurance To control loss ratios, most schemes A focus on health microinsurance in have some sort of relationship with the Indian and Kenyan contexts Further work applying this the healthcare service providers which perspective of scale, cost and claims India has the highest concentration of drives down costs. Additionally, as to health microinsurance schemes health microinsurance programmes, schemes track emerging experiences, in India and Bangladesh provides a and yet no programmes are known at times they have modified benefits number of key observations. These to have achieved break-even without (e.g., longer elimination periods, schemes represent a diversity of government intervention. Voluntary, different maternity cover, limits on key business models and yet, despite private models struggle with scale benefits) to lower future loss ratios. the stated need of health coverage which leads to high expenses. In for low-income populations, the Of note is that the expense ratio the ICICI public RSBY scheme, voluntary health microinsurance and not the loss ratio has proven to for example, the member invests schemes studied have a very low be the primary driver of losses. To approximately US$ 0.50 and receives take-up rate, even when premiums control expense ratios, investments US$ 2.30 in benefits each year. In are remarkably low because of in enrolment technology and cashless contrast, a member of a private subsidies. Here, attitudes that “God claims settlements have been used in programme invests US$ 1.88 and will provide” sometimes keep people some cases. receives only US$ 0.82 in benefits from purchasing coverage. each year. Additionally, as a result of In general, the micro health insurance bidding, public programmes spend Notably HDFC9-ERGO in India has schemes run the spectrum of one third more on administration, experienced success in increasing sustainability. While certain schemes further enhancing their ability to offer rural penetration rates of the are unprofitable, these tend to be an attractive package of benefits. Arogya Raksha Yojana (ARY) health linked to commercial ventures that microinsurance scheme. It has subsidise their losses. Others, such as When these two types of programmes achieved this by partnering with RSBY, have been profitable but have operate in a single market, public the Biocon Foundation to market an explicit subsidy. The schemes that programmes will be preferable for and enrol villagers in the scheme are profitable also have an implicit individuals, making it challenging for during the Foundation’s education subsidy, such as that of HDFC-ERGO private programmes to achieve scale and preventive healthcare camps. and the Biocon Foundation. (see Figure 27). While the strategy of tying insurance premiums to a microfinance loan, as practiced by SAJIDA Foundation Figure 27 in Bangladesh, may support Private HMIs find it difficult to offer scale, it also limits the provider’s attractive products at affordable ability to price appropriately and prices without subsidy ties insurance growth directly to Cost vs. Benefit per Member microfinance growth. per Year (US$)

0.57 ICICI RSBY 2.30 (public programme)

0.82 Sample private programme 1.88

Premium charged to member Benefit provided to member (claims)

Source: Richard Koven. Presentation “Business Case for Health Microinsurance: Examples from 9 Kenya and India.“ 9th International Microinsurance Housing Finance Conference 2013. Development Corporation Report 9th International Microinsurance Conference 2013 58

Parallel session 10 The business case for microinsurance

Where the support of a government In these two country examples, it Lessons learnt subsidy drives scale, scale and becomes evident that there are critical ——The three primary components competition in turn drive down costs, geographical differences, but also of profitability are: achieving though this in and of itself does not that private, individual and voluntary scale, keeping acquisition and guarantee a business case. In fact, health microinsurance programmes administrative costs low, and the programme’s age appears to tend not to lead to significant and managing claims costs. have little correlation with the ability sustained participation, especially to scale or move toward financial when targeting relatively small ——The expense ratio is the primary sustainability; achieving scale is populations. Without scale and driver of losses. in part a function of uptake which without subsidy, administrative ——Movement is seen over time from requires a design that balances low costs in these countries are too high loss-making to profit-making in premiums and attractive coverage. to support attractive coverage at individual products as an insurer affordable premiums, creating a In Kenya, there has been a lot of monitors and adjusts the scheme. vicious cycle. insurer activity over the last ten ——A programme’s age has little years but limited enrolment. Despite Here, community-based programmes correlation with its ability to scale. over 1.1 million MFI members and are more likely to succeed. With a 1.37 million active microinsurance community presence, high uptake ——When public and private policies, there are only 30,000 health rates are more feasible to achieve, programmes compete in a single policies, and the majority of these are and resources may be shared market, public programmes will through the public National Hospital through a central hub charged with be preferable for individuals, Insurance Fund. In fact, rather than risk pooling, claims processing and making it challenging for private Kenyan insurers moving down- administrative activities. programmes to achieve scale. market, they are pricing themselves By entering into public-private further up-market. partnerships, cross-subsidising, In Kenya then, despite commissions monitoring and adapting to reduce and expenses being relatively administrative and claims costs, contained, health microinsurance start-up costs can be overcome is not profitable as of yet. Losses and profitability is more attainable. are somewhat offset by bundling One must not forget, however, that with life and funeral cover; however, realities are not only different in opportunities for offering out-patient different markets but also in each coverage as a complement to the of the different insurance lines, and public programme are missing. thus too the drivers for the individual business case.

40 — Left to right: Richard Koven, MicroInsurance Centre, United States; Janice Angove, University of Witwatersrand, South Africa; Michael Weilant, Milliman, United States; Facilitator: Herman Smit, Cenfri, South Africa

40 Report 9th International Microinsurance Conference 2013 59

Parallel session 11 Education

This session presented three cases ——Simple and intuitive interface, Lessons learnt of raising microinsurance awareness ——Ability to present information in a ——Technology has a big role to play among various stakeholders. A case consistent and accessible manner, in packaging and disseminating in Tanzania involved the application ——Opportunity of mixing media (e.g., information for complex subjects of tablet technology to educate audio, video, photo, animations, such as insurance. consumers on health insurance cartoons), in a rural area. In the Philippines, ——Ability to demonstrate programme ——Semi-literate consumers relate a public-private partnership is credibility, better with audio and visuals than implementing a “Roadmap to ——Ability to constantly educate with bare explanations or printed Financial Literacy” targeting nine the new sales clerks about the text. Print materials do not provide stakeholder groups. And in Indonesia, programme, the requisite interaction. a project has developed a framework ——Ability to control message delivery. ——Low-income earners are very for capacity building in weather The communication content was comparative in nature; unless they index insurance based on farmer designed and scripted by the can see the hard evidence and and stakeholder engagement. partners. A multi-media agency in can compare it with their current Tablet technology increases credibility Dar es Salaam then developed its situation, they will ignore it rather application. The content was tested than learn more about it. The educational drive in Tanzania in one community, tablets were using tablet technology targeted ——The information provided on distributed among sales clerks across coffee farmers on the slopes of the tablet increased programme different primary societies, and Mount Kilimanjaro. They belong to credibility. ultimately a field test was conducted the Kilimanjaro Native Cooperative to examine the effect of tablet on ——The tablet quickly built up Union (KNCU). Three years ago, the sales. It was found that people were knowledge on the KNCU Health union partnered with PharmAccess more interested in listening and Plan among sales clerks, helping (the Netherlands) and MicroEnsure interacting with the information thus them to be more confident. (UK) to introduce a health plan for its provided. For farmers, the tablet members. A pilot phase in 2011–12 ——The results of the field test suggest provided the following “E”s: led to rollout in the middle of 2012, a positive effect of the tablet and the plan now covers more than ——Experience on sales. 17,000 individuals. ——Endorsement ——Evidence Most rural communities are semi- Figure 28 literate at best, and have little The tablet can run a short film or Average sales (households) knowledge of, or confidence in, story showing what could happen in per clerk insurance. Their main source of a family when health problems arise. information is the union’s sales The tablet was also endorsed by a clerks whose verbal messages have local leader. It made the health plan not always been consistent. There credible, since all the information was 35 was a need to communicate with provided in one place. Test results 33 the union members in a simple way. showed that sales with the tablet 30 The partners therefore decided were almost three times higher (see to use tablet technology for the Figure 28) than usual. Although the 25 following reasons: production costs of the educational drive were high, the use of the tablet is seen as a long-term investment in 20 financial literacy and advocacy. 15 12 41 — John Mugo, MicroEnsure, 10 United Republic of Tanzania.

