launch of the microinsurance compendium
DESCRIPTION
The ILO’s Microinsurance Innovation Facility launched the second volume of the Microinsurance Compendium with an overview of the major trends of the sector. Take a look at the full presentation, focusing on agriculture, catastrophic risks, client value, health, migration, the role of commercial insurers, regulation, social protection and technology.TRANSCRIPT
Launch of the Microinsurance
Compendium, vol 2
3rd July 2012ILO
Library
Opening remarks
M. Assane DiopExecutive Director
Social protection sector (ILO)
Keynotes
Craig ChurchillTeam Leader
ILO’s Microinsurance Innovation Facility
Social Security and the ILO
John WoodallSocial protection (ILO)
Background on social protection
• The ILO’s concern with the extension of social protection dates back to its foundation in 1919 (e.g. Maternity Protection Convention)
• 1950s onwards• Contingency (risk) focused (9 specific branches)
• Social insurance as primary mechanism of provision
• Complemented by provisions through social assistance• 1980s onwards
• Recognizing prevailing paradigm of informal economy
• Development of Social Protection Floor Initiative (2009-2012)
The potential contribution of microinsurance to social protection
• Microinsurance sits at the intersection between social protection and financial inclusion
• Synergies linking microinsurance to other tools, such as social transfers or social insurance, can enhance the impact of both microinsurance and social protection, for example:• Some social security schemes have been built on a
microinsurance foundation (e.g. health mutuals in Rwanda, Ghana)
• Microinsurance schemes can serve as a distribution channel to reach workers in the informal economy (e.g. CIC in Kenya)
• Microinsurance can provide supplementary benefits to fill in gaps in social protection coverage (e.g. higher benefit levels or covering additional risks )
Opportunities and challenges in health microinsurance
Jeanna HoltzILO’s Microinsurance Innovation Facility
Health Microinsurance
CONUNDRUM: /kəˈnʌndrəm/[kuh-nuhn-druhm] A puzzle or challenging problem
Health Insurance…what’s that?
I should only pay for insurance
if I use it
I don’t visit a doctor unless I’m really sick
My village does nothave a doctor
I don’t have money to paythe hospital up front
I share my insurance card
with my neighbors Our well is
contaminated
Health Microinsurance
Way Forward
• Public Private Partnerships (to achieve scale)
• Expand member benefits (client value)
• Outpatient cover• Value added services• Reduce financing burden
Third party payment (“cashless”) solutions
Health Microinsurance
Reimbursement Claim Model
Health Microinsurance
Third Party (“cashless”) Claim Model
Migration and microinsurance
Samia Kazi AoulMigrant – Social protection (ILO)
Migration & Microinsurance
• Migrant workers & their families face barriers to access health services and social protection
• Needs/products/models• Repatriation, accidents & death, health
• Home/host/hybrid models
• Initial lessons drawn• Legal and regulatory constraints• Marketing target : migrants or family members?• Migrant workers’ status • Partner selection: key role of diaspora associations • Financial literacy & consumer education for migrant family
members
• Health microinsurance: operational challenges
HMI for family members in SenegalMain lessons learned
CHALLENGES OPPORTUNITIES
Number of dependants Priority for 76% of interviewees (family members)
Contribution capacities are limited Remittances are regular & significant
Diaspora mobilisation Involvement of diaspora association & migrants’ families
TrustTransparency & Sound management
- Migrants & local communities’ involvement in a Supervisory board
- Data & risk management delegated to professionals
- Progressive development
To create new structures (mutual/associations)
Link with national social security scheme
Coverage of families with no members in the family being a migrant worker
Possible to include them in a 2nd phase
Quality of health care services To improve access to health services
Key to stimulate
contribution
MICROINSURANCE CLIMATE CHANGE & NATURAL DISASTERS:
Enabling Livelihoods Resilience
Alfredo Lazarte HoyleCRISIS (ILO)
Microinsurance and Climate Change: understanding the Challenges
High Risks &
Vulnerability
Hydro/Meteor
.Events
Climate
Change
Natural Disaster
Climate Change exacerbates hydro-meteorological events increasing risks and exposures to Natural Disasters
Natural Disasters are the effect of a Natural Hazard combined with high vulnerability and risks.
