Edited byCraig Churchill and Michal Matul

Protecting the poorA microinsurance compendiumVolume II

Microinsurance is a critical tool to help poor people manage risks e ciently. � e increasing interest for base-of-the-pyramid insurance is fueling the rapid development of innovative products and delivery mechanisms that combine sustainability and value to clients. � is volume comes at the right time to pull together key lessons so far and distill the latest innovations from an impressive roster of market leaders.

Tilman EhrbeckCEO, Consultative Group to Assist the Poor (CGAP)

� is volume reinforces our experience that microinsurance works well when it stands on four strong pillars. First, the product has to deliver tangible value to the bottom of the pyramid at an a ordable price point. Second, the business has to make commercial sense to ensure long-term sustainability. � ird, the programme has to be aligned with the national policies on social protection and nancial inclusion. A good working relationship and shared understanding between the government and the insurance company is a great enabler. Last but not least, microinsurance must leverage technology to enhance outreach, lower distribution costs, simplify processes and improve the quality and consistency of delivery.

Bhargav DasguptaCEO, ICICI Lombard

� is insightful compendium makes a critical contribution to advancing nancial inclusion and the impact of microinsurance around the globe, furthering the understanding and discussions among regulators, supervisors and key stakeholders in improving inclusive insurance markets.

Yoshi KawaiSecretary General, International Association of Insurance Supervisors (IAIS)

� is second volume of Protecting the poor is a unique collection of recent practices and emerging ideas in microinsurance. It covers numerous innovations that have emerged in recent years to meet the challenges of providing insurance to low-income people, from new products and delivery channels to consumer education tools, while examining changes in regulations, providers and schemes. As the microinsurance community dramatically evolves and millions more low-income households have access to better insurance cover, this timely second volume will be an invaluable resource for policymakers, insurers, academics and NGOs.

ILO and Munich Re Foundation, PublishersISBN 978-92-2-125744-8

Supported by

Protecting the poorA m

icroinsurance compendium

Volume II

Edited by C

raig Churchill and M

ichal Matul

Protecting the poor A microinsurance compendium Volume II

Edited byCraig Churchill and Michal Matul

Protecting the poor A microinsurance compendium Volume II

Publications of the International Labour Office enjoy copyright under Protocol 2 of the Universal Copyright Convention. Nevertheless, short excerpts from them may be reproduced without authorization, on condition that the source is indicated. For rights of reproduction or translation, application should be made to ILO Publica-tions (Rights and Permissions), International Labour Office, CH-1211 Geneva 22, Switzerland, or by email: pubdroit@ilo.org. The International Labour Office welcomes such applications. Libraries, institutions and other users registered with a reproduction rights organization may make copies in accordance with the licences issued to them for this purpose. Visit www.ifrro.org to find the reproduction rights organization in your country.

International Labour Office, CH-1211 Geneva,Switzerlandwww.ilo.orgin association with Munich Re Foundation80791 München,Germanywww.munichre-foundation.org

Copyright © International Labour Organization 2012 First published 2012

ISBN 978-92-2-125744-8Munich Re Foundation order number302-07392

Cover photo: L. Rain, © ILO

Printed in Germany

The designations employed in ILO publications, which are in conformity with United Nations practice, and the presentation of material therein do not imply the expres-sion of any opinion whatsoever on the part of the Inter-national Labour Office concerning the legal status of any country, area or territory or of its authorities, or concern-ing the delimitation of its frontiers. The responsibility for opinions expressed in signed articles, studies and other contributions rests solely with their authors, and publication does not constitute an endorsement by the International Labour Office or Munich Re Foundation of the opinions expressed in them. Reference to names of firms and commercial products and processes does not imply their endorsement by the International Labour Office or Munich Re Foundation, and any failure to mention a particular firm, commercial product or process is not a sign of disapproval. ILO publications and electronic products can be obtained through major booksellers or ILO local offices in many countries, or direct from ILO Publications, International Labour Office, CH-1211 Geneva 22, Swit-zerland. Catalogues or lists of new publications are avail-able free of charge from the above address, or by email: pubvente@ilo.org Visit our website: www.ilo.org/publns

Acknowledgements xiv

Table of acronyms xvi Introduction 1

Craig Churchill and Dirk Reinhard

Part i Emerging issues 7

1 Current trends in microinsurance 8 Craig Churchill and Michael J. McCord 1.1 The definition of microinsurance is becoming operational 8 1.2 More low-income households are covered by insurance 11 1.3 Stakeholders in microinsurance are becoming more diverse 18 1.4 Providers are offering an expanding and varied range of products 32 1.5 There is greater concern that insurance provides value to the insured 36 1.6 Conclusion 37

2 The potential of microinsurance for social protection 40 Yvonne Deblon and Markus Loewe 2.1 Scope and functions of social protection 42 2.2 Social protection in developing countries 46 2.3 Microinsurance as a social protection tool 49 2.4 Conclusion: The need for a systematic approach 58

3 What is the impact of microinsurance? 59 Ralf Radermacher, Heidi McGowan and Stefan Dercon 3.1 What is impact? 59 3.2 The current literature 62 3.3 Expected and observed impact of microinsurance 65 3.4 Conclusion 81

4 Microinsurance and climate change 83 Thomas Loster and Dirk Reinhard 4.1 The impact of climate change 84 4.2 Microinsurance and weather events 87 4.3 Operational challenges and solutions 98 4.4 Role of key stakeholders 104 4.5 Conclusion 109

Contents

vi Contents

Part ii Health insurance 111

5 Innovations and barriers in health microinsurance 112 Sheila Leatherman, Lisa Jones Christensen and Jeanna Holtz 5.1 Evidence of the impact of health microinsurance 113 5.2 Demand and supply challenges for health microinsurance 116 5.3 Innovations and interventions for health microinsurance 122 5.4 The way forward 128

6 Third-party payment mechanisms in health microinsurance 132 Pascale LeRoy and Jeanna Holtz 6.1 Current TPP practices 134 6.2 Establishing and managing a TPP mechanism 137 6.3 Conclusions 153

7 The elusive quest for estimates of willingness to pay for health microinsurance 156 David Dror and Ruth Koren 7.1 Methods of eliciting WTP 158 7.2 Search of relevant WTP experiments 160 7.3 Key findings 163 7.4 Lessons learned and implications for practitioners 172

Part iii Life insurance 175

8 Savings in microinsurance: Lessons from India 176 Rob Rusconi 8.1 Saving and insurance considerations 176 8.2 Products considered 180 8.3 Key lessons learned 186 8.4 Concluding thoughts and way forward 195

9 Improving credit life microinsurance 197 John Wipf, Eamon Kelly and Michael J. McCord 9.1 What is credit life insurance? 198 9.2 Who benefits from credit life? 200 9.3 Quantifying the value of credit life 204 9.4 Existing expanded products 207 9.5 Operational aspects 211 9.6 Conclusions and recommendations 215

10 Funeral insurance 217 Christine Hougaard and Doubell Chamberlain 10.1 Funeral cover matters 217 10.2 Key characteristics of funeral cover 223 10.3 Delivering value 228 10.4 Conclusion 235

Part iv General insurance 237

11 Designed for development impact: Next-generation index insurance for smallholder farmers 238

Michael R. Carter 11.1 Agricultural index insurance basics 239 11.2 Designing contracts to minimize basis risk 244 11.3 Interlinking insurance and credit 249 11.4 Conclusion: Designed for development impact 254 Appendix: Simulation analysis index insurance versus self-insurance 254

Contents vii

12 Livestock insurance: Helping vulnerable livestock keepers manage their risk 258 Anupama Sharma and Andrew Mude 12.1 Why livestock insurance? 258 12.2 Livestock insurance provision to the poor 260 12.3 Difficulties in providing livestock insurance 264 12.4 Catalysing the market: Innovations to make livestock insurance viable 265 12.5 Conclusion 271

Part v Insurance and the low-income market 273

13 The psychology of microinsurance: Small changes can make a surprising difference 274 Aparna Dalal and Jonathan Morduch 13.1 Small changes can make a surprising difference 274 13.2 Strategies 275 13.3 Conclusion 284

14 Emerging practices in consumer education on risk management and insurance 286 Iddo Dror, Aparna Dalal and Michal Matul 14.1 Content of consumer education 287 14.2 Delivery of consumer education 291 14.3 Sustainability and business model for consumer education 294 14.4 Conclusion 298

15 Improving client value: Insights from India, Kenya, and the Philippines 300 Michal Matul, Clémence Tatin-Jaleran and Eamon Kelly 15.1 Client value assessment framework and tool 300 15.2 Value-creation opportunities 304 15.3 Setting benchmarks: Informal mechanisms and social security schemes 316 15.4 Relative value from products at the country level 318 15.5 Conclusions 328