5

0 With tablet Without tablet

Source: Richard Koven. Presentation “Business Case for Health Microinsurance: Examples from Kenya and India.” 9th International Microinsurance Conference 2013. 41 Report 9th International Microinsurance Conference 2013 60

Parallel session 11 Education

High impact of national awareness Each road show takes four days and Lessons learnt programmes involves the following: advocate ——A unified perspective towards training; a public seminar; exhibits “Financial literacy is educating, not insuring the low-income sector from microinsurance providers and marketing; advocacy is convincing, is required to shorten the gap intermediaries; press conferences. not selling.” between the public and private Advocacy messages are specifically sectors. In the Philippines, a national targeted at different stakeholders (see awareness programme is aimed Figure 29 for messages addressing ——A stakeholder-tailored approach at nine larger stakeholder groups government agencies and insurance supports financial inclusion in involved in microinsurance provision providers). design and content delivery, and use: legislators, regulators, educating each distinct Several institutional steps are national government, local stakeholder group on their roles applied to improve the provision of government, insurance providers, and opportunities in promoting microinsurance. One example is the intermediaries, support institutions, microinsurance. integration of the microinsurance donors and development agencies, topic into the pre-departure ——A Financial Literary Road Show and clients. orientation seminar which is is an evolving strategy, whereby The cornerstone of the programme mandatory for Filipino workers each road show is an opportunity is two-fold: financial literacy is departing for overseas. Another for discovering lessons for quality educating, not marketing; advocacy example is the local government units management of all those involved. is convincing, not selling. Called the that pass city ordinances providing ——Such an initiative can be replicated “Roadmap”, it is a public-private additional insurance coverage to by any country in line with its collaboration designed to build the temporary employees such as street policy and regulatory environment capacities of the nine stakeholders sweepers, village peace-keepers and and current or planned activities to become proactive in the provision health workers. on microinsurance education. and promotion of microinsurance. Its implementation consists of three steps: the development of modules and tools; training master trainers from different stakeholders; the organisation of financial literacy road shows nationwide. Figure 29 Microinsurance advocacy messages to stakeholder

Programmes and projects Products and services For government agencies For insurance providers 42 — Left to right: Véronique Faber, Microinsurance Network, Luxembourg; Antonis Malagardis, GIZ, Conduct Address Be aware of Microinsurance Philippines; Rizaldi Boer, Center Insurance is financial constituents‘ responsibilities is a viable for Climate Risk and Opportunity a business of literacy and needs for risk and needs of business activity Management in Southeast Asia trust – Build it education protection clients – not charity and Pacific (CCROM). Bogor Agriculture University, Indonesia. Provide Tailor-fit to Incorporate MI Expand Think outside linkages the needs of as an integral delivery and of the box – with industry the low-income part of plans approaches innovate players sector

Source: Malagardis, Antonis. Presentation “Financial Literacy Roadshow: A Vehicle for Stakeholder- Tailored Education in Inclusive Risk Protection.“ 9th International Microinsurance Conference 2013. 42 Report 9th International Microinsurance Conference 2013 61

Engaging farmers and stakeholders to Capacity building needs to focus Lessons learnt help index insurance take hold on both ——Local partners and agricultural Climate plays a key role in the socio- ——the ability of insurance to reduce extension agents should be economic activities of agriculture. risk, and involved in the design of local Uncertainty in agricultural production ——the means for insurance to serve as educational material so that farmer is closely related with weather a vehicle to unlock productivity. workshops can be targeted to variability, in particular with a sharp address specific local climate risk The project argues that index design drop in rainfall which causes severe management needs. and capacity building require losses. Climate change has now participatory processes. Farmers, local ——Capacity-building material for increased this uncertainty and risk, experts, extension services, scientists weather index insurance should with farmers no longer sure about and government must connect and be interactive and built on local which crops to select, when to interact in several stages of design contexts in discussion with start planting, and when to expect and education. local experts on climate risk the harvest. management whenever possible. IRI and CCROM are pursuing a three- For farmers, climate change means part strategy for Indonesia: ——Target market participants (i.e. more bad years and worse bad years. farmers) should be engaged They have to adapt by increasing ——Knowledge development early in the process of local index productivity in normal years to cover for extension workers insurance capacity building efforts bad-year losses. But even in a good and government, to build to gain feedback on their needs, year, with a high risk of default and understanding of the index constraints and preferences for no financial protection, they forgo insurance concept; climate risk management. another purchase of fertiliser on credit ——Interactive exercises, to engage that would ensure a good harvest. farmers and communities in index ——When undertaking capacity The threat of one bad year out of design; building for index insurance at five can prevent the other four from ——Instructional games, to illustrate the farmer level, exercises that being much more productive. Key for key concepts and obtain local demonstrate not only how the insurance, therefore, is to reduce risk feedback. index insurance contract works, to unlock the potential of the credit but also how it relates to the markets to help farmers increase needs and constraints that the productivity in good years. Figure 30 community faces, will work best to gain farmer attention and Index-based insurance, insuring Rainfall index insurance engagement. a weather/climate index and not Why Index Insurance? crops, addresses problems with ——Feedback from all educational traditional insurance and can protect Problems with traditional 1 workshop/training participants impoverished farm households insurance have made it should be solicited at the 2 against climate shocks (see Figure 30). tough to implement conclusion of every session — High transaction cost – 3 and used to better target future Index-based insurance has been high premium price 4 workshops to local issues and tested in several countries and contexts. contexts, but its acceptance among Recent innovation – 5 Index Insurance farmers continues to be below 6 — Insures a weather/climate expectations. Now, a project at Bogor index not crop, 7 Agriculture University in Indonesia e.g. provides payout if 8 suggests a way in which supporters, there is drought promoters and users alike can help — Cheap, “easy” to 9 index-based insurance take hold in implement, good 10 incentives agricultural communities. The project Trigger 11 is a special collaboration between Simple Drought Index 12 the International Research Institute Insurance Design Exit 13 (IRI) for Climate and Society and 1. Partial Payout if rainfall the new Centre for Climate Risk and below “Trigger” 14 Opportunity Management (CCROM), 2. Full Payout if rainfall is 15 and calls for capacity building by below “Exit” engaging farmers and stakeholders in index-based insurance. Source: Boer, Rizaldi. Presentation “Developing A Framework for Capacity Building in Weather Index Insurance Based on Farmer and Stakeholder Engagement: Indonesian Case.” 9th International Microinsurance Conference 2013. Report 9th International Microinsurance Conference 2013 62

Parallel session 12 Catastrophe risks

An average of 69 natural disasters ACA Asuransi: Using satellites to make index- hits the Asia-Pacific region each Dana Gempa, Indonesia insurance scalable year. With 60% of economic wealth Insured risk To meet the value proposition exposed to disaster risk, the impact Property after earthquake of insurance, the client needs to on the economy is significant. Even receive accurate payouts. The fast if not all of the disasters are as Premium take-up of index insurance shows severe as the Indian Ocean Tsunami US$ 2 per voucher which offers the demand for insurance on one in 2004, the Sichuan Earthquake in a payout of US$ 200; max. five side but also puts pressure on the 2008 or Typhoon Haiyan, which hit vouchers per building on-the-ground network for timely the Philippines in 2013, the impact, Number of people insured verification as part of the claims especially on poor households, is n/a management process. Obtaining enormous. Insurance penetration adequate rainfall and crop data is in this region is still low so that the In response to this need, ACA a key element in verifying the triggers insured losses from the Sichuan Asuransi, an Indonesian insurance for index insurance and reducing earthquake amounted to only company, launched Dana Gempa, a basis risk. The holistic adaptation risk- US$ 388 million whereas total losses product insuring buildings against management approach of the Horn were more than US$ 100 billion. damage caused by earthquakes, of Africa Risk Transfer for Adaptation regardless of the level of damage and This session focused on how (HARITA) project in Ethiopia tests magnitude of the earthquake. To avoid catastrophe risk insurance can be satellite data to help the team on the basis risk, Dana Gempa was set up as implemented effectively and whether ground provide quality products on an emergency fund. The client buys there is a business case. larger scales. insurance vouchers for US$ 2 each, Earthquake fund for Indonesia either electronically or as a scratch Satellite estimates of rainfall (under card, and activates the insurance via a a cloud) are simply based on the Recent earthquakes in Aceh Gayo, text message. Any building anywhere temperature measured on the top located at the northern tip of Sumatra, in Indonesia can be covered by up to of the cloud. The satellite view of damaged 18,207 houses (see Figure five vouchers, each paying US$ 200 vegetation is probably not just an 31). Historically, the middle-income in case the building is damaged by image of the crop but also a mix of (and higher) class has shown that earthquake. Claims can be reported dirt, rock shadow, trees, grasses and it can shoulder recovery costs and via text message or via the local crops. This view is used to proxy rebuild using savings or conventional news – the insurance accepts media response of the landscape to rainfall; insurance. However, the lower-income coverage as a claims report. To release for example, “Did the landscape turn segment of the population, with the emergency payments as quickly as ‘brown’ one month after the end of the insufficient savings, is dependent possible, the only document required season?” on help from the government, when collecting the payment is an international and non-governmental Since satellites follow a scientific ID card or a notice from the local organisations, and relatives method, potential errors can cause subdivision that the victim is the and friends. problems. To validate the satellite owner of the damaged building. data, the use of different technologies The vouchers for Dana Gempa are and field visits should be combined. available in branch offices and more than 9,000 retail and convenience stores across Indonesia. The client receives a text message invitation to renew the voucher before expiry.

43 — Teddy Hailamsah, ACA, Indonesia. 44 — Left to right: Facilitator: Vijaysekar Kalavakonda, IFC, Indonesia; Clémence Tatin-Jaleran, MicroInsurance Centre, Canada; Daniel Osgood, Columbia University, United States.