Poverty, informal economy, week institutions, inadequate and insufficient infrastructures, lack of prevention and preparedness are core underlying factors for disasters
Adaptation to climate change and Disaster Risk Management requires a two fold approach: 1. Micro level: reduce exposure to risks2. Macro Level: increase response capacity to
mitigate damages
Enabling Adaptation & Risk Reduction
At the Micro level:1. Identify threats & risks
2. Review economic activities to tackle the challenges and identify opportunities
3. Implement adaptation measures
4. Plan for business continuity
5. Introduce mitigation measures
The International Livestock Research Institute (ILRI) in Kenya seeks to reduce poverty and promote sustainable development for poor livestock keepers and their communities. ILRI, have developed a research program that produces market-mediated index-based insurance products targeted at livestock keepers, particularly those in arid and semi-arid lands (ASALs) to reduce the vulnerability of pastoralist households and the impacts of drought risks due to climate change. Promotion campaign through radio and outdoor activities bundled with broader risk-management education seemed to be effective in building awareness. Complementary technical assistance seeks to influence economic decisions. for mitigation.
Some ILO Tools: Multi-hazard Business Continuity Management: Guidelines for MSE
Local Investments for Climate Change Adaptation in brief
Enabling Adaptation & Risk Reduction
At the Macro level:1. Identify Critical responses
2. Prepare plan for prevention and preparedness
3. Enabling the capacity of National and local institutions for respond effectively
4. Reduce Risk and Exposures of core partners
Some ILO Tools: Pre-disaster Recovery Planning for Employment & Income
ILO/FAO Livelihood Assessment Toolkit for Natural Disasters
The Haitian Microfinance institution Fonkoze started in 2010 the Micro-insurance Catastrophe Risk Organization (“MiCRO”), a donor/investor-capitalized "Public-Private Partnership"(PPP) acting as a parametric catastrophe risk pool, providing the financial tools through which the micro-entrepreneurs in the informal sector can protect themselves against the vagaries of natural hazards risk. The contract with each client specifies that for 3% of the value of the loan they receive, if their home or business premises is destroyed, or if they lose all or most of their business stock as a result of a natural disaster, then they will receive (a) a lump-sum payout of 5000 gourdes (approximately $125), and (b) the reimbursement of their loan from Fonkoze, if they have one. As part of the contract, Fonkoze also commits to providing the client with a new loan, when they are ready to re-start their business activities.
Lessons Learned Connectors
DRR &CC
Adaptation
PPP Sustainability
Living ExperiencesMirror Impact
Communication Campaigns
Change of Economic Culture
MicrofinanceSchemes
ImplementDRR & CC
Adaptation
Reduce of Portfolio
Risks
LIN
KS
WHAT LIN
KS
HOW LIN
KS
WHY
Access to Insurance & Financial Regulation
Peter van den Broeke International Association of Insurance
Supervisors
Supervision and Access to Insurance
Supervision protects policyholders by:• regulating access of insurance providers• monitoring capability of insurers to meet commitments (pay
claims)• checking if customers are treated fairly• keeping the insurance sector stable
Supervision promotes access to insurance and stability
Key areas for insurance supervision
• Application of Insurance Core Principles• Tailor to nature, scale and complexity of inclusive markets (=
proportionality)
• Formalisation / licensing / registration
• Distribution of insurance
• Market conduct by providers:• Suitability of products / product design• Claims settlement / dispute settlement
The technology revolution
Eric GerelleIBEX
Factors supporting the growth of technology in microinsurance
• Scaling the business model to address the mass market
• Technology's role is to reduce and redistribute costs
• Lower administration costs
• Integrate internal functions and link to other organizations
• Reduce fraud
• Gain a better understanding of the microinsurance market
• Create new market opportunities
• Improve customer service
• Technology introduction is a stress test for insurers
• The introduction of technology to support microinsurance will
expose the weaknesses in an insurer's business model
What challenges to scale coverage while providing value?