16 Microinsurance that works for women 331 Anjali Banthia, Susan Johnson, Michael J. McCord and Brandon Mathews

16.1 Gender and risk in poor households 332 16.2 Traditional risk management and coping strategies 336 16.3 Gender-sensitive microinsurance 340 16.4 Conclusion: A call to action 346

17 Formalizing the informal insurance inherent in migration: Exploring potential links between migration, remittances and microinsurance 349

Jennifer Powers, Barbara Magnoni and Emily Zimmerman 17.1 Demand considerations for migration-linked insurance 350 17.2 Framework: The 3Hs of migration-linked insurance 352 17.3 Legal and regulatory challenges 353 17.4 Operational opportunities and challenges to migration- and remittance-linked insurance 355 17.5 Conclusion 364

Part vi Insurers and microinsurance 367

18 Is microinsurance a profitable business for insurance companies? 368 Janice Angove and Nashelo Tande 18.1 Framework for the assessment of profitability 369 18.2 Context and setting the scene 370 18.3 Financial analysis and drivers of profitability 376 18.4 Conclusions and recommendations 396

viii Contents

19 Teaching elephants to dance: The experiences of commercial insurers in low-income markets 399

Janice Angove, Martin Herrndorf and Brandon Mathews 19.1 Involvement of commercial insurers in microinsurance 400 19.2 Internal organization: Models for success 406 19.3 External outreach: Building market relations 414 19.4 Conclusion 425

20 State and market synergies: Insights from India’s microinsurance success 427 Rupalee Ruchismita and Craig Churchill 20.1 Industry overview 429 20.2 Products 433 20.3 Distribution channels 450 20.4 Conclusion: Catalysts of success 458

21 Pricing of microinsurance products 464 Denis Garand, Clémence Tatin-Jaleran, Donna Swiderek and Mary Yang

21.1 The pricing cycle 465 21.2 Gather and analyse data 467 21.3 Setting assumptions 473 21.4 Determining the premium 475 21.5 Monitoring and evaluating product experience 479 21.6 Refining the premium 479 21.7 Summary example 480 21.8 Conclusion 482

Part vii Delivery channels and intermediaries 485

22 New frontiers in microinsurance distribution 486 Anja Smith, Herman Smit and Doubell Chamberlain 22.1 Rethinking distribution 487 22.2 Comparing the distribution channels 492 22.3 Emerging themes 495 22.4 Moving forward 501

23 Microinsurance intermediaries 503 Alex Bernhardt, Roland Steinmann and Michael J. McCord 23.1 Insurance intermediation: Conventional vs. micro 504 23.2 Microinsurance-only intermediaries 510 23.3 Traditional intermediaries with some microinsurance activities 516 23.4 The value of microinsurance intermediation 520 23.5 Conclusions 524

Part viii Infrastructure and environment for microinsurance 527

24 The technology revolution in microinsurance 528 Anja Smith, Eric Gerelle, Michiel Berende and Grieve Chelwa 24.1 Benefits and risks of technology in microinsurance 528 24.2 Client-interfacing technology 531 24.3 Transaction processing 538 24.4 Data analysis 542 24.5 The promise of mobile phones 543 24.6 Conclusion 546

Contents ix

25 Access to insurance and financial-sector regulation 548 Arup Chatterjee 25.1 Financial inclusion and insurance 549 25.2 Prudential role and developmental role – is there a trade-off? 550 25.3 Regulatory interventions through enabling policy frameworks 553 25.4 Treatment of MCCOs and informal providers 562 25.5 Recognizing alternative distribution channels 564 25.6 Access to insurance and consumer protection 568 25.7 Conclusion 571

26 Protecting consumers while promoting microinsurance 573 Rodney Lester and Katharine McKee 26.1 Microinsurance market characteristics relevant for consumer protection 575 26.2 Towards a consumer protection framework for microinsurance 579 26.3 Designing and implementing special consumer protection regimes for microinsurance 586 26.4 Non-legislative and non-regulatory consumer protection 589 26.5 Emerging good practices 592 Appendix 595

About the authors 596 Bibliography 604 Index 622

List of tables 1.1 Estimated outreach of microinsurance: Millions of risks covered 11 2.1 Overview of social protection schemes organized by the various players 47 3.1 Impact assessment framework and evidence from studies reviewed 66 4.1 Projections of extreme weather and climate events 85 4.2 Possible effects of climate change in classes of insurance, 2030–2050 87 4.3 Dimensions of insurance: Scale, products, beneficiaries 93 6.1 Summary of case study information 133 6.2 Possible advantages and disadvantages of TPP mechanisms 137 6.3 Advantages and disadvantages of the different payment methods 141 7.1 Advantages and disadvantages of different elicitation methods 159 7.2 Overview of the data, locations, and method of elicitation of WTP used 161 7.3 Association between income and WTP 164 7.4 Association of WTP with socio-economic parameters 166 7.5 Effect of healthcare availability on WTP 167 7.6 Effect of health expenditure on WTP 169 8.1 Key features of products assessed 181 9.1 Key performance indicators for credit life 204 9.2 Value for money of credit life programmes (ranked by claims ratio) 206 10.1 Thembi’s coping strategies 222 10.2 Types of funeral insurance providers 223 12.1 Types of risk in livestock livelihoods 259 12.2 Chronological events in the insurance history of India 261 12.3 Comparison of different techniques for identification of livestock 266 12.4 Index-based insurance experiments for livestock insurance 268 12.5 Parameters of performance for LPS, Andhra Pradesh, India 270 13.1 Summary recommendations 285 14.1 Content areas for CARE India 288 14.2 Business models – strengths and challenges 297 14.3 Examples of monitoring and evaluation indicators 298 15.1 Products included in the testing of the client value assessment tool 305 15.2 Products included in the PACE analysis for Kenya 319 15.3 Products included in PACE analysis, India 323

x Contents

15.4 Products included in the PACE analysis, Philippines 326 17.1 General characteristics of the 3H models 353 17.2 Partners for marketing and distribution of migration-linked microinsurance 359 17.3 Summary of opportunities and challenges of the 3H models 363 18.1 Framework for assessing the profitability of microinsurance initiatives 370 18.2 Overview of microinsurance initiatives 372 18.3 Gross insurance profit ratios 377 18.4 Premium volumes and covered lives 381 18.5 Growth in premiums and renewal rates 382 18.6 Gross claims ratios 388 18.7 Expense ratios 391 19.1 Microinsurance activities of commercial insurers and their measures of success 406 19.2 Various approaches to structuring the business 414 20.1 Making subsidies work 431 20.2 Comparative features of the four largest mass health insurance schemes 449 21.1 Potential sources of data to price a health product for a farmers’ cooperative 471 21.2 Common errors in deriving health insurance assumptions from scant data 473 21.3 Sample risk premium calculations 475 21.4 Organization B, expected health claims 481 21.5 Organization B, incidence results 481 22.1 Perspectives on distribution success 489 22.2 Summary of insurance business models considered 490 22.3 Characteristics of the distribution channels 492 22.4 Strengths and weaknesses of distribution channels 494 23.1 Key differences between insurance and microinsurance intermediation 508 24.1 Main categories of technology in microinsurance 530 24.2 Technology in client enrolment and premium payment 532 25.1 G-20 principles for innovation financial inclusion:

Country examples from the insurance sector 554 25.2 Regulatory definitions of microinsurance products 558 25.3 Alternative distribution channels and regulatory issues 565

List of figures 1.1 Microinsurance risks covered in Colombia 13 1.2 Insurer motivations for entering microinsurance 21 1.3 Distribution channels for commercial insurers 25 1.4 International Microinsurance Conference attendance 32 1.5 Evolution of microinsurance products and processes 33 1.6 The demonstration effect chain of microinsurance market development 38 2.1 The gap in social protection coverage in a typical developing country 41 2.2 The promotional function of social protection:

Breaking the vicious circle of poverty and vulnerability 43 2.3 Possible roles of microinsurance as a social protection instrument 52 4.1 Global and continental temperature change 84 6.1 TPP mechanism 134 6.2 Integrated care and financing model 135 6.3 Reimbursement model 135 11.1 A stylized rainfall index insurance contract 241 11.2 Yield prediction using satellite data 247 11.3 Calculation of VCI using maximum and minimum NDVI 248 11.4 Insuring the traditional technology 255 11.5 Interlinking insurance and credit for technology take-up 256 14.1 Hollard’s conversational map 290 14.2 CHAT game 292 15.1 Client value creation model 302 15.2 PACE added value analysis framework 303