43 44 Report 9th International Microinsurance Conference 2013 63

So far, the project has shown an 80% Studies of existing catastrophe Lessons learnt to 90% correlation of the satellite insurance schemes in industrialised ——In times of catastrophe, people data with the situation on the ground. countries show that voluntary are in urgent need of cash. Vegetation indexes supported the purchase of property catastrophe Catastrophe microinsurance validation of hazards that are most coverage is often low, even among products should have a very easy widespread. The images become wealthy households. In some and fast claims management more accurate towards the end of countries, households are required process. the season when foliage is dense. In by law to purchase catastrophe addition, infrequent high-resolution coverage, or compulsion can be ——Satellite imagery is a reliable images can validate more frequent indirect when banks require coverage scientific instrument for improving low-resolution images. As a result, as a precondition for lending. To go coverage quality and controlling satellite imagery of vegetation beyond mandatory sales, the products validation cost. It could quickly improves the coverage quality and need to be affordable, which in many scale up index insurance products, lowers the cost of validating index cases calls for cross-subsidies. but should be cross-checked with insurance products. data from on-the-ground sources. Many countries have significant levels Business case for catastrophe of government intervention in the ——There is a tremendous opportunity microinsurance market, ranging from subsidies to for bringing government and primary underwriting or reinsuring. insurance companies together Disaster relief and reconstruction The take-up rates, even across and creating suitable risk-transfer efforts after catastrophic events are industrialised countries, therefore solutions via public-private mostly financed by governments since vary significantly, depending on the partnerships. Unless the private catastrophe insurance penetration is level of compulsion and enforcement, sector gets involved, the liability low. Over the past decade, a series of as well as the nature of government will stay with government. catastrophe microinsurance products intervention. Therefore, both sides should find have emerged. Private players have ways of creating a shared agenda entered this traditionally government and working together effectively. and donor-driven sector to offer ex-ante risk transfer solutions. As part of the MILK10 business case series, seven catastrophe microinsurance schemes were examined and tested for their business case from the risk carrier’s perspective. Preliminary findings point to the potential for a business case for catastrophe microinsurance which has yet to be realised. There has been no clear evidence yet for a business case without public-sector support.

Figure 31 Earthquake risk zone map of Indonesia Zone I Zone II Zone II Zone IV Zone V

10 Source: Hailamsah, Teddy. Presentation “Dana Gempa – Earthquake Fund.” Microinsurance Learning and 9th International Microinsurance Conference 2013. Knowledge (MILK) is a project to assess its value and business case. Report 9th International Microinsurance Conference 2013 64

Parallel session 13 Takaful

This session delved into practitioners’ What is takaful? To address this problem, stakeholders, experiences in takaful or sharia- including the country’s Actuarial Although the concept and practice of compliant insurance in Malaysia, Partners consultancy, are advocating takaful varies widely among countries, Pakistan and Bangladesh. Presenters new financing approaches that several common tenets differentiate described the takaful landscapes eliminate the shareholder role. it from traditional insurance. In 1985, in their countries, the goals they Specifically, they propose using waqf for example, the Fiqh Academy of have achieved, the challenges that (or the Muslim practice of endowing Mecca defined halal (or permissible) remain and how best to proceed with religious or charitable endeavours) insurance as inherently cooperative expansion of the sector. to fund takaful setups managed by (involving the sharing instead of the trustees and meet costs such as transfer of risks), with benefit pools government-established reserve charitably constituted on the basis of requirements. Policyholders would donations. Takaful providers’ offerings then continue to contribute to the and related investment income must cooperative risk pools from which additionally avoid paying or receiving benefits are paid, as illustrated in riba (interest), gharar (contractual Figures 32 and 33. uncertainty) and maysir (gambling); surpluses are further returned to Likewise, reformers also suggest policyholders and their communities. using zakah (or compulsory annual From the Muslim perspective, takaful tithes paid by financially better-off is therefore primarily about building Muslims) to subsidise poor solidarity while managing risks, and participants’ premiums. With these not a business for making money. changes, stakeholders hope that more low-income Malaysians (including Malaysia: equity for policyholders non-Muslims) will be able to access Although Malaysia’s takaful market and benefit from effective mini- and is highly developed and well- microtakaful products. regulated, microtakaful isn’t yet prevalent there. Additionally, since even the smallest annual premiums are comparably expensive at about US$ 76, practitioners talk about mini- takaful (instead of microtakaful) in the Malaysian context. To expand and improve the number of takaful products available to low-income people, practitioners have identified several issues that merit focus. These include the proprietary structures of Malaysian insurers (including the country’s 45 — Left to right: eleven takaful providers), which Kazi Mohammad Mortuza Ali, Prime Islami Life Insurance currently prioritise the maximisation Limited, Bangladesh; Capt. M. of shareholder profits over serving Jamil Akhtar Khan, Consultant, lower-income clients. Pakistan; Zainal Abidin Mohd Kassim, Actuarial Partners Consulting Sdn Bhd, Malaysia; Facilitator: Sabbir Patel, ICMIF, United Kingdom.

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Figure 32 Existing Malaysian Takaful model

Shareholders Operator’s Account Operator provides capital to pay Dividends potential qard, expense overruns, and finance solvency margin

Receives Provides wakala administration fees services

Participants Participants’ Pool — Pays wakala fees Contributions — Pays claims — Pays retakaful contributions

Source: Kassim, Zainal Abidin Mohd. Presentation “Microtakaful: The search for a fair deal for participants.” 9th International Microinsurance Conference 2013.

Figure 33 Proposed Malaysian Takaful Model

Public Waqf Waqf funds to be used contributions to finance any Qard from public

Qard Repayment Surplus of qard

Participants Cooperative Pool Pay — Pays expenses contributions — Pays claims — Pays retakaful contributions — Builds contingency reserve

Source: Kassim, Zainal Abidin Mohd. Presentation “Microtakaful: The search for a fair deal for participants.” 9th International Microinsurance Conference 2013. Report 9th International Microinsurance Conference 2013 66

Parallel session 13 Takaful

Pakistan: significant opportunity Sungi Development Foundation Going forward, takaful stakeholders Takaful Health Plan for Northern suggest a number of potential Pakistan’s 180 million people have the Rural Families (Pakistan) improvements including: lowest rate of insurance penetration as a percentage of GDP in Southern Number insured ——Reduced capital requirements, Asia. There is widespread poverty 7,000 families ——Government tax incentives for and low financial literacy in a mini- and microtakaful providers, Covered risks predominantly rural (and difficult to ——Awareness-building campaigns, Health serve) population. Takaful products ——Formation of strategic alliances, previously only provided corporate Premium range ——Development of new distribution (as opposed to individual) coverage PKR 350 (US$ 3.23) for individuals channels. and raised sharia compliance issues. and PKR 1,250 (US$ 11.55) for With a 97% Muslim population, The 2010 flash floods taught many families annually Pakistan has millions of people who at first hand about the importance Lessons learnt in this growing have shunned mainstream financial of insurance, and the potential for market include: services for religious reasons mini- and microtakaful has grown but would react well to a sharia- significantly. As a result, Pakistan’s ——The importance of careful compliant concept. The future of Islamic banking sector is now more consideration of local needs (such mini- and microtakaful in this country firmly established. as affordability and accessibility), looks good. ——Product sustainability (loss ratios Currently available products – increase as policyholders become delivered through MFIs, rural support more cognisant of benefits and and development cooperatives, other claims procedures over time), NGOs and even informal groups ——The difficulty of surmounting created after the flood – insure the bureaucratic hurdles. range of risks presented in Figure 34. In addition, there is a takaful health microinsurance plan (see profile box below).

Figure 34 Range of Mini-Takaful products available in Pakistan Relative complexities

Crop Takaful

Integrated Takaful Packages Most complex

Health Takaful

Annuities / Endowment

Property / Livestock Takaful

Personal Accident / Unemployment

Life Takaful

Least complex

Source: Khan, Akhtar. Presentation “Case study: Micro-takaful in Pakistan.” 9th International Microinsurance Conference 2013. Report 9th International Microinsurance Conference 2013 67