High investment cost of technology
• Cost of back-office systems inhibits scaling of sustainable
microinsurance solutions
• Infrastructure costs prevents installation of weather data
systems
• Business models of most technology suppliers is not
adapted to microinsurance
Lack of process and data and standards • Donor funded projects create unsustainable software platforms
• Lack of process & data standardization impedes cost reduction
Success through Cooperation
• Cooperation between microinsurers and technology providers to develop cost effective platforms
• Premium Collection• Mobile Premium Collection in Kenya (CIC Life & MPesa)• MI Life Mobile Insurance in Ghana
(MTN Ghana, MicroEnsure, MFS, UT Life, Hollard Insurance)
• Integrated Microinsurance• Life, Health and Livestock Insurance in India (Dhan
Foundation & Eureko) • Product Design
• Integration of client information into the design process in Colombia (Mapfre & Codensa )
• Weather Insurance• Weather Risk Management Services in India (Indian
Government & National Collateral Management Services Ltd)
Crop and livestock insurance
Pranav PrashadILO’s Microinsurance Innovation Facility
Challenges and Opportunities
• Viability• Converting need to demand: knowledge, skills for attitude and
behaviour change… awareness and education
• Operational issues: adverse selection, claims adjudication, value chain partnership management, client servicing
• Size of portfolio: investment and commensurate returns: time to build scale, cost efficiency, convenient product experience, marketing RoI
• Government as a facilitator• Promote trust by regulation, supervision and standards
• Provide premium subsidies to overcome ability to pay restrictions
• Infrastructure for customer education, awareness, enrolment and training
• Technology• Product relevance and simplification• Awareness creation• Diversifying distribution partners; training and effectiveness• Providing insurance ”plus” services… acceptance enhancement
Index insurance interventionsRelevance and scale
• Automated Weather stations and satellite imagery of vegetation being increasingly used
• Enhancement of appropriate location identification and faster claims payout
• Issues of replicability, efficiency, affordability, increased value for the clients, diversity of crops
• Parametric insurance for faster ‘first level’ settlement of claims in case of natural catastrophes
Livestock Insurance: identification and fraud reduction
• Proper cattle identification through Radio Frequency Identification Devices and process re-engineering
• the lower claims ratio (about 40%)… faster approvals and payout• 90% of RFID product clients were very satisfied with the product,
since no impact on cattle productivity• Premium rationalisation for RFID linked product to 3% of the sum
assured … lower than earlier for the traditional ear tag product
Client value from microinsurance
Michal matulILO’s Microinsurance Innovation Facility
Client value from microinsurance
Financial value
Expected value
Covers catastrophic expenses
Unlocks productive activities
Two products in Kenya
Jamii Bora Trust
Start date 2001
Product typeIP health, credit lifeMandatory, credit-linked
CoverageUnlimited IP, outstanding loan cover
Yearly premium KES 2,400 for family
Distribution MFI
Targeted segmentUrban slum dwellersKES 10-20,000
Performance600,000 lives (10.2010)80-120% claims ratio
Jamii Bora Trust CIC, Bima ya Jamii
Start date 2001 2007
Product typeIP health, credit lifeMandatory, credit-linked
IP health (NHIF), hospital cash, AD&D, funeral; Voluntary, standalone
CoverageUnlimited IP, outstanding loan cover
KES 340,000 (IP), KES 50,000 (hospital cash), KES 100,000 (AD&D), KES 30,000 (funeral)
Yearly premium KES 2,400 for family KES 3,650 for family
Distribution MFI SACCOs and MFIs
Targeted segmentUrban slum dwellersKES 10-20,000
SACCO members and MFI clientsKES 10-15,000 (rural)KES 15-30,000 (urban)
Performance600,000 lives (10.2010)80-120% claims ratio
8,300 lives (06.2010)40% claims ratio for life; 120% for health
product
access
cost
experience
#REF!
JBT
CIC
0 1 2 3 4 5
Holistic
Simple
Mandatory
Mature
Client value: key issues
The role of commercial insurers
Brandon MathewsZurich Financial services
http://youtu.be/lW9LKvcMKQo