Contents xi

15.3 PACE evaluation of informal risk management and NHIF in Kenya 318 15.4 Client value PACE analysis, Kenya 321 15.5 Client value PACE analysis, India 324 15.6 Client value PACE analysis, Philippines 328 16.1 Lifecycle events and risks for poor women 331 16.2 Examples of risk strategies and implications 340 19.1 Model to develop sustainable microinsurance initiatives 406 20.1 Total rural and social sector premiums for general insurers (2009–10) 432 20.2 Growth of NAIS coverage, 2001–09 436 20.3 NAIS performance (2001–09) (in US$ million) 437 20.4 Chronological evolution of pro-poor mass health insurance schemes in India 446 20.5 The top five products offered by MFIs 454 21.1 Iterative process of pricing cycle 466 21.2 Determining the premium 475 22.1 Innovation throughout the distribution process 488 23.1 Product delivery supply chain 505 23.2 Delivery channels 506 23.3 Various reinsurance cover structures 519 25.1 Regulatory and supervisory levers to enhance access to insurance 555

List of boxes 1.1 Supply and demand for microinsurance in South Africa 15 1.2 Origins of microinsurance 19 1.3 Critique of the BoP approach 22 1.4 The Access to Insurance Initiative 27 2.1 The National Health Insurance Act of Ghana 54 2.2 The Viet Nam social risk funds 56 3.1 Impact of social health insurance schemes 64 3.2 Impact of “Yeshasvini” Health Insurance Programme in India 70 3.3 Insurance, credit, and technology adoption in Malawi 72 4.1 ICICI Lombard’s rainfall index cover, India 88 4.2 Drought insurance, Malawi 90 4.3 HARITA (Horn of Africa Risk Transfer for Adaptation), Ethiopia 92 4.4 CLIMBS (Coop Life Insurance and Mutual Benefit Services), Philippines 94 4.5 MiCRO (Microinsurance Catastrophic Risk Organization), Haiti 95 4.6 Caribbean Catastrophe Risk Insurance Facility (CCRIF) 97 4.7 Catastrophic farming insurance for climatic events, Mexico 98 4.8 SystemAgro, PPP approach in Turkey 108 5.1 Expanding member benefits in India 122 5.2 Making premium payments easier 126 5.3 Mobile technology to connect doctors with rural patients 128 6.1 Understanding the vocabulary: “cashless” and TPP mechanism 133 6.2 Claims models in HMI schemes 136 6.3 GRET-SKY’s experience with capitation 143 6.4 A co-payment to limit over-utilization by clients induces moral hazard by providers 145 6.5 Preventing fraud without photograph identification 146 6.6 Monitoring the service quality of health care 148 6.7 Improving quality of care 149 6.8 The claims administration function 152 6.9 Balancing premium and capitation payments 153 8.1 Channel experimentation in Max Vijay 194 9.1 Impact on clients 201 9.2 Credit life as a competitive advantage in Cambodia 202 9.3 Benefit flows in credit life 203 10.1 Mapping funeral insurance 218 10.2 Why have multiple funeral insurance policies? 221

xii Contents

10.3 Alternative distribution: Pep-Hollard, South Africa 227 10.4 Alternative distribution: CODENSA Mapfre, Colombia 228 10.5 The importance of claims: Alternative Insurance Company (AIC), Haiti 232 10.6 The role of market research in designing funeral-plus products 233 12.1 Livestock risk management strategy by BASIX, India 263 12.2 Improving the viability of livestock insurance at IFFCO-Tokio 267 12.3 Index-based livestock cover in Mongolia 269 12.4 Paying the premium after the term? 271 14.1 Content areas for Swedish Cooperative Centre and Microfinance Opportunities 289 15.1 Client value definition and value creation process 301 15.2 Preferences for higher co-payments (and lower premiums) at PWDS in India 311 15.3 CARD’s 1-3-5 claims settlement model 312 15.4 Process of improving client value at MicroEnsure 313 15.5 Process of improving client value at Uplift 315 15.6 Client value from informal risk-sharing mechanisms in Kenya 316 16.1 Bolivia’s BancoSol negotiates to deliver better benefits to women 341 16.2 Colombia’s La Equidad structures life insurance benefits to protect children 343 16.3 India’s SEWA Bank: A pioneer in gender-sensitive microinsurance 345 17.1 SegurCaixa’s repatriation and accidental death insurance 352 17.2 A review of Indonesia’s mandatory overseas workers insurance 356 17.3 The right way to market? Medical plans for the families of

Guatemalan migrants in North America 357 17.4 Seguros Futuro: Recognizing the need for consumer education 358 17.5 Pioneer Life’s SparxX 359 17.6 Pioneer’s Savings and Wellness Clubs 360 18.1 Measurement of profitability 370 18.2 Regulatory implications for premiums 385 18.3 Creating a dedicated sales force 387 18.4 Re-pricing risk 389 18.5 Reinsuring weather risk 391 19.1 Increasing diversity of products by commercial insurers 401 19.2 Innovative distribution used by commercial insurers 402 19.3 Zurich’s global “emerging consumer” microinsurance practice 405 19.4 Mixed reactions from management 408 19.5 Creating space for errors and learning 410 19.6 Iterative learning process 411 19.7 Microinsurance in multinational insurance companies 413 19.8 Meeting the market where it is 416 19.9 Building a cascade of trust 417 19.10 Using technology 418 19.11 First-mover advantage 419 19.12 Hollard’s partnership philosophy 420 19.13 Image and reputation of partners 421 19.14 Importance of creating full buy-in at the partner level 422 19.15 Partnerships and products responding to partner needs 423 20.1 Rural and social sector obligations 429 20.2 Crop-stage weather tickets 438 20.3 Weather-index for non-agricultural groups 440 20.4 Modified National Agricultural Insurance Scheme (MNAIS) 442 20.5 Bringing in the absent TPA 445 20.6 RSBY: Delivering at scale 448 20.7 Opportunity in the crisis? 455 20.8 New distribution channels and technology 457 21.1 Consequences of gross pricing errors 465 21.2 Cultural barriers to WTP 469 21.3 Financial limitations and liquidity of low-income households 470 21.4 Processes influence expenses 477 21.5 Pricing: Organization A 480

Contents xiii

21.6 Pricing: Organization B 481 23.1 WFII policy position on microinsurance 509 23.2 Intermediaries as market makers: MicroEnsure in the Philippines 522 24.1 Microinsurance Network’s Technology Working Group 531 24.2 Premium payments through airtime deduction: The case of AKSItext 533 24.3 Role of technology in sales and premium collection: The case of Kilimo Salama 534 24.4 M-PESA mobile money product in Kenya 536 24.5 Evolution of software systems at the DHAN Foundation 539 24.6 Electronic data transmission standards: The case of the ACORD standards 541 24.7 Mi Life mobile insurance in Ghana 544 25.1 Taking active steps to develop a microinsurance market in India 552 25.2 Developing a national microinsurance strategy: The Brazilian experience 556 25.3 The evolving definition of microinsurance in Peru 559 25.4 Proposed framework for dedicated microinsurance companies in South Africa 561 25.5 Formalizing informal insurance in the Philippines 563 25.6 Creating a flexible regime for distribution: Technology and financial inclusion 566 25.7 The six TCF consumer outcomes 569 25.8 Microinsurance standards and products: Philippines 570 26.1 What can go wrong? Kenya consumer research findings 577 26.2 Social performance indicators especially relevant to consumer protection 582 26.3 South African rules on advice 589

xiv

Acknowledgements

Th is publication benefi ts from the experiences of dozens of microinsurance inno-vators from across the globe who have generously shared their experiences, including successes and failures. In particular, we would like to acknowledge the contribution made by the following organizations:

Africa and the Middle East

Asia and the Pacifi c (except India)

India Latin America and Caribbean

Other/global

Britak (Kenya)Cooperative Insurance Company (Kenya)HARITA (Ethiopia) Hollard (South Africa)Jamii Bora Trust (Kenya)Kenya OrientMetropolitan (South Africa)Microfund for Women (Jordan)Mutual and Federal (South Africa)National Hospital Insurance Fund (Kenya)Old Mutual (South Africa)Pioneer Assurance (Kenya)Sanlam Sky (South Africa)Syngenta Foundation (Kenya)UMSGF (Guinea)UNACOOPEC (Cote d’Ivoire)

Allianz (Indonesia)CARD MBA (Philippines)CBHI (Lao PDR) China Life CLIMBS (Philippines)FICCO MBA (Philippines)First Microinsurance Agency (Pakistan)GRET (Cambodia)Groupama (Viet Nam)Malayan (Philippines)Philam Life (Philippines)PICC (China)TSKI (Philippines) Vision Fund (Cambodia)