Bangladesh: the PILIL story PILIL – Lessons learnt Small Savings Assurance Plan Forty per cent of Bangladesh’s densely ——The concept and practice of packed 150 million people live below Number insured takaful varies significantly across the poverty line, often in disaster- 28,533 policyholders (as of 31 countries. prone areas of the country’s low-lying December 2012) ——Because of cost concerns, delta. Although 46 non-life (including Covered risks providers in places such as three takaful) and 27 life (including five This 10- or 15-year savings vehicle Malaysia offer mini-takaful instead takaful) insurers offer a wide range of provides death benefits. of micro-takaful. products there, insurance penetration remains low at about 1% of GDP. Premium range ——For practitioners, regulatory Amounts of up to BDT 200,000 issues are particularly pressing. Of The experience of Prime Islami (US$ 2,555.36) are assured, paid in specific concern are the questions Life Insurance Limited (PILIL), monthly, quarterly, semi-annual or of whether takaful products should which began operations in 2001, annual instalments. be regulated separately, whether illustrates how a takaful provider existing companies can offer can successfully launch microtakaful sharia-compliant products through products in this market. Operating In developing, promoting, selling and “takaful windows” into their under the mudaraba model (through servicing these products, PILIL has businesses, and whether capital which investor capital is deployed encountered a number of challenges: requirements can be relaxed. by “working partners” under ——The need to educate customers, contractually set conditions), PILIL ——Product affordability, accessibility insurance professionals and Islamic currently offers three microtakaful and sustainability are demanding scholars about takaful products, savings vehicles: increasing attention. ——The permissibility of life insurance PILIL (Bangladesh) – under sharia law, Deposit Pension Scheme ——Overcoming the Bangladeshis’ negative image of insurance, Number insured ——The dearth of support services 30,338 policyholders (such as marketing firms), Covered risks ——Capriciously priced products from Regular and accidental death unregulated competitors, benefits in the 10–15 year ——Traditional distribution systems retirement savings/pension scheme that do not effectively reach low-income clients. Premium range BDT 200 (US$ 2.56) – BDT 1,000 Going forward, PILIL and other (US$ 12.78) per month stakeholders are contemplating two specific steps that could be of help to a growing number of low-income PILIL–Kalyan Bima people: reduction of distribution costs Number insured (for example, by collecting premiums 71,792 policyholders through mobile technology) and cultivation of trust in the market (by Covered risks reliably paying claims and supporting Death benefits in the variable term the extension of regulatory oversight). retirement savings/pension scheme Premium range BDT 200 (US$ 2.56) – BDT 10,000 (US$ 127.77) per month Report 9th International Microinsurance Conference 2013 68

Parallel session 14 Life

Life insurance is the most popular Bajaj Allianz: Sarve Shakti Microinsurance as safety net and and most widely distributed Suraksha, India business opportunity microinsurance products. This session Number of people insured China Life launched its initial presented three successful case 3,000,000+ microinsurance pilot programme studies of life products from India, in rural areas in 2008, and added China and the Philippines. Insured risks the urban market after a change in Death due to natural or Microinsurance turning into a regulations. Today, it is present in 36 accidental causes macro business provinces nationwide. The company Premium range offers 22 microinsurance products, In India, only 5% of the population US$ 0.73 per month or covering personal accident, illness is covered by an insurance policy, US$ 8 per year and term life with a special focus leaving 800 million people, mainly on tailoring the products to specific in rural areas, without protection. To access the rural market, Bajaj needs. It addresses the rural-urban Insurance companies are realising Allianz partnered with rural banks, differences in product design. Since this untapped market opportunity and microfinance institutions, business traffic management in rural areas is are developing inclusive products correspondence and dairy federations, less strict than in cities, rural products for rural and low-income customers. among others. More than three million do not require the driver to hold a Bajaj Allianz offers a microinsurance lives across India have been covered valid driver’s and vehicle licence. savings product tailored to rural within two years after launching, Furthermore, the supplementary needs. As the key elements of its and Bajaj Allianz has gained 50% accident medical care portfolio is “Sarve Shakti Suraksha” plan, Bajaj of the market share. To remain a a mainstream product which was Allianz sets minimal documentation leader in microinsurance in India, the adapted to rural low-income groups requirements for enrolment company launched several special by reducing exclusions, simplifying and claims. initiatives. These initiatives include payment processes and targeting sending handwritten postcards Sarve Shakti Suraksha includes breakeven pricing. With these and public announcements in local a customised group-based life adjustments, the product could be languages reminding clients about insurance cover that pays a fixed offered with a 20% discount from the policy renewal, as well as role plays, amount on death due to natural or standard premium rate. movies, jingles and games for accidental causes and a savings educational purposes. Since the launch of the component that provides a microinsurance pilot in 2008, China guaranteed maturity benefit and low Modified versions of this product Life has provided coverage to nearly surrender penalties. The policy is are now being developed by Allianz 120 million low-income people. The simple and offers payment options in other regions, such as Indonesia proportion of China’s rural population from monthly to annual basis. The and parts of South America and benefitting from microinsurance has five-year endowment plan charges West Africa, to suit the distinct risen from 0.35% to 7.56% in 2008. a monthly premium of US$ 0.73 or requirements of customers there. China Life has become the main force US$ 8 per year for a minimum policy of microinsurance development in value of US$ 40. The most important China with an 80% market share. features of the product are guaranteed insurance benefits, investment returns on the accumulated savings and withdrawal flexibility. Report 9th International Microinsurance Conference 2013 69

China Life: supplementary The value of claims speed in The Philippines rural accident medical care microinsurance CARD MBA: Life insurance microinsurance As part of the MILK11 client value Insured risk Number of people insured series, the speed of claim processing Life and accidental death 14,400,000 for two micro life insurance products in the Philippines was evaluated. Premium Insured risks US$ 18 per year Accident medical care Funerals in the Philippines involve ceremonies over several days, where Number of people insured Premium family and community come together n/a US$ 1.64 to honour the deceased. The costs MicroEnsure: Life insurance The company has created significant quickly add up and often leave value for low-income groups and families with a substantial financial Insured risk even for the government: a large burden. So life insurance products Life and personal accident number of low-income groups are popular even on a voluntary Premium with access to insurance coverage basis. The two life insurance products US$ 20 reduces the government’s burden and studied, one offered by MicroEnsure strain. Social security systems are and the other by CARD MBA, are Number of people insured not perfect, and low-income people, almost identical. n/a dealing with the consequences Both offer life and accident coverage of risky ventures, often end up in (US$ 1,069 and US$ 723-1,220) for conflicts and disputes with the system. an annual premium (US$ 20 and Microinsurance, by compensating US$ 18). A key differentiator of the them in the event of a loss or injury, products is the speed of claims reduces these conflicts and disputes payments. While CARD MBA provides and helps maintain social stability a one-time payment to cover funeral and harmony. benefits of US$ 723 within eight days, MicroEnsure tranches the payments. The first payment to cover funeral benefits of US$ 324 is transferred after 26 days and the second payment of US$ 745 for life benefits is disbursed after 82 days.

46 — Left to right: Yogesh Gupta, Bajaj Allianz Life Insurance Co. Ltd, India; Facilitator: Craig Churchill, ILO/ Microinsurance Innovation Facility, Switzerland; Hengxuan Su, China Life, China. 47 — Barbara Magnoni, MicroInsurance Centre, United States. 46

11 Microinsurance Learning and Knowledge is a project to assess its value and business case. 47 Report 9th International Microinsurance Conference 2013 70

Parallel session 14 Life

The CARD MBA product simply Lessons learnt offered to cover funeral costs and ——Clients find value in life insurance delivered this promise by paying products combined with a savings the claims quickly and giving the component, especially when the beneficiaries peace of mind. It reduced arrangement provides for secure the reliance on debt and created savings with a competitive yield, tangibility and trust. However, it also flexibility and wide insurance enabled and tempted the family of coverage across all ages and is, the deceased to spend more on the above all, affordable. funeral. The MicroEnsure product, with a slower claims settlement, did ——Microinsurance is viewed as not meet the deadline of covering an important safety net for the the funeral expenses on time, poor. Various trials of providing but provided additional capital microinsurance to low-income for investment and consumption groups have achieved positive smoothing. It reduced the temptation affirmation by government and of overspending on the funeral since low-income groups. the amount had to be borrowed ——When designing new products, first, which could entail a new risk. careful attention should be given Even after repaying this loan, the to the intended outcome. In the beneficiaries were more likely to save, case of life insurance, the timing replace lost income, or invest in a of claims processing can have business or asset. a major influence on whether This product comparison shows the payout is used to cover that the timing of the payouts has funeral-related costs or long-term an influence on how the money is investment purposes. spent. Payout timing should be taken into consideration together with the intentional use of the payout when designing micro life insurance products (see Figure 35).

Figure 35 Implication for product design

Calculating Scheduling Honoring

— Understanding existing — Consider the purpose — Transparency financing mechanisms of coverage, and the and setting clear can maximise value other financing tools expectations is — Target speed of claims available to clients at important based on when cash different times and for — Delays must be is most needed and different needs intentional and clearly unavailable elsewhere — Some delays may communicated actually increase value for some clients

Source: Magnoni, Barbara. Presentation “The value of claims speed in microinsurance: Not always what we think.” 9th International Microinsurance Conference 2013. Report 9th International Microinsurance Conference 2013 71

Parallel session 15 Health 2

Understanding the drivers of claims Because of the limited monitoring In the midst of differences, capacity, no scheme could provide all commonalities in claims patterns Claims matter; they take a central data points requested: for the three schemes were clear. role in client value and viability and A double disease burden (i.e. should be seen as an opportunity ——Diagnosis, presence of both communicable and to improve both. Claims are the ——Length of stay, non-communicable disease) was moment of truth for the insurer to ——Amount claimed, amount paid, evident in each scheme, and similar deliver on the promise of insurance. ——Claimant age, gender, claims frequencies were observed For the insurer, claims are also an ——Occupation, despite the variations in contexts, opportunity for gathering data on ——Urban or rural, products and business models. the performance of the scheme ——Type of hospital. While overall claims frequency and identifying opportunities and Nor could it provide in a single data was within the expected range of threats. To understand claims drivers set the data it did have. Imperfect 2– 4% depending on the disease, the in South Asia more deeply, the ILO data are nevertheless also revealing. schemes still experience challenges in Microinsurance Innovation Facility Mapping by disease group brought achieving viability. undertook a study comparing claims to light the fact that VimoSEWA has data of three schemes with in-patient These findings raise points for further a claims frequency for common benefits: VimoSEWA and Uplift, both consideration: infectious disease that is almost in India, and Naya Jeevan in Pakistan. twice as high as the claims frequency ——Given that so many claims of the other schemes, potentially are for common, preventable opening the door for the introduction diseases, how effective is health of targeted prevention work (see microinsurance in improving health Figure 36). outcomes? ——As the schemes are seeing hospital claims for common, preventable illnesses despite their work around primary care interventions, what is the relationship between out-patient care and hospital claims? Figure 36 ——There is also a need to expand data Reasons for hospitalisation among selected schemes in South Asia on claims drivers more broadly in Claims frequency per 1,000 members the health microinsurance sector.

