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?

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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

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What is insurance?

4  Lloyd’s  of  London  

What is insurance?

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•  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]

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Inside  Lloyd’s  of  London  (BBC  photo)  

Some opinions about insurance…

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Blind people describing an elephant…

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Catheryn’s story: UK vs US

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Different views of microinsurance

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Poor  people  

Donors  Financial  analysts  

Insurers  

Microfinance  ins5tu5ons  

Academics  

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•  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

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•  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

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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

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•  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

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•  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?

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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

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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

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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

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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

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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

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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

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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

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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?

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ARE YOU READY TO TAKE ACTION?

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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

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Contact Information

•  Mosleh Ahmed –  info@microfinancewithoutborders.com

•  Dr Phyllis SantaMaria –  Mobile: +44 7715 004 303 –  Landline: +44 207 839 0844 –  Email: phyllis@microfinancewithoutborders.com

•  Gabriel Flores –  Mobile: +44 7834 528 966 –  Email: gabriel@microfinancewithoutborders.com

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