Bajaj Allianz BASIXCARE Foundation CARE IndiaCentre for Insurance Risk Management (CIRM)Dhan Foundation HDFC Ergo ICICI Lombard ICICI Prudential IFFCO-Tokio Max New York Life (MNYL)Palmyrah Workers Development Society (PWDS)Rashtriya Swasthya Bima Yojana (RSBY)SBI Life Swayam Shikshan Prayog (SSP)Tata AIGUplift VimoSEWA Weather Risk Management Services (WRMS) Yeshesvini

ACE (Brazil)AIC (Haiti)Alico (Colombia)Aseguradora Rural (Guatemala)Bradesco (Brazil)Colseguros (Colombia)FUNDASEG (Colombia) Fonkoze (Haiti)Mapfre (Brazil)Mapfre (Colombia)QBE (Brazil)Seguros Futuro (El Salvador) Solidaria and La Equidad (Colombia) SINAF (Brazil)Zurich (Bolivia)

Aga Khan Agency Microfi nance (AKAM)AllianzAon Affi nityCenfriGuy CarpenterMicroEnsureMicro Insurance AcademyMicroInsurance CentreMicroinsurance NetworkMunich RePlaNet GuaranteeSwiss ReZurich

Th is book was prepared under the auspices of the Microinsurance Network, formerly known as the CGAP Working Group on Microinsurance. As a member-based association of donors, multilateral agencies, insurance and social protection providers, policymakers and academics, the Network provides a platform for information sharing and stakeholder coordination with the aim of promoting the development and proliferation of insurance services for low-income persons.

Africa and Africa and the Middle Eastthe Middle East

Asia and the Pacifi c Asia and the Pacifi c (except India)(except India)

IndiaIndia Latin America and Latin America and CaribbeanCaribbean

Other/globalOther/global

Britak (Kenya)Britak (Kenya)Cooperative Insurance Cooperative Insurance Company (Kenya)Company (Kenya)HARITA (Ethiopia) HARITA (Ethiopia) Hollard (South Africa)Hollard (South Africa)Jamii Bora Trust Jamii Bora Trust (Kenya)(Kenya)Kenya OrientKenya OrientMetropolitan Metropolitan (South Africa)(South Africa)Microfund for Women Microfund for Women (Jordan)(Jordan)Mutual and Federal Mutual and Federal (South Africa)(South Africa)National Hospital National Hospital Insurance Fund Insurance Fund (Kenya)(Kenya)Old Mutual Old Mutual (South Africa)(South Africa)Pioneer Assurance Pioneer Assurance (Kenya)(Kenya)Sanlam Sky (South Sanlam Sky (South Africa)Africa)Syngenta Foundation Syngenta Foundation (Kenya)(Kenya)UMSGF (Guinea)UMSGF (Guinea)UNACOOPEC UNACOOPEC (Cote d’Ivoire)(Cote d’Ivoire)

Allianz (Indonesia)Allianz (Indonesia)CARD MBA CARD MBA (Philippines) (Philippines)CBHI (Lao PDR) CBHI (Lao PDR) China Life China Life CLIMBS CLIMBS (Philippines) (Philippines)FICCO MBA FICCO MBA (Philippines) (Philippines)First Microinsurance First Microinsurance Agency (Pakistan)Agency (Pakistan)GRET (Cambodia)GRET (Cambodia)Groupama (Viet Groupama (Viet Nam)Nam)Malayan (Philippines)Malayan (Philippines)Philam Life Philam Life (Philippines) (Philippines)PICC (China)PICC (China)TSKI (Philippines) TSKI (Philippines) Vision Fund Vision Fund (Cambodia) (Cambodia)

Bajaj Allianz Bajaj Allianz BASIXBASIXCARE Foundation CARE Foundation CARE IndiaCARE IndiaCentre for Insurance Centre for Insurance Risk Management Risk Management (CIRM)(CIRM)Dhan Foundation Dhan Foundation HDFC Ergo HDFC Ergo ICICI Lombard ICICI Lombard ICICI Prudential ICICI Prudential IFFCO-Tokio IFFCO-Tokio Max New York Life Max New York Life (MNYL)(MNYL)Palmyrah Workers Palmyrah Workers Development Society Development Society (PWDS)(PWDS)Rashtriya Swasthya Rashtriya Swasthya Bima Yojana (RSBY)Bima Yojana (RSBY)SBI Life SBI Life Swayam Shikshan Swayam Shikshan Prayog (SSP)Prayog (SSP)Tata AIGTata AIGUplift Uplift VimoSEWA VimoSEWA Weather Risk Weather Risk Management Services Management Services (WRMS) (WRMS) YeshesviniYeshesvini

ACE (Brazil)ACE (Brazil)AIC (Haiti)AIC (Haiti)Alico (Colombia)Alico (Colombia)Aseguradora Rural Aseguradora Rural (Guatemala)(Guatemala)Bradesco (Brazil)Bradesco (Brazil)Colseguros Colseguros (Colombia)(Colombia)FUNDASEG FUNDASEG (Colombia) (Colombia) Fonkoze (Haiti)Fonkoze (Haiti)Mapfre (Brazil)Mapfre (Brazil)Mapfre (Colombia)Mapfre (Colombia)QBE (Brazil)QBE (Brazil)Seguros Futuro Seguros Futuro (El Salvador) (El Salvador) Solidaria and La Solidaria and La Equidad (Colombia) Equidad (Colombia) SINAF (Brazil)SINAF (Brazil)Zurich (Bolivia)Zurich (Bolivia)

Aga Khan Agency Aga Khan Agency Microfi nance Microfi nance (AKAM)(AKAM)AllianzAllianzAon Affi nityAon Affi nityCenfriCenfriGuy CarpenterGuy CarpenterMicroEnsureMicroEnsureMicro Insurance Micro Insurance AcademyAcademyMicroInsurance MicroInsurance Centre CentreMicroinsurance Microinsurance Network NetworkMunich ReMunich RePlaNet GuaranteePlaNet GuaranteeSwiss ReSwiss ReZurichZurich

Acknowledgements xv

The Network provided a five-person Editorial Board that was responsible for shaping the overall outline of the book, helping to identify authors and reviewers, and also provided reviews for a number of chapters. The Board – Doubell Cham-berlain (Cenfri), Iddo Dror (Micro Insurance Academy), Michael McCord (MicroInsurance Centre), Dirk Reinhard (Munich Re Foundation) and Rupalee Ruchismita (CIRM) – provided essential contributions and guidance.

This book would not have been possible without financial, technical and logisti-cal support from the Munich Re Foundation, especially Martina Mayerhofer, Dirk Reinhard and Thomas Loster. Munich Re Foundation’s Annual Microinsurance Conferences, co-sponsored by the Microinsurance Network, remain an on-going source of inspiration and insight, providing considerable material for the book.

Although funding for the book came from the Munich Re Foundation, we would also like to acknowledge additional donors who provided funding for content development, especially the Bill & Melinda Gates Foundation, which contributed to many of the chapters through its support of the ILO’s Microinsurance Innovation Facility. Additional support for some chapters was provided by the Consultative Group to Assist the Poor (CGAP), FinMark Trust, Gesellschaft für Internationale Zusammenarbeit (GIZ), Luxembourg Ministry of Foreign Affairs, Swiss Develop-ment Cooperation (SDC) and USAID.

More than 50 people co-authored chapters of this book and nearly 80 people were involved in reviewing them. To acknowledge their inputs, each chapter specifies the authors and the reviewers. Our colleagues in the ILO’s Microinsur-ance Innovation Facility deserve a particular mention for their tireless involve-ment in the writing, reviewing and editing process.

Dozens of others have helped with the administration, proof-reading, layout and typesetting. Behind the scenes, Abigail Gray, Lauren Peterson and David Saunders provided invaluable administrative, editorial and technical assistance. Important contributions were also made by Nalina Ganapathi of the ILO’s Social Finance Programme, Charlotte Beauchamp and Alison Irvine of the ILO’s Publications Department, and Anton Sandbiller from Munich Re’s publication department. Copy editing was performed by Andrew Lawson of Munich Re’s language department, layout and typesetting by Marcus Maurer, Anja Gindele and Andreas Töll. Many thanks to all.

Lastly, we dedicate this book to the memory of our colleague José Navarro, an actuary and humanitarian, whose passion for protecting the poor continues to inspire us all.