12

10

8

6

4

2

0 CID NCD Trauma Other 1 Other 2

SEWA Uplift NJ

Source: Holtz, Jeanna. Presentation “Drivers of Claims in Health Microinsurance.” 9th International Microinsurance Conference 2013. Report 9th International Microinsurance Conference 2013 72

Parallel session 15 Health 2

Understanding hospitalisation of The results presented yielded a A provider-driven health plan in Kenya insured women for fever strong indication that the insurance Currently in the design phase, a is compensating for a weak health Since 1992, the National Insurance provider-driven health plan is being system. While there was little VimoSEWA Cooperative has been brought to the market in Kenya indication of a member’s moral offering a voluntary composite through a partnership between the hazard, the possible impact of the microinsurance product for women in Kenyan network of private healthcare woman’s structural position within the India’s informal economy (and their providers KMET, insurer AAR, household may be a factor. Provider families) which includes in-patient mobile network operator SafariCom, moral hazard is unclear. cover. When a study showed a high PharmAccess Foundation and third- rate of hospitalisation of members for These findings offer various party administrator Africa Medilink common illnesses such as fever, the implications for practice and policy. Limited. organisation wanted to understand Firstly, there is a need for health Called Bima Poa, the product is why. In response, a qualitative study education both in regard to preventive being designed and marketed with was undertaken in Gujarat, India, and promotional aspects as well the active participation of the KMET consisting of ten case studies of as for enhanced understanding of network of healthcare providers. This insured urban women hospitalised care. Secondly, the sustainability of approach leverages the providers’ for common illnesses (selected the insurance programme and the existing position in the communities by systematic sampling) and five needs of members must be balanced and recognises that quality of care doctor interviews. when considering benefits. An even and services is vital to the success broader question raised by the study The study found a mix of factors in the of a health plan. It also invests in is whether voluntary insurance can be hospitalisation decision: health clinics for business growth and a substitute for the lack of universal quality improvement. The six pilot ——Deterring factors: fear of hospital, health care? facilities in Kisumu and Siaya, Kenya, household disruption, costs VimoSEWA (India) were selected for having adequate ——Precipitating factors: minor services, finance and administrative persisting symptoms, acute Number of people insured capacities, catchment areas, symptoms, failed outpatient 100,000 individuals strong entrepreneurial traits and a treatment Insured risks community environment. ——Facilitating factors: having Hospitalisation, personal accident, insurance, providers’ perspective life, property Premium range INR 400 (US$ 6–7) per family per annum

48 — Left to right: Facilitator: Thomas Wiechers, GIZ, Germany; Tara Sinha, SEWA, India; Doriane Nzorubara, Pharm Access, Netherlands. 49 — Jeanna Holtz, ILO/ Microinsurance Innovation Facility, Switzerland.

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The product was designed with BimaPoa (Kenya) Lessons learnt the involvement of beneficiaries, Number of people insured: in ——Evidence on claims drivers is healthcare providers and other design phase. 2013 target: 1,068 still limited. partners. It covers all outpatient families. 2018 target: 91, 178 primary care except chronic disease. ——There is a need for health families The premium is US$ 94 per family education on both preventive and per year paid through M-Pesa12 in Insured risks promotional aspects. up to two instalments. This latter Outpatient primary care, maternity ——Sustainability and need must component is expected to facilitate Premium range be balanced when considering automated administration and will KES 8,000 (US$ 94) per family benefits. be supported by sales through field per annum community health workers, health ——Insurance appears to be centres, sales executives and a call compensating for weak centre. Providers will be reimbursed health systems. through capitation with a service fee ——Provider-driven health plans for maternity services, thereby sharing offer a strategy for leveraging the risk and addressing concerns of providers’ existing position in the provider moral hazard (see Figure 37). communities and controlling costs, Although still in the design phase, thus bringing together a range this innovative scheme offers a new of players. way of bringing together a range of actors to develop and provide a health product. While dependent on provider capacity in both sales and size, there is nevertheless a significant opportunity for scale.

Figure 37 Bima Poa provider capitation compensation scheme Number of visits per year per enrollee

Visits per individual per year 4.5

4 Cap Compensation 3.5

3 Risk threshold

2.5 Assumed

2

1.5

1

0.5

0 July May April June March August October January February December November September

12 M-Pesa (m for mobile and pesa Source: Nzorubara, Doriane. Presentation “Bima Poa Health Plan: Provider-Based Health Plan.” for money in Swahili) is a mobile- 9th International Microinsurance Conference 2013. phone based money transfer and micro financing service. Report 9th International Microinsurance Conference 2013 74

Parallel session 16 Academic research 2

Cases reviewed in this session Using data from India’s Ministry Box 6 included an evaluation of a mass of Labour and Employment, the Effects of health insurance health insurance scheme, the effect study will aim to explain district- of health insurance on household level differences in enrolment, ——Health insurance coverage consumption, and the impact of hospitalisation, claims ratios, could play an important role in shocks on poor households. premiums, and average family size smoothing consumption against over the first four years of RSBY. severe health shocks. RSBY: key performance At this stage, CIRM (the Centre for indicators study ——Access to health insurance Insurance and Risk Management) eliminates the negative aspects The first presentation revealed early shared descriptive results of all of severe illness on investment in findings of an ongoing study of four indicators as well as a preliminary girls’ education and agricultural years of data from India’s inpatient regression to uncover the drivers activities. health insurance scheme Rashtriya of enrolment. Swasthya Bima Yojana (RSBY). ——Benefits of social insurance for The descriptive analysis shows that in low-income households could RSBY (India) most areas, enrolment has stagnated come from reducing the use of at around 54%, with the exception Number of people insured costly smoothing mechanisms. of the wealthiest districts whose 37.6 million families; 179.7 million enrolment levels have grown steadily ——The inference of the welfare gain individuals under the poverty line to 68%. (During its first four years, of additional insurance from Insured risks the RSBY scheme was rolled out in consumption smoothing alone is Inpatient health phases, beginning with wealthier incomplete. districts and moving toward poorer Premium range ones.) Hospitalisation rates reached US$ 6.50–9.00 per family per year 5% in the wealthier pilot districts but (US$ 0.50–0.70 per patient) have since dropped to 3%; rates in Source: Kai Liu. Presentation: “Health poorer districts have not exceeded Insurance Coverage for Low-income 2% in their first two years. Premiums Households: Consumption Smoothing and are decreasing over time; this may Investment.” 9th International Microinsurance Conference 2013 be related to low utilisation. Average family size seems to be growing over time. There is no evident pattern of changes in claims ratios.

50 — Rupalee Ruchismita, CIRM Design and Research Labs, India. 51 — Kai Liu, Norwegian school of economics, Norway.

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Some of these statistics call into New Cooperative Medical Scheme Using household panel data from question the level of outreach and (China) 36 counties prior to and after the awareness in the newer, poorer policy (China Health and Nutrition Number of people insured districts, as both enrolment and Survey), it calculates the household- 812 million utilisation are below expected rates. level financial effects of a health shock Insured risks prior to and after the expansion of The team ran a regression analysis Inpatient health the schemes. to uncover the drivers of enrolment. It found that the previous year’s Premium range Prior to the reform, a health shock enrolment and hospitalisation ratios US$ 12 per person resulted in a significant drop in girls’ were significant determinants of (US$ 3 with subsidy) enrolment in school and investment the current year’s enrolment ratio. in livestock and durable goods. After In addition, the state (representing the scheme’s expansion, a health institutional factors) was a significant In 2003, the central government shock had no impact on any of these predictor. Interestingly, the number of launched the New Cooperative three measures. In essence, the years a scheme had been operating in Medical Scheme (NCMS) with the goal health insurance scheme eliminated a district is not significant, and joining of offering health insurance to all rural the impact of health shocks on girls’ the scheme in later phases has a areas by 2010. education and investment in livestock surprisingly positive relationship with and durable goods. Each provincial government was enrolment. One supply-side factor was assigned a number of counties in In addition to this, prior to the reform, identified: when a district’s insurance which to expand coverage. a health shock increased out-of- provider switches from private to pocket expenditure by a substantial public, enrolment tends to drop. By 2008, the programme had been magnitude; the spike in expenditure implemented in all rural areas, Further research will attempt to break was much lower after the reform. covering the entire rural population. down state-level variables into specific The impacts on worker productivity factors, such as field officer incentives, Because insured and uninsured and income were also mitigated government and local health worker individuals are inherently different, once the reform was in place: this engagement and state enrolment it is usually difficult to make causal may be due to improvements in initiatives. Separate regressions to arguments about the impacts of health healthcare quality. explain hospitalisation ratios, claims insurance on household consumption. ratios and premium prices will also be However, the study capitalises on a developed. change in policy – the expansion of China’s new medical scheme from Consumption smoothing 15% to over 95% coverage in just and investment five years – to determine the effect The second case, from the Norwegian of health insurance on consumption School of Economics, looked into the smoothing and investment in the effects of an increase in public health face of health shocks. Where other insurance on low-income households. consumption smoothing mechanisms are present, it is helpful to identify In China, universal health insurance whether insurance is adding value through a Cooperative Medical over and above these other strategies. Scheme (CMS) collapsed in 1979, leaving around 90 percent of all farmers uninsured. Report 9th International Microinsurance Conference 2013 76

