microinsurance: not insurance as you know it!
DESCRIPTION
The UK Microfinance Club meets monthly to discuss the latest developments in microfinance around the world. Wednesday 17 October saw discussion around Microinsurance - uncovering the important value, importance and pitfalls. Global expert in Microinsurance, Mosleh Ahmed provided expert input to the material that was presented by Microfinance without Borders to the UK Microfinance Club.TRANSCRIPT
MicroInsurance
Not insurance as you know it! Gabriel Flores
Dr. Phyllis SantaMaria
Warm up! Walk around and introduce yourself to three other people
• Name • What you do • Why are you here tonight?
2
After tonight’s session, you will be able to...
• Distinguish the benefits of microinsurance and how it differs from conventional insurance
• Describe how microinsurance helps people maintain and possibly improve their position on the economic pyramid
• Select a way to get involved with microinsurance
3
What is insurance?
4 Lloyd’s of London
What is insurance?
5
• Unemployment: Gov’t
• Disaster: Gov’t • Security: Gov’t &
Private • Injury: Corporate • Professional:
Individuals
• House • Life • Car & Consumer
Goods • Health: NHS &
Private
• Pensions: Gov’t & Private
What are your opinions about insurance?
– [insert photo of Lloyd’s building]
6
Inside Lloyd’s of London (BBC photo)
Some opinions about insurance…
7
Blind people describing an elephant…
8
Catheryn’s story: UK vs US
9
Different views of microinsurance
10
Poor people
Donors Financial analysts
Insurers
Microfinance ins5tu5ons
Academics
11
• A loan, NO insurance, NO savings
• 43, two sons, husband died
• NO assets, home, job, money, help from in-laws
• Moved to Dhaka, Bangladesh, seeking job and shelter
1998
Budi, a Borrower
12
• A loan, NO savings • Insurance with Delta Life
on her husband’s life • 29, widowed, 3 young
children • Her in-laws demanded
the life insurance money • She refused, got thrown
out with her three children
1998
Jorina Bibi, a Borrower with Insurance
13
2008: Budi and her children • She and her two sons
begged, scavenged food and slept on pavements in Dhaka
• US$ 0.50 a day • We lost contact
– Budi disappeared – probably victim of a human trafficking gang
– Elder son, then 16, in jail for robbery
– Younger son, then 13, breaking bricks at a construction site
Photo by courtesy of Mike Bedner, Alberta, Canada; Rotary GSE Member on visit to Bangladesh
1998
2008: Jorina Bibi, a Delta Life Policyholder
14
• With help of friends and an NGO she moved into a home for destitute women
• With part of £80 from her husband’s life insurance – rented some land – built a hut to live in – set up a poultry
business A Delta Life Microinsurance beneficiary and her poultry farm
Photo by Gono-Grameen Bima Manager, Delta Life
2008
2008: Jorina Bibi’s and her children’s success
15
• Today a micro entrepreneur – employs 4 people – earns Taka 8,000 (£64) per
month
• Her children are successful – Daughter got a teaching degree
and teaches at a local school – Both her sons finished college
and joined her business
Jorina Bibi’s daughter Nasreen (1st from left), a teacher, with some of her colleagues
Photo by Gono-Grameen Bima Manager, Delta Life
How does microinsurance help cushion the impact of shocks?
16
Destitute
Loan Cycles and Impact of Losses
Econ
omic
Lev
els
Wealthy
Non-poor
Moderate poor
Extreme poor
Vulnerable non-poor
The 4 main microinsurance products
Health Insurance: needs health care providers
Life Insurance: oFen given by MFIs
Livelihood Insurance: machinery
Crop and livestock Insurance: needs sophisMcated data such as 50 yrs’ rainfall
How does microinsurance differ?
Needs based Groups Fast Response
EducaMon On your doorstep CollaboraMon
MARKET SIZE: 4 BILLION PEOPLE GLOBALLY (2-‐3 BILLION POLICIES)
Delivery channels
19
Low Income People
Employers
Bank, Post office
Suppliers
Insurance companies
Hire Charge service providers
MFIs NGOs
On-line & ATM
Cell phones Smart cards
Retailers
Labour unions
Cooperatives
Mutuals
Life insurance with flexibility Amparar Policy by LA EQUIDAD, Colombia for their cooperative members only • Monthly premium US$ 1.00;
basic coverage US$ 1,250.00 • 50% pay out for treatment in
case policy- holder contracts incurable disease while insured
• After policyholder’s death for two years – Child’s education expenses – Medical expenses for dependents – Monthly food vouchers – Utility bills
Beneficiaries of a La Equidad AMPARAR policy by courtesy of La Equidad
20
Indexed rainfall insurance BASIX- India • Collaboration: World Bank,
IFC, and ICICI Lombard Bank,
July 2003: benefits indexed to rainfall
• 3rd Year – 2005 – 23,080 policyholders
• 5th year – 2007 – 37,685 policies sold
• 8th year – 2010 – 97,700 policyholders
NOW IN 7 STATES in INDIA, PRODUCTS INCREASED Farmer in India waiting for rain by courtesy of BASIX
21
Comprehensive healthcare with ID card
Microcare - Uganda • Provides in-patient and out-
patient treatment and prescription medicine
• Several thousand policy holders
• Started as a NGO; now a licensed Uganda insurance company
• A Microcare desk at a participating hospital has a third party administrator to reduce moral hazard by beneficiaries or the clinic
Photo courtesy of MIRT
22
Integrated insurance package
Vimo SEWA co-op, India • Three packages: death,
sickness, loss of assets • Annual premiums or fixed
deposits • Special benefits for fixed
deposit members – Maternity $6.90 – Dentures $13.80 – Hearing aid $23.00
Marketing of SEWA through outdoor folk theatre. Photo courtesy of MIRT
23
Key challenges Clients • Negative attitude • Don’t see the value • Low and irregular income
Delivery channels • Poor infrastructure • Low insurance competence • Slow claims handling
Insurance products and industry • Little knowledge of the
market • Low premiums • High transaction costs • Clients’ high expectations • Lack of data for pricing • Low retention rate • Few health care providers
to link with health products
24
Cautions about microinsurance!
• NOT a ‘magic bullet’ • NOT the right risk
mgmt solution for all poor people
• Microfinance institutions – Don’t have all skills
required – Must assess expenses
and risks before offering Microinsurance
– MUST NEVER act as insurers unless they have huge resources
25
What new things have you encountered tonight?
• What are the benefits of microinsurance?
• How does it differ from conventional insurance?
• How does microinsurance help people maintain and possibly improve their position on the economic pyramid?
26
ARE YOU READY TO TAKE ACTION?
27
How to get involved • Tweet your insights to @MicrofinanceWoB (We’ll Tweet
back!) • Sign up to our mailing list on your Smartphone
www.microfinancewithoutborders.com and get copies of tonight’s presentation
• Book for our free event: Practical Microfinance in Action!
Tue 13 Nov, 6.30-9 pm at Allen & Overy • Enquire about MWB’s
– Practical Microinsurance Consultancy Courses – Consultancy support for Insurers, Regulators and Microfinance
Institutions
28
Contact Information
• Mosleh Ahmed – [email protected]
• Dr Phyllis SantaMaria – Mobile: +44 7715 004 303 – Landline: +44 207 839 0844 – Email: [email protected]
• Gabriel Flores – Mobile: +44 7834 528 966 – Email: [email protected]
29