Craig Churchill and Michal Matul Social Finance Programme, Employment Sector International Labour Organization Geneva, Switzerland

xvi

AABY Aam Admi Bima Yojana (India)ACORD Association for Cooperative Operations Research and

DevelopmentAD&D accidental death and disabilityADB Asian Development BankAIC Alternative Insurance Company (Haiti)AIC Agriculture Insurance Corporation (India)AIDS acquired immune deficiency syndromAIG American International GroupAIO African Insurance OrganisationAKAM Aga Khan Agency for MicrofinanceAKDN Aga Khan Development NetworkALMAO All Lanka Mutual Assurance Organization (Sri Lanka)APRA Australian Prudential Regulatory AuthorityASR Aseguradura Rural (Guatemala)ATP ability to payAWS automated weather stationsBIP Base Insurance ProductBG bidding gameBHI basic health insuranceBMZ Federal Ministry for Economic Cooperation and Development

(Germany)BoP bottom of the pyramidBPL below poverty lineBRS Belgian Raiffeisen FoundationCARD Center for Agriculture and Rural Development (Philippines)CaribRM Caribbean Risk Managers LimitedCARICOM Caribbean CommunityCBHI community-based health insuranceCCIS Comprehensive Crop Insurance SchemeCCRIF Caribbean Catastrophe Risk Insurance FacilityCDA Cooperative Development Authority

Table of acronyms

Table of acronyms xvii

Cenfri Centre for Financial Regulation and InclusionCEO Chief Executive OfficerCGAP Consultative Group to Assist the PoorCHAT Choosing Health-plans All TogetherCHF community health fundCIC Cooperative Insurance Company (Kenya)CIF Confédération des Institutions Financières (West Africa)CIGNA Connecticut General Life Insurance Company

of North America CIRC China Insurance Regulatory Commission CIRM Centre for Insurance and Risk Management (India)CLIMBS Coop Life Insurance and Mutual Benefit Services (Philippines)COP Conferences of the PartiesCRED Centre for Research on the Epidemiology of DisastersCSC common service centersCSR corporate social responsibilityCV contingent valuationDBCV double-bounded contingent valuationDC dichotomous choice techniqueDECSI Dedebit Credit and Savings InstitutionDFID Department for International Development (United Kingdom)DGA Denis Garand & AssociatesDHAN Development for Human Action FoundationDNA deoxyribonucleic acidDRP Disaster Response ProductDRTV direct response televisionENT ear, nose and throatEPSS Empresa Promotora de Servicios de Salud (Guatemala)EU European UnionEUDN European Development Research NetworkFAIS Financial Advisory and Intermediary Services Act (South Africa)FAO Food and Agriculture Organization of the United NationsFAQ frequently asked questionsFasecolda Federación de Aseguradores ColombianosFEWS NET Famine Early Warning System NetworkFGD focus group discussionFICCO First Community Cooperative FIDES Federación Interamericana de Empresas de SegurosFINCA Foundation for International Community AssistanceFINO Financial Information Network and OperationsFMiA First Microinsurance Agency (Pakistan)

xviii Table of acronyms

FMD foot and mouth diseaseFSA Financial Services AuthorityFSB Financial Stability BoardFUNDASEG Fundación de Aseguradores ColombianosGDP gross domestic productGESS Global Extension of Social Security (ILO)GFDRR Global Facility for Disaster Risk and ReductionGFEP Global Financial Education ProgramGIIF Global Index Insurance FacilityGIZ Gesellschaft für Internationale Zusammenarbeit (Germany)GNP gross national productGoI Government of IndiaGPRS general packet radio serviceGRET Groupe d’échange et de recherche technologique (Cambodia)GTZ Gesellschaft für Technische Zusammenarbeit (Germany)HARITA Horn of Africa Risk Transfer for AdaptationHH householdHIS health insurance schemeHIV human immunodeficiency virusHMI health microinsuranceHR human resourcesIAA International Actuarial Association IAIS International Association of Insurance SupervisorsIBLI index-based livestock insuranceIC Insurance Commission (Philippines)ICARD International Center for Agricultural and Rural DevelopmentICMIF International Cooperative and Mutual Insurance FederationICP insurance core principlesICRISAT International Crop Research Institute for the Semi-Arid TropicsICT information and communication technology ICU intensive careID identification IDB Inter-American Development BankIEI in-patient expenses insuranceIFAD International Fund for Agriculture DevelopmentIFC International Finance CooperationIFFCO Indian Farmers Fertiliser Cooperative Limited IFMR Institute for Financial Management and Research (India)IFPRI International Food Policy Research InstituteILAL Insure Lives and Livelihood Programme (India)ILO International Labour Organization

Table of acronyms xix

IMF International Monetary FundINR Indian RupeeIOM International Organization for MigrationIP in-patientIPCC Intergovernmental Panel on Climate ChangeIRAM Institut de Recherche et d’Applications des Méthodes de

Développement (Mozambique) IRDA Insurance Regulatory and Development Authority (India)IRDP Integrated Rural Development ProgrammeIRI International Research Institute for Climate and Society IT information technologyITGI IFFCO Tokio General Insurance Company, Ltd. (India)JBT Jamii Bora Trust (Kenya)JBY Janashree Bima Yojana (India)KES Kenyan ShillingKFW Kreditanstalt Für Wiederaufbau (Germany)KPI key performance indicatorsLIC Life Insurance Corporation (India)LIC low-income countriesLIS Livestock Insurance Scheme (India)LPS Livestock Protection Scheme (India)MAS Manipal Arogya Suraksha Yojana (India)MBA mutual benefit associationMCCO mutuals, cooperatives and community-based organizations MCDI Medical Care Development InternationalMCII Munich Climate Insurance InitiativeMFI microfinance institutionMFIC Microfinance International CorporationMGA managing general agentsMIA Micro Insurance AcademyMiCRO Microinsurance Catastrophic Risk Organization MIS management information system MNAIS Modified National Agricultural Insurance Scheme (India)MNO mobile network operatorMNYL Max New York LifeMOLISA Ministry of Labour, Insurance and Social Affairs (Viet Nam)MTA money transfer agentNABARD National Bank for Agriculture and Rural Development (India)NAIS National Agriculture Insurance Scheme (India)NASFAM National Smallholder Farmers’ Association of MalawiNCMS New Cooperative Medical Scheme (China)

xx Table of acronyms

NCMSL National Collateral Management Services LimitedNDVI normalized difference vegetation indexNGO non-governmental organizationNHIF National Health Insurance Fund (Ghana)NHIF National Hospital Insurance Fund (Kenya)NIC national identity cardNICE National Insurance Corperation of EritreaNSCB National Statistical Coordination Board (Philippines)NSSF National Social Security Fund (Kenya)OE open-ended formatsOECD Organisation for Economic Co-operation and DevelopmentOEI outpatient expense insuranceOOP out-of-pocketOP outpatientPA partner agentPACC Programa de Atención a Contingencias Climatológicas

(Climate Contingencies Programme, Mexico)PACE product, access, cost, experiencePACS primary agricultural credit societiesPC payment cardPHFI Public Health Foundation of IndiaPHP Philippines PesosPIA partner intermediary agentPICC People’s Insurance Company of ChinaPoS point-of-salePPP public-private partnershipPRADAN Professional Assistance for Development ActionPWDS Palmyrah Workers Development Society (India)RCT randomized controlled trialREST Relief Society of Tigray (Ethiopia)RFID radio frequency identification deviceRMB Chinese YuanROSCA rotating savings and credit associationRP revealed preferencesRPLI Rural Postal Life Insurance (India)RSBY Rashtriya Swasthya Bima Yojana (India)SaaS Software as a ServiceSACCO savings and credit cooperative organizationSACCOL Savings and Credit Co-operatives LeagueSAHB State Animal Husbandry Department (India)SAIA South African Insurance Association

Table of acronyms xxi

SBS Superintendencia de Banca, Seguros y AFP (Peru)SCC Swedish Cooperative CentreSDA state designated agency (India)SDC Swiss Development CorporationSEC Securities and Exchange CommissionSECP Securities and Exchange Commission of PakistanSEED Save, Earn, Enjoy DepositsSEEP Small Enterprise Education and Promotion NetworkSEGURO Solvency/stability, Efficiency, Governance, Understanding

of the Product, Risk-based capital and Outreach SES socio-economic statusSEWA Self Employed Women’s Association (India)SFDA Small Farmers’ Development Agency (India)SICL Sanasa Insurance Company, Ltd. SI-CUN Self-Insured Credit Union NetworkSI-MFI self-insurance microfinance institutionSHEPHERD Self-Help Promotion for Health and Rural DevelopmentSHG self-help groupSIM subscriber identity moduleSINCAF Sindicato Carioca dos Fiscais de RendaSKDRDP Sri Kshetra Dharmasthala Rural Development ProgrammeSKY Sokhapheap Krousar Yeung (Health for Our Families,