Parallel session 16 Academic research 2

Kwara financial diaries Health spending and borrowing were Lessons learnt significantly higher in the immediate A team from the VU University aftermath of health shocks. Purchases ——RSBY enrolment and claims are of Amsterdam and the Tinbergen and saving withdrawals were also somewhat lower than expected Institute presented initial findings higher, though the difference was in newer regions. Institutional from a longitudinal study in which not significant. Surprisingly, the and supply-side factors at the 309 participants in Kwara, Nigeria, health expenditures of insured district level might be part of the chronicled their health and financial and uninsured respondents were explanation. lives weekly for a year. These essentially the same. The majority “diaries” track all cash and in-kind ——In China, health insurance of these expenses were medicines inflows and outflows and all major- eliminated the negative impact purchased from patent medicine asset or health-related events. The of health shocks on investment in vendors. Thus, in spite of their researchers supplemented the diaries girls’ education, livestock and in coverage, insured clients are not with other tools, including in-depth durable goods. It also dramatically visiting facilities as frequently as interviews, baseline and endline lowered out-of-pocket expenses expected and instead continue to surveys, incentivised time preference and productivity losses stemming obtain medicines through alternate and risk-attitude games, and periodic from health shocks. routes. household inventories. The team built ——Financial and health diaries in a preliminary fixed-effects regression Going forward, the team hopes Kwara point to similar health to model how health shocks impact to answer the following research expenditures among insured and household finances for insured and questions: uninsured individuals, indicating uninsured individuals. ——When do people use which tools that insured clients are still seeking to finance shocks? How does this care outside the network. affect their cash flow? ——How do strategies differ between insured and uninsured people? ——How do the strategies differ for minor frequent shocks vs. large infrequent shocks? ——What are the short and long-term financial effects of health shocks? ——How can we explain “overshooting” (an excess of cash 52 — Lukasz Marc, VU flow after a shock)? University Amsterdam and ——Is high frequency data a more Tinbergen Insititute, useful way of understanding the Netherlands. impact of health insurance? 53 — Facilitator: Richard D. Phillips, Georgia State University, United States.

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Agenda Day 3 afternoon sessions 14 November 2013

Plenary 4 Closing Business case and client Closing remarks value: the magical balance and Welcome 2014 Asher Hasan Rahmat Waluyanto CEO, Naya Jeevan, Vice Chairman, OJK, Pakistan Indonesia Martin Hintz Thomas Loster Allianz SE, Chairman, Munich Re Germany Foundation, Germany Facilitators Véronique Faber Executive Director, Michael J. McCord Microinsurance Network, President, MicroInsurance Luxembourg Centre, United States Craig Churchill Chairman, MicroInsurance Network, ILO/ Microinsurance innovation Facility, Switzerland Report 9th International Microinsurance Conference 2013 78

Plenary 4 Business case and client value: the magical balance

Can clients and providers alike Microinsurance improves access and Life insurance products tend to be benefit from microinsurance? The ILO utilisation of health services. Over profitableand are often the quickest Microinsurance Innovation Facility 20 studies have shown a positive products to reach scale. Health is less and the Microinsurance Learning effect of insurance on health access profitable and may require subsidy. and Knowledge (MILK) project of and utilisation, including earlier Private health microinsurance models the Microinsurance Centre shared treatment, higher utilisation of struggle to achieve profitability, while culminating insights into this session modern care, and fewer hospital days. government-subsidised programmes after several years of research on the A handful of impact studies have also reach scale more easily. Catastrophe client value and financial viability of connected these factors to improved microinsurance is unlikely to achieve microinsurance products. health outcomes. viability on its own, based on the history of the insurance market in Does microinsurance provide Microinsurance must be developed countries. client value? complementary – it is insufficient to address risks. Client math studies Standalone microinsurance products Microinsurance can reduce the use showed that insurance payouts tend to be less viable than mixed of burdensome coping mechanisms. accounted for between 30% and 80% models. By sharing overhead Twelve impact studies have shown of shock expenses – in no case did costs with “macro” products, that insurance reduces the use of it cover the full loss. It is important microinsurance premiums can these difficult strategies, including to explore how insurance is used in stay low and affordable while still asset selling, borrowing and relationship to other services; this may generating profit. child labour. illuminate opportunities for linkages Microinsurance requires a long- Appropriate product structure and with these other mechanisms. term perspective and a view of the service response provides value. Microinsurance can stimulate whole value chain. Revenues and Client-centred product design investment. Ten impact studies loss ratios can change substantially and customer service are major have shown increases in agricultural from year to year. It is also crucial to drivers of value. Products should be and business investment among take into account the commissions intentional about the ways in which insured groups. of distributors when thinking clients will use the insurance: for about profitability. instance, the timing of life insurance Is there a business case for payments determines whether or not microinsurance? Scale might be a proxy or a beneficiaries will spend more on the precondition for viability. Products wake, funeral or future consumption that have achieved scale are and investment. concentrated mostly in Asia, and unsurprisingly, most are life and funeral policies. Interestingly, subsidies do not appear to be necessary for scale.

54 — Left to right: Asher Hasan, Naya Jeevan, Pakistan; Martin Hintz, Allianz SE, Germany. 55 — Left to right: Facilitators: Craig Churchill, Microinsurance Network/ ILO/Microinsurance Innovation Facility, Switzerland; Michael J. McCord, 54 MicroInsurance Centre, United States.

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Competition rationalises pricing, This client-focused strategy leads By investing in client engagement, motivates innovation and client to higher sales, which can make a the product can keep acquisition and focus. As more products enter the product profitable. And incorporating retention costs low. The theory is that market, clients have a choice and this value-added services in health once clients experience this value, helps to drive improvements in client and education can lead not only their willingness to pay will increase. value. This is especially evidenced to higher social impact but also to Especially in nascent markets, it in the life microinsurance market, higher retention. is important to experiment with where competition has driven growth, products and to increase consumer The practitioners’ view moderated pricing and encouraged awareness over time. Subsidies can innovation. Two microinsurance practitioners help during this incubation period. illustrated different takes on how What are some examples of Naya Jeevan (Pakistan) products can evolve towards innovations that have benefited both achieving a balance of value and Number of people insured clients and providers? business case: 250,000 (preventive health plan) + Investing in technology such as 25,000 (integrated health insurance) Plans for Naya Jeevan, a health biometric smartcards and livestock insurance product in Pakistan, include Insured risks identification chips has reduced investment in client value upfront Outpatient health fraud and claims ratios for the insurer with the anticipation that scale and and improved claims efficiency for Premium range profitability will follow. Where most clients. In the short term, moving US$ 2/person/month (individual microinsurance products focus on towards high-touch sales strategies domestic workers/families) hospital based care, Naya Jeevan’s is often costly but it improves and US$ 1–1.50/person/month plans focus on the principal need of client engagement, trust and (larger groups) the clients: primary and outpatient understanding. care. They emphasise the creation of tangible value for clients: for example, that all clients receive an orientation and medical examination upon joining.