Cambodia)SLDB State Livestock Development Board (India)SMS short message serviceSP stated preferencesSRF social risk fundSSP Swayam Shikshan Prayog (India)SSS Sarva Shakti Suraksha SSS Social Security Software (DHAN Foundation, India)SUSEP Superintêndencia de Seguros Privados (Brazil)TA technical assistanceTCF treating customers fairly TIOLI “take it or leave it” approachTPA third-party administratorTPD total and permanent disabilityTPP third-party paymentTSKI Taytay Sa Kauswagan, Inc. (Philippines)UEMOA Economic Community of West African StatesUMASIDA Umoja wa Matibabu Sekta Isiyo Rasmi Dar es Salaam

(United Republic of Tanzania)

xxii Table of acronyms

UMSGF Union des Mutuelles de Santé de Guinée Forestière (Guinea)UN United NationsUNDP United Nations Development ProgrammeUNIFEM United Nations Development Fund for WomenUSAID United States Agency for International DevelopmentVCI vegetation condition indexVHC village health championVHI Vietnam Health InsuranceVOIP voice over internet protocol WASP wireless access service providerWBCIS Weather-based Crop Insurance Scheme (India)WFII World Federation of Insurance IntermediariesWFP World Food ProgrammeWHO World Health OrganizationWMO World Meteorological OrganizationWRMS Weather Risk Management Services (India)WTP willingness to payWWB Women’s World BankingXBRL eXtensible Business Reporting LanguageXML eXtensible Markup Language

1

The poorest citizens of the poorest countries are typically exposed to the greatest risks. Earthquakes, floods, drought, disease, crime all tend to hit the poor hardest. Vulnera-bility and poverty go hand in hand, but microinsurance holds out the promise of breaking a part of the cycle that ties them together.

Jonathan Morduch, 2006

Five years after the publication of the first volume of Protecting the poor: A microinsurance compendium, the publishers felt that it was time to look at recent developments and achievements and consider where the industry stands now.

The intervening years have seen a significant transformation. In 2008, the launch of the ILO’s Microinsurance Innovation Facility, financed initially by the Bill & Melinda Gates Foundation, substantially increased the number of micro-insurance pilots and research activities. In 2009, the CGAP Working Group on Microinsurance became the Microinsurance Network to formalize its efforts to share experiences and collaborate on improvements. In addition, in 2009, the Access to Insurance Initiative was launched – the second offshoot of the Network after the Facility – to help strengthen the understanding of insurance supervisors and their ability to create an environment more favourable to inclusive insur-ance. Microinsurance providers evolved as well. While many of the schemes dis-cussed in the first book involved small organizations, there is now active involve-ment by governments and the insurance industry, which contributes to the attainment of significant scale.

The quotation above from Morduch talks about the promise of microinsur-ance to contribute to breaking the cycle of vulnerability and poverty. As described throughout this book, significant progress in fulfilling that promise is being made, though it still remains an aspiration. The promise of microinsurance can be seen at various levels as it benefits the working poor and their service pro-viders, and contributes more broadly to economic development.

Introduction Craig Churchill and Dirk Reinhard

2 Introduction

Benefits for the working poor

At the household level, the potential contribution of microinsurance to breaking the cycle of poverty has both protective and productive roles (e.g. Collins et al., 2009, Dercon, 2005, Cohen and Sebstad, 2005). There are many challenges in measuring these benefits, but initial evidence presented in Chapters 3 and 15 illustrates that some of those benefits are being realized.

On the protective side, insurance can protect policyholders from the financial consequences of various risks, including illness and death. If a risk is insured, the poor can cope more efficiently when they experience large losses. Regular pay-ments of small premiums are easier to afford than the large immediate expenses that accompany crises.

On the productive side, insurance can be a means through which the poor can amass a lump sum of savings, for example through a long-term life insurance policy that allows them to build assets. Alternatively, insurance can help unlock access to productive inputs such as credit by covering some of the risks (e.g. drought, excess rain and livestock death) that a lender does not want to assume. There is also the peace-of-mind effect whereby the poor may feel less compelled to set aside unproductive funds in contingency saving under the mattress if they are insured, and therefore they may make larger investments, possibly in higher-risk, higher-return activities.

Benefits for the providers

A diverse range of organizations are involved in the provision of insurance to low-income households. Although these organizations have a variety of motiva-tions and interests, they all can, or at least should, be able to benefit from provid-ing insurance to the working poor.

Insurance can help cooperatives, unions, non-governmental organizations (NGOs), self-help groups, and other organizations that are primarily interested in helping their members manage risks, to achieve their social objectives. As such, insurance can be an ideal tool to complement other services they might be providing, including loss prevention, financial education and the provision of savings and emergency loans.

Microinsurance can assist more commercially minded organizations in enter-ing a new market or expanding their services to an existing market. For example, microinsurance provides insurers with a bottom of the pyramid (BoP) strategy (Prahalad, 2005) to effectively reach and serve the next generation of policy-holders today. For delivery channels, such as retailers, utility companies and providers of agricultural inputs, microinsurance is not only an additional source of revenue, but if designed properly, can also generate additional turnover for their core business.

Introduction 3

Even governments can fall into this category of provider. Where they have an interest in extending social protection cover to excluded populations, such as workers in the informal economy, microinsurance may be a means to achieve that objective. Additionally, the proliferation of microinsurance should provide governments with more efficient means of expanding social protection, provid-ing better cover against the increasing threat of natural disasters, and achieving public policy objectives including several of the Millennium Development Goals (Churchill, 2006).

Benefits for the community and the country

Various studies have demonstrated a causal link between the development of the insurance industry in general – not specifically microinsurance – and national economic development (Arena, 2006; Haiss and Sumegi, 2008). This is accom-plished in part by supporting entrepreneurial activity. For example, by enabling businesses to operate with less volatility, insurance can promote economic stabil-ity. Since insurers and reinsurers have an incentive to reduce claims, they contrib-ute to development by promoting risk reduction measures. Insurance can be used to manage certain risks faced by creditors and borrowers more efficiently than other financial instruments, thereby facilitating access to credit and stimu-lating entrepreneurial effort. Insurance also facilitates investment in higher-risk, higher-return business opportunities by helping measure and manage high-risk exposures. Investment in higher-return activities in turn contributes to higher productivity and economic growth.

More broadly within the economy, by mobilizing long-term savings insurers are an important source of long-term finance that can be invested in initiatives such as infrastructure improvements, as well as acting as a significant stimulator for the development of debt and equity markets. As prominent investors in equity markets, insurers can compel listed companies to adopt stronger corporate governance measures and greater transparency. In summary, according to Brainard (2008), “The net result of well-functioning insurance markets should be better pricing of risk, greater efficiency in the overall allocation of capital and mix of economic activities, and higher productivity.”1

An important item missing from the literature thus far is the possible specific contribution of microinsurance to the deepening and strengthening of the insur-ance industry in general. Insurance industries in developed countries were largely built on a strong foundation along retail lines, perhaps with roots that can be traced back to friendly societies or industrial life assurance. The insurance sectors

1 For more details on the impact of insurance development on economic development, see USAID (2006), Brainard (2008) and Skipper (1997).

4 Introduction

in many emerging and developing economies evolved in the second half of the 20th century, and focused largely on corporate clients, with little effort made to build the infrastructure required for retail or personal lines.

Since many countries have missed out on this initial stage of insurance devel-opment and leapfrogged to more sophisticated lines, the insurance sectors may be thin and not well developed. Microinsurance, however, can provide them with an opportunity to rebuild from the bottom up and create a foundation of retail insurance, and ultimately make a stronger contribution to the country’s general economic development. It is interesting to note that developing coun-tries in which the insurance industry did have a strong retail base, such as India and South Africa, have emerged among the microinsurance leaders.

The contribution of microinsurance to the community and the country extends beyond its involvement in deepening the insurance industry. As microin-surance lies at the intersection between social protection and financial inclusion – two critical agenda items for the G-20 – its contribution to economic develop-ment will be greatest where these forces are well coordinated. For example, public-private partnerships seem to be an important way to get the best of both worlds, although it is easier said than done. Similarly, as suggested by Dercon (2011), cash transfers that provide a steady income stream for low-income households could be supplemented by insurance to help those same households to manage risk more efficiently as well.

Microinsurance is unlikely to break the cycle of poverty by itself, but it is a valuable tool in the poverty alleviation toolkit. When coupled with risk preven-tion and mitigation, and supplemented by other risk-managing financial services such as savings and emergency loans, insurance can play a critical role at multiple levels to efficiently manage risks, reduce vulnerability and, it is hoped, contribute to poverty alleviation.

Target audience

As described in Chapter 1, for microinsurance to succeed it requires the commit-ment of a host of stakeholders. Without the cooperation of insurance profession-als, distribution channels, policymakers and supervisors, technical assistance and service providers, donors, community organizations and academics, it would hardly be possible to provide sustainable insurance solutions to huge numbers of low-income households. This book is therefore intended for persons from any of these groups who want to learn from experience and are keen to glean insights into how to provide viable and valuable cover to the working poor.

Introduction 5

Structure of the book

This book is organized into eight parts. Part 1 highlights major developments in the sector, explains the relationship between insurance and social protection, describes the potential impact of microinsurance, and considers the challenge of providing microinsurance in light of climate change. In particular, Chapter 1 provides an overview of the contents of the book by discussing the main trends and referring to other chapters for more details.

Parts II through IV cover specific lines of business: health, life, and agricul-tural and livestock insurance. Part V summarizes important topics specific to the low-income market such as the psychology of microinsurance, consumer educa-tion and client value. It also explores the design of microinsurance for specific target groups, notably women and migrants. Part VI considers the profitability of microinsurance for the insurance industry and the experience of commercial insurers in serving the low-income market. This part of the book also describes how to price microinsurance products with limited data and provides a detailed analysis of microinsurance in India, which is a bastion of innovation and a beacon for government involvement. Part VII focuses on distribution and intermedia-tion, and the book concludes with Part VIII, which provides information on the infrastructure necessary for microinsurance to succeed, including technology, conducive regulations and appropriate consumer protection.

7

Emerging issuesI

8

1 Current trends in microinsurance Craig Churchill and Michael J. McCord

The authors wish to thank the following reviewers for their detailed and perspicacious comments:

Doubell Chamberlain (Cenfri), Iddo Dror (Micro Insurance Academy), Veronique Faber (Microinsurance Network), Jeanna Holtz (ILO), Brandon Mathews (Zurich), Lisa Morgan (Milliman), Dirk Reinhard (Munich Re Foundation), Jim Roth (Leapfrog) and Rupalee Ruchismita (CIRM).

Microinsurance is developing at a breathtaking pace, with numerous innovations emerging to meet the challenge of providing insurance to low-income people. New products covering a variety of risks are being launched and distributed to poor households through an increasing diversity of channels. Entertaining con-sumer education tools are being used to create better-informed consumers. Insurance authorities are adapting their regulations to facilitate the expansion of insurance to the poor. In short, millions more low-income households now have access to better insurance cover.

To introduce this second volume of Protecting the poor, this chapter describes five trends that reflect the dramatically changing state of affairs for micro-insurance:

1. The definition of microinsurance is becoming operational. 2. More low-income households are covered by insurance. 3. Stakeholders in microinsurance are becoming more diverse. 4. Providers are offering an expanding and varied range of products. 5. There is greater concern that insurance provides real value to the insured.

1.1 The definition of microinsurance is becoming operational

The first of the five trends is that the definition of microinsurance is becoming operational. In the first volume, microinsurance was defined as follows:

Microinsurance is the protection of low-income people against specific perils in exchange for regular premium payments proportionate to the likelihood and cost of the risk involved. This definition is essentially the same as one might use for regular insurance except for the clearly prescribed target market: low-income people … How poor do people have to be for their insurance protection to be considered micro? The answer varies by country, but generally microinsurance is for persons ignored by main-stream commercial and social insurance schemes, persons who have not had access to appropriate products.

Churchill, 2006, pp. 12-13.

9Current trends in microinsurance

While this is a sound conceptual definition, it is not sufficient. A clear dis-tinction is necessary, for example, for an insurance company with a microinsur-ance department that needs to define the boundaries where that department’s work starts and stops. Insurance supervisors also require operational definitions. For example, if policymakers create requirements for insurers to serve the poor, or propose incentives for insurers to go down-market, then they need a means of determining whether these objectives have been achieved.

There are four main ways to make the definition of microinsurance opera-tional:

1. Target group: The original definition was a target-group approach, indicating that microinsurance was for low-income people. However, because it did not provide guidance on how to measure or determine whether the “low-income” group was actually being served, the definition could not be used effectively by insurers or regulators. It is not realistic to expect insurers to assess whether pro-spective policyholders are sufficiently poor to warrant microinsurance.1

2. Product definition: The most common operational definition uses product parameters based on the assumption that placing a cap on the sum assured and/or premium will ensure that the product is relevant only for low-income house-holds. As illustrated in Table 25.2, this approach is commonly used by regulatory authorities, and it is particularly relevant if their intention is to compel or entice existing insurers to go down-market. However, simply defining microinsurance on the basis of premium and benefit caps can be problematic if it inhibits inno-vation by restricting the insurer’s options in product design. Furthermore, many products within the specified parameters are not intended for the target group, such as credit card or travel insurance with their relatively small premiums.

3. Provider definition: A third way to define microinsurance is based on the type of organization that can provide it. Apart from formal insurers, microinsurance could be provided by burial or friendly societies, mutuals, cooperatives and com-munity-based organisations. This approach is used, for example, in the Philip-pines, where mutual benefit associations (MBAs) have lower capital and techni-cal requirements and can provide a restricted range of products. However, definitions that focus exclusively on providers could hinder the expansion of microinsurance because a range of institutional arrangements are necessary to reach the vast unserved market.

1 For some social protection programmes, such as Rashtriya Swasthya Bima Yojana (RSBY), a mass health scheme in India, a means-testing mechanism is used to determine whether households are vul-nerable enough to be eligible for the government subsidy. To identify the households below the pov-erty line (BPL) who can access government assistance in India, a series of parameters are used, with different criteria for rural and urban areas. The survey to determine BPL eligibility uses various socio-economic indicators such as the size of landholding, type of housing, access to water and sanitation, type of employment, and educational status.

10 Emerging issues

4. Distribution channel: A fourth approach, sometimes used by insurance compa-nies, is to define microinsurance by the intermediary involved. For example, if products are distributed by microfinance institutions (MFIs), low-cost retailers or other organizations that typically reach the low-income market, then they could be considered as microinsurance by the insurer.

All of these ways of defining microinsurance have advantages and disadvan-tages. Consequently, a mixed approach – looking at the concept of serving the low-income market, coupled with a quantitative product definition and allow-ance for provider and distribution types – may be most appropriate. For exam-ple, Allianz is piloting a microinsurance “stress test” that considers 12 parameters to assess if an insurance product qualifies as micro, which includes elements of the target group, product and distribution channel definitions.

Regardless of how one defines microinsurance, product design and access are key differentiators. The focus on simplicity and accessibility, and the efficiency of processes, separates microinsurance from traditional insurance. For example, insurance with a long application form, numerous exclusions, and other require-ments may not qualify as microinsurance, even if the premiums are low and the product is intended for the low-income market.

Microinsurance should be defined in a manner that responds to the national or corporate objectives of regulators and insurers respectively, and thus the defi-nitions will vary. Indeed, the trend is important not simply because the defini-tion itself is becoming operational, but because insurers and policymakers are actually interested in putting it into practice in their operations. This indicates that they are taking this target group more seriously, and possibly creating incen-tives or special structures to protect the poor.

There is nothing magical about the term “microinsurance”. Popular insurance provided through financial cooperatives for many years could be called microin-surance where the members of those cooperatives are poor. The mass-market insurance delivered by insurers through affinity groups – such as the members of unions or the customers of retailers or utility companies – could qualify as well. Nevertheless, the term “microinsurance” continues to be used because it empha-sizes the importance of understanding the needs, preferences and characteristics of this target group: the low-income household, the working poor and the under-served.

In this book, an inclusive definition is used because the primary concern is to ensure that low-income households can manage important risks more effectively. A market-based approach is relevant for some target groups, such as the working poor with small disposable incomes that insurers have not reached in the past, but it will not effectively reach the poorest of the poor.

11Current trends in microinsurance

As emphasized in Chapter 2, both market-led approaches and social protec-tion initiatives are critical and complementary, and therefore, from a public pol-icy perspective, they need to be considered holistically. One of the interesting trends in recent years is the increase in public-private partnerships (PPPs) and the willingness of policymakers to subsidize premiums for vulnerable house-holds. Indeed, in some countries the boundary between market- and govern-ment-driven initiatives is becoming quite blurred, and both are necessary to ensure that vulnerable households have adequate risk protection.