Figure 38 Magical balance

Value

First generation Second generation Client value

Business value

Time

trade-off win-win trade-off win-win

Source: Churchill, Craig; McCord, Michael. Presentation “The magical balance .” 9th International Microinsurance Conference 2013. Report 9th International Microinsurance Conference 2013 80

Plenary 4 Business case and client value: the magical balance

Allianz argues for a different Conclusions Lessons learnt approach: first achieve scale and Many first-generation products ——Microinsurance provides value then invest in additional value over passed through early struggles to clients by reducing their time. A product should grow with where adding client value meant expenditures, helping them to its clients, becoming more complex sacrificing profits, but they have now avoid stressful financing strategies and valuable as clients grow in their achieved a balance and are improving and increasing access and awareness and willingness to pay. value to remain competitive. Many utilisation of healthcare. Designing This process should be gradual: it can insurers may now take the leap into a client-centred products and be dangerous to add too much value second generation of more valuable providing quality service facilitates too soon. products. As the market becomes these outcomes. The Allianz strategy requires a long- more sophisticated, companies will ——The most financially viable term view: although there may be again sacrifice short-term profits products are life insurance little profit at first, building a brand to dramatically improve value, and schemes, schemes that share will encourage the same clients to buy eventually these investments will resources with macro products, more profitable products in the future. translate into profits for insurers (see and schemes that have Allianz defines profit as “customer Figure 38). achieved scale. gratitude”. If a product is profitable, this is an indication that it has value ——Health products remain the for clients. most difficult value proposition for insurers and often require Although the strategies differ, both subsidising to reach scale. agree that value itself is a driver of profitability. ——As markets become more sophisticated and competition Allianz (Germany) increases, profits are increasingly Number of people (micro)insured driven by investments in client 25 million value. Insured risks ——Technology, high-touch client Life, credit life, disability, personal engagement strategies, and added accident, vehicle, home, livestock, services have all been shown to weather impact both profits and value. ——Some practitioners argue for investing in value first to promote retention and a growing willingness to pay. Others believe that a product must first achieve scale and build a brand and then gradually grow in value and complexity. Report 9th International Microinsurance Conference 2013 81

Conference closure

“The international conference OJK will be establishing a special On behalf of the conference provided a valuable opportunity work unit to collaborate with Bank organisers and participants, to promoters, supporters and Indonesia, and the government Thomas Loster, Chairman, Munich practitioners to learn how to in following up on the President’s Re Foundation, thanked the host implement and develop micro­ directive to open financial access organisations OJK and DAI and their insurance in Indonesia”, said Rahmat to the lower-class society”, Mr staff members for their hard work in Waluyanto, Vice-Chairman of OJK, Waluyanto said. “OJK will educate making the conference such a success. in his closing remarks on behalf the public in regions in Indonesia “In countless ways, you made our of the host organisations. “The timing which lack knowledge of the financial stay here enjoyable and enabled us of the conference is also opportune. sector. There will be several initiatives to take back lasting memories of a The insurance industry in the country involving people in financial worthwhile visit.” has grown by 6% annually over education, which is becoming one of Mr. Loster announced that the the past five years, but the insurers’ the main tasks of OJK.” 10th International Microinsurance reach has so far not extended to On behalf of the Microinsurance Conference will take place in Mexico people far and wide who need the Network, Executive Director on 11-13 November 2014. protection the most.” Véronique Faber thanked the hosts, For this reason, the government in particular for the memorable gala has introduced a financial inclusion dinner at the end of Day 2. programme, the National Strategic Next year will be the 10th edition Blueprint for Indonesia Financial of the conference, she said, and so Literacy, as a key financial sector much has happened since the first activity on its agenda,” he said. “The conference in Munich: “Innovations, conference has taken place at the right growth, evolution, learning from time as a reminder to not relax our failures, global insurers becoming efforts to pursue financial inclusion.” key players, more sophistication Mr Waluyanto added: “One of our and efficiencies, new partnerships efforts to enhance financial inclusion developing and more value-added is through a financial literacy services reaching millions of programme. And I am proud to low-income people.” Access to announce that OJK has decided to effective insurance for low-income launch a National Financial Literacy people is essential to sustainable Day which will be inaugurated by development, she added. “As we look Indonesia’s President Susilo Bambang ahead, we need to make the case for Yudhoyono.” insurance within the complexities of climate change debates, food security issues, chronic unemployment leaving millions of young people without something to aspire to, poor housing, and growing economic disparity”, she finished.

56 — Left to right: Rahmat Waluyanto, Deputy Chairman of OJK Board of Commissioners, Indonesia; Véronique Faber, Executive Director, Microinsurance Network, Luxembourg; Thomas Loster, Chairman, Munich Re Foundation, Germany. 56 Report 9th International Microinsurance Conference 2013 82

Field trip

Market kiosk and housing protection The products How they work against fire DanaKios and DanaRumah together Each contributing donor purchases On the day after the conference, some comprise a dual corporate social packages worth IDR 7,000,000 40 delegates visited Jakarta’s Tanah responsibility (CSR) initiative between (US$ 584.04) to insure blocks Abang Market to learn about the Asuransi Central Asia, provincial of 500 low-income dwellings or DanaKios and DanaRumah kiosk and Jakarta’s Disaster Management vendor kiosks. For each block, the housing microinsurance coverage Agency and local authorities. Based local authorities enumerate the provided to vendors there. on national regulations which housing (which must be legally encourage the use of insurance to registered for inclusion) or kiosks They were welcomed by Ngalim manage risks, the products address involved for Asuransi Central Asia, Sawega, Deputy Commissioner the region’s problem with fire damage which subsequently organises of Insurance, OJK, Bambang (approximately three buildings burn meet-and-greets in the applicable Musawardyana, Head, Jakarta in Jakarta every day) while attempting neighbourhoods and markets to Province Disaster Management to increase financial literacy and build explain the schemes. Agency, and Christine Setyabudhi, the infrastructure necessary for a Chief Executive Officer and President Master policies listing all participants thriving microinsurance sector. Director of Asuransi Cigna Indonesia. in the residential districts and markets Six of the market’s vendors were DanaKios and DanaRumah provide are then furnished to the local presented with oversized placards benefits to the value of US$ 100 and authorities, with copies distributed representing one year’s worth of free US$ 300 respectively, when fires affect to the relevant sub-district and microinsurance benefits (see photo, insured kiosks or housing (regardless market heads as proof of coverage. below). This was followed by a brief of the amount of destruction Information about the products is also question-and-answer session. involved). Initially, the consortium posted prominently in public areas. If of donors (displayed in the photo fire damage occurs, the corresponding below) will offer this coverage on a sub-district or market head submits a complimentary year-long basis to notification letter for Asuransi Central 7,000 targeted low-income households Asia’s review; all claims judged and 3,000 kiosk vendors in Tanah legitimate are paid in cash within Abang and beyond. Other customers ten working days of submission. (and those whose free coverage has Because DanaKios and DanaRumah expired) can purchase the products on were launched so recently (on 14 and line or at participating retailers for a 23 November 2013), no claims have premium of US$ 2. yet been filed.

57 — Twenty-one participants from 9 countries join the field trip to Blok G Market, Tanah Abang, Jakarta to learn about “Microinsurance for Small Kiosks”. The purpose of the Field Trip is to witness and learn about the “Fire Microinsurance Programme” dedicated to the less fortunate people whose house are prone to fire.

57 Report 9th International Microinsurance Conference 2013 83

CSR and microinsurance The CSR partnerships additionally enable participating organisations, DanaKios and DanaRumah are including Jakarta’s Disaster initially being offered through CSR Management Agency, Asuransi partnerships with the donors for Central Asia and local authorities several reasons. to split the costs of what would First, this arrangement provides otherwise be a prohibitively expensive policyholders with a free project. Through their demonstration introduction to microinsurance that effects, however, organisers believe increases their financial literacy that DanaKios and DanaRumah and demand for risk management will encourage stakeholders to tools – something the donors can continue operating within Jakarta’s capitalise on if they introduce their microinsurance sphere. own microinsurance products. To This financing model – and specifically facilitate such innovation, the field microinsurance – further allows trip served as a kick-off for multiple donors to stretch their CSR budgets by CSR-themed events, including a paying significantly smaller premiums two-hour “sharing session” between upfront instead of the ex-post costs of participating donors and low-income disaster mitigation. With the savings DanaRumah beneficiaries from ten made, participating companies can residential sub-districts. The session purchase more coverage or pursue will teach policyholders about other projects. general microinsurance concepts, DanaRumah’s specific benefits, terms The CSR-based model presents an of coverage and claims procedures innovative and cost-effective way of and even opportunities of becoming connecting relevant organisations, microinsurance agents in their developing introductory products, communities. It will also provide and increasing low-income client donors with important insights into familiarity with insurance. It also clients’ needs and potential ways of helps build the infrastructure, serving them. relationships and expertise required for microinsurance to succeed.

58 — Market vendors receive coverage.

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Countries represented

Norway

Sweden

Canada United Kingdom

Netherlands Belgium Germany Luxembourg France Switzerland

Italy USA

Bermuda

Haiti Cayman Islands Jamaica

Mexico Saint Lucia Burkina Faso Nigeria Grenada

Costa Rica Ghana

Togo

Gabon

Brazil The Democratic Republic of the Congo

< 5 participants 5 –10 participants 10 – 50 participants > 50 participants Report 9th International Microinsurance Conference 2013 85

Germany Mongolia Switzerland

Japan

China Lebanon

Jordan Pakistan

India Hong Kong Bangladesh

Vietnam Philippines Thailand

Ethiopia Cambodia Sri Lanka Uganda Malaysia

Kenya Papua Singapore New Guinea

United Republic Indonesia of Tanzania

Zambia Fiji

Zimbabwe Madagascar

Swaziland Australia

South Africa

New Zealand Report 9th International Microinsurance Conference 2013 86

Participating organisations

Australia Germany Insurance Council of Luxembourg Saint Lucia United Kingdom AUS AID A2ii Indonesia ADA EC Global Insurance Bupa Macquarie University Allianz SE Investor Daily Grameen Credit Company Limited ICMIF Syngenta Foundation BMZ Jakarta Times Agricole Microfinance Financial Services Microensure ERGO Insurance Group kabar3.com Foundation Regulatory Authority Bangladesh United States GIZ Keluarga Microinsurance Network Saint Lucia Development INAFI Bangladesh Abt Associates Hannover RE Kementerian Sosial Ri Bank Prime Islami Life Malaysia Columbia University Munich Re Foundation Kontan Insurance Actuarial Partners Singapore EA Consultants Koran Sindo Syngenta Foundation Ghana Consulting Sdn Bhd AXA Asia Regional Georgia State University Maju Jakarta UT Life Insurance Central Bank of Malaysia Office Health Investment & Belgium Manulife LeapFrog Finance BRS – Belgian Raiffeisen Grenada Media Asuransi Mexico Monsanto IFC Foundation GARFIN Magazine AMUCSS SAP ILO/Microinsurance Grenada Co-Operative Mega Life Bermuda Mongolia Swiss Re Innovation Facility Bank Ltd. MicroSave Haverford Bermuda Financial Regulatory Inter-American Milliman Indonesia South Africa Haiti Commission Development Bank Brazil MNC Business BFA Fonkoze Mongolian Insurers Group Bradesco Seguros Neraca Cenfri Association IRI Hong Kong Nestlé Financial Services Board Burkina Faso School of Economic Mercy Corps International Insurance OJK Hollard ILO/Microinsurance Studies, National MetLife Society Pasfm MIP Holdings pty Ltd. Innovation Facility University MiCRO Insurance Swiss Re Pewarta Indonesia MMI Holdings UNDP Catastrophe Risk Cambodia PMedia Indonesia Mutual & Federal India Organisation PKMI Prudential Life Netherlands Old Mutual Agriculture Insurance MicroInsurance Centre Assurance Achmea Wits University Canada Company Milliman Rakyat Merdeka APMG BV Denis Garand and Bajaj Allianz Life Sri Lanka Purdue Sun Life Berende Consulting Associates Insurance Ceylinco Insurance Plc Water.org Syngenta Foundation Micro Insurance ID&CS CARE World Bank Tempo Media Association Swaziland MicroInsurance Centre CIRM Design and The Jakarta Post Nynenrode Business Financial Services Viet Nam Research Labs Cayman Islands The World Bank Universiteit Regulatory Authority SNV HDFC ERGO General Caribbean Catastrophe Tokio Marine Life PharmAccess State Bank of Vietnam Insurance Sweden Risk Insurance Facility WHO VU University TYM ICICI Lombard Bima Amsterdam China ICICI Prudential Life Italy Zambia Switzerland China Life Insurance Insurance International Fund New Zealand Advantage Insurance Accenture AG Microsave for Agricultural Acacia Consulting FinMark Congo, The Democratic ILO/Microinsurance National Insurance Development Limited Focus General Insurance Republic of The Innovation Facility VimoSEWA Insurers Association of LISUNGI GIE - B.U.O. Jamaica Nigeria International Association SEWA Zambia Sprl Financial Services Hygeia Community of Insurance Tata AIG General Pension and Insurance Commission Health Care Supervisors Costa Rica Insurance Authority Jamaica International PharmAccess International Finance Omtrix Inc. ZSIC General Insurance Indonesia Insurance Corporation Norway Ethiopia A.J. Sequis Life MicroInsurance Centre Zimbabwe Japan Norwegian Insurance Ethio Life and General Administrasi Medika Stonestep Insurance and Pensions Japan Risk Specialist Council Insurance SC AIG Insurance Indonesia Swiss Re Commission Norwegian School of ILO Regional Office for Allianz Life Jordan Symbiotics Economics Africa Antara Microfund for Women Syngenta National Bank of ARLDF Pakistan The Global Fund Kenya Ethiopia Berita Sato News GIZ Insurance Regulatory Tanzania, United Channel Jubilee Life Insurance Fiji Authority Republic of Bima Naya Jeevan Pacific Financial International Livestock Financial Sector Bina Dana Arta Inclusion Programme Research Institute Papua New Guinea Deepening Trust Bisnis Indonesia Jumuia Fund for Office of Insurance Intertrade Express Ltd. France Bloomberg TV Indonesia Development Commissioner, Metropolitan Life AXA Business News NHIF Department of Treasury Tanzania CCROM-SEAP France PharmAccess MicroEnsure Central Asia Insurance Philippines Hannover RE PharmAccess Dayin Mitra Lebanon Asian Development Bank MetLife Tanzania Insurance Dewan Asuransi Commercial Insurance Cebuana Lhuillier PlaNet Guarantee Regulatory Authority Indonesia Insurance Solutions Pleiade Conseils DKI Jakarta GIZ Thailand Gabon Equity Life Indonesia GIZ – RFPI Alliance for Financial CIMA Generali Indonesia Insurance Commission Inclusion GIZ - RFPI KCDI Office of Insurance Harian Ekonomi Neraca LGT Venture Commission Harian Republika Philanthropy The World Bank Himalaya Pelindung Mapfre Insular Insurance Togo Hukum Online Corporation The World Bank IFC MicroEnsure IFC / The World Bank Peoples General Uganda Group Insurance Save for Health Uganda Indo Premier News Pira, Inc. Indonesia Finance Today Indonesia Life Insurance Association Info Bank Institute of Technology Bandung Report 9th International Microinsurance Conference 2013 87

Figure 39 Number of participants per continent

Asia 58 % Europe 15 % Africa 14 % America 11 % Australia 2 %

Figure 40 Type of representatives

Insurance and finance industry 22 % Other 19 % Donor agencies, development 17 % and international organisations Microfinance and 10 % microinsurance providers Government and 10 % regulatory bodies Media 10 % Consultants 7 % Academics 5 % Report 9th International Microinsurance Conference 2013 88

Acronyms

ADB CLIS HARITA KMET Asian Development Cebuana Lhuillier Horn of Africa Risk Kenyan network of Bank Insurance Solutions Transfer for Adaptation private healthcare (the Philippines) providers AIC HCHC Agriculture Insurance CSR Hygeia Community KNCU Company (India) Corporate social Health Care (Nigeria) Kilimanjaro Native responsibility Cooperative Union AMUCSS HEF Asociacion Mexicana de DAI Health Equity Fund LCAM Uniones de Credito del Dewan Asuransi Low-cost agency model HMF Sector Social Indonesia Health Mutual Fund MILK Insurance Council of a2ii Microinsurance Indonesia HMI Access to Insurance Learning and Health microinsurance Initiative FSDT Knowledge Financial Sector IAIS BMZ OJK Deepening Trust International Bundesministerium Otoritas Jasa Association of Für Wirtschaftliche GDP Keuangan/Financial Insurance Supervisors Zusammenarbeit Gross domestic product Services Authority of (German Federal IBLI Indonesia GIIF Ministry for Economic Index-based livestock Global Index Insurance PILIL Development insurance Facility Prime Islami Life Cooperation) IC Insurance Limited GIIN BRS Insurance Commission, Global Impact Investing PPP Belgian Raiffeisen the Philippines Network Public-private Foundation ICMIF partnership GIZ CARD International Deutsche Gesellschaft RCT Centre for Agriculture Cooperative and Mutual für Internationale Randomised control and Rural Development Insurance Federation Zusammenarbeit trial CBHI (German Society ICT RSBY Community-based for International Information and Rashtriya Swasthya health insurance Cooperation) communications Bima Yojna/National technology CCROM GPRS Health Insurance Centre for Climate General Packet Radio IDR Programme, India Risk and Opportunity Service Indonesian rupiah UHC Management GPS IFC Universal health CEAR Global Positioning International Finance coverage Center for the System Corporation Economic Analysis of GSU ILO Risk at Georgia State Georgia State International Labour University, USA University Organisation Cenfri ILRI Centre for Financial International Livestock Regulation and Research Institute Inclusion INR CHF Indian rupee Community health fund IRI CHW International Research Community health Institute worker IRDA CIMA Insurance Regulatory Inter-African and Development Conference on Authority Insurance Markets IT CIRM Information technology Centre for Insurance and Risk Management Report 9th International Microinsurance Conference 2013 89

© 2014 Munich Re Foundation Königinstrasse 107 80802 München, Germany Letters: 80791 München, Germany Telephone: +49 (0)89 38 91-88 88 Fax: +49 (0)89 38 91-7 88 88 [email protected] www.munichre-foundation.org Order number 302-08301 Contact Dirk Reinhard [email protected] Design Keller Maurer Design, Munich Lithography Gold, Munich Printed by Gotteswinter und Aumaier GmbH Joseph-Dollinger-Bogen 22 80807 München, Germany Picture credits Pictures 57 and 58: Heidi McGowan Pictures 13 and 15: OJK Picture 14: Dirk Reinhard All other pictures: Munich Re Foundation/OJK “The conference for Indonesia was taking place at a perfect time, coinciding with its agenda to accelerate development of microinsurance in the country.”

Firdaus Djaelani, Commissioner of Insurance, OJK, Indonesia

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