1.2 More low-income households are covered by insurance

Th e second trend is that microinsurance is expanding dramatically, from 78 mil-lion low-income persons identifi ed as having some cover in the 100 poorest countries in 2006 (Roth et al., 2007), to 135 million insured in 2009 (Lloyd’s, 2009). Today, back-of-the-envelope estimates suggest that the sector is approach-ing 500 million risks covered, including the lives and health of low-income people, as well as protection for their crops, animals and other assets (see Table 1.1). Th is massive increase is in part attributable to expansion, and some markets are growing by leaps and bounds. Besides growth, a big boost comes from the inclusion of countries and schemes that were not identifi ed or included in the previous studies for which a narrower defi nition of microinsurance had been used.2

Indeed, one of the main challenges in assessing growth stems from the fi rst trend, the defi nition. Without a universal defi nition of microinsurance, it is diffi cult to tally the numbers, but estimates provide useful insights into how the sector is evolving (see Table 1.1). Th is section reviews regional diff erences and considers the primary drivers of growth.

Table 1.1 Estimated outreach of microinsurance: Millions of risks covered

Asia Latin America Africa Total20061 66 8 4.5 7820092 14.72011 350 to 400 45 to 50 18 to 24

12 Emerging issues

1.2.1 Scale, growth and geography

In the 2006 study, 85 per cent of the insured were in Asia, 10 per cent in Latin America and a mere 5 per cent in Africa (Roth et al., 2007). While that distribu-tion has not changed dramatically, different developments are contributing to the expansion in each region.

Asia In the 2006 study, the scale of microinsurance in Asia was driven by 30 million

persons covered in India – where the volume was boosted by regulatory require-ments obliging insurers to serve this market – and 28 million in China, which was the result of a bundled product promoted by a single trade union.

Both of these microinsurance powerhouses have seen dramatic growth in the years since then. As mentioned in Chapter 20, one study estimated that by 2010, 300 million low-income persons were covered just under state-supported mass health insurance schemes in India. In addition, 163 million poor persons had life, agriculture or livestock insurance, often partly subsidized by the Government. Although the chapter considers the first number as overly optimistic, and it overlaps considerably with the second figure since many persons enrolled in the health schemes also have other types of insurance, it is still reasonable to estimate that 60 per cent of the persons covered by microinsurance around the world live in India.

Data from China are harder to come by, but perhaps another 40 million low-income persons have access to insurance cover there. For example, according to Qureshi and Reinhard (2011), over 11 million low-income persons are covered by China Life and 600 000 through the People’s Insurance Company of China (PICC). The Government is actively encouraging microinsurance pilots by insurance companies that have expanded from 3.8 million insured lives in 2008 to more than 14 million in 2010.

However, growth and scale in Asia are not limited to the two most populous countries in the world. The Philippines provides an interesting example because of the diversity of approaches. Private insurers are active in the market, with Malayan Insurance Company expanding its outreach from 4.1 million to over 5 million low-income lives from 2007 to 2009 by distributing through pawnshops (see Chapter 18) and Country Bankers Life covering nearly one million persons. During that same period, MicroEnsure, a specialized broker, facilitated cover for 1.2 million lives (see Chapter 23) and PhilHealth’s KaSAPI programme, the Government’s social protection scheme for the informal economy, covered nearly 30 000 persons (Qureshi and Reinhard, 2011). However, the Center for Agriculture and Rural Development (CARD), an MBA, eclipsed them all, covering 7.0 million low-income persons.3

3 CARD data from August 2011 as reported on http://cardbankph.com.

13Current trends in microinsurance

Signifi cant growth is also apparent in Bangladesh and Pakistan, while coun-tries like Cambodia, Indonesia and Sri Lanka are beginning their journey and already have signifi cant outreach. Overall, with roughly 350 to 400 million risks insured, Asia is spearheading microinsurance development, in part because of large and dense populations, interest from public and private insurers, willing aggregators or distribution channels, and, perhaps most importantly, active government involvement, for example through subsidies.

Latin America In Latin America, the bulk of the almost 8 million insured lives in 2006 were in

Peru and Colombia. Peru had primarily credit life cover, which refl ected its mature microfi nance industry, while the fi gures from Colombia suggested that microinsurance was essentially based around a single insurance company with a popular funeral policy.

Although growth data are generally unavailable, Colombia is an exception because the insurance association, Fasecolda, has been collecting microinsurance performance data for years. According to Fasecolda, microinsurance grew from less than 1.5 million risks covered in 2008 to nearly 8 million in July 2011 (see Figure 1.1). Initially, the growth was attributed to the group life and personal accident products distributed via public service companies, but in 2010–11 unemployment and home insurance products experienced strong take-up.

Figure 1.1 Microinsurance risks covered in Colombia

Source: Data provided by Fasecolda, Colombia, 2011.

Microinsurance risks covered in ColombiaMicroinsurance risks covered in Colombia

Source: Data provided by Fasecolda, Colombia, 2011. Source: Data provided by Fasecolda, Colombia, 2011.

Millions of risks covered

Risks covered10

8

6

4

2

0

01–0

8

03–0

8

05–0

8

07–0

8

09–0

8

11–08

01–0

9

03–0

9

05–0

9

07–0

9

09–0

9

11–09

01–1

0

03–1

0

05–1

0

07–1

0

09–1

0

11–10

01–1

1

03–1

1

05–1

1

07–1

1

14 Emerging issues

Brazil and Mexico, which are huge markets, were not part of the original study. In an exhaustive analysis of microinsurance in Brazil, Bester et al. (2010) estimated that between 23 and 33 million low-income persons had cover, including funeral assistance schemes that were not regulated by the insurance authorities. Brazil is one of the fastest growing markets in the region, in part because of the proactive approach adopted by policymakers (see Box 25.2).

Indeed, several Latin American governments are actively promoting an enabling environment for microinsurance to facilitate the involvement of the private sector at the bottom of the pyramid (BoP). In this region, microinsurance is mainly a commercial endeavour. Growth stems from insurers moving down-market where there is less competition and more space for innovation. Volumes in Latin America, which are probably in the 45-to-50 million range, also come from a broader definition of microinsurance than in Asia, including upper poor and lower middle class.

Africa More data are available for Africa following a survey in 2009 (Matul et al.,

2010). The 2006 data, which did not include South Africa, identified 4.5 mil-lion lives covered mostly by basic credit-linked cover. The 2009 study identified 14.7 million people covered by microinsurance, of which 8.2 million were in South Africa. The growth outside South Africa during this period was nearly 13 per cent per annum, which was primarily attributed to the expansion of life cover in East Africa. The provision of microinsurance was led by commercial insurers in the East and South, and by health mutuals in the West.

The experience in South Africa, described in Box 1.1, is atypical for the continent. Perhaps the biggest outreach by an African insurer is Hollard, which is insuring four million low-income lives (Coydon and Molitor, 2011), mostly through funeral cover, mostly in South Africa. Sanlam Sky also covers more than one million persons through one delivery channel (see Chapter 19), and Old Mutual has one product line that insures nearly 0.5 million persons (see Chapter 18).

Although the continental figure may not exceed 24 million persons, micro-insurance is picking up steam in several countries. Ethiopia, for example, has seen the number of low-income lives covered grow from almost nothing in 2006 to one million in the 2009 study and 2.5 million in 2011 (Zeleke, 2011), primarily due to controversial regulations that allow microfinance institutions to carry insurance risk. In Ghana and Zimbabwe, microinsurance cover has soared through member benefit-type products offered by mobile phone companies covering millions of people. In Kenya, Smith et al. (2010) estimate that the

15Current trends in microinsurance

voluntary microinsurance market is 150 000 to 200 000 policyholders, while credit life cover increases the market to 650 000 to 700 000 persons covered, or more than 3 per cent of the Kenyan adult population.4

Box 1.1 Supply of and demand for microinsurance in South Africa

Microinsurance in South Africa is quite diff erent from in the rest of the conti-nent, in part because there is both a supply of and a demand for cover. Due to the high social and cultural value placed on dignifi ed funerals, many low-income households have funeral insurance, even multiple policies. On the supply side, many South African insurers are sophisticated and entrepreneurial – the country has one of the highest penetration rates in the world (Swiss Re, 2011). Th e combi-nation of sophisticated insurers and the demand from low-income households results in a growing and innovative market.

In South Africa, under the Financial Sector Charter that encouraged insurers to go down-market, the low-income market was defi ned as those earning a monthly income below approximately US$400. Th e proportion of this population that has some form of risk cover (formal or informal) grew substantially from 33 per cent in 2006 to 38.5 per cent in 2010. Th is expansion was almost exclusively driven by an increase in formal funeral insurance. However, in absolute terms, the number of insured lives actually fell from just under 6.5 million in 2006 to just over 4.5 million in 2010. From 2006 to 2010, the population living below US$400 per month fell from just over 19.5 million to less than 12 million people. Consequently, the drop in the number of persons covered in South Africa can be perceived as a positive development outcome.

Source: Adapted from Chamberlain et al., 2011.

1.2.2 Growth drivers, big and small

Th is section briefl y reviews growth drivers for microinsurance, including the sources of major leaps forward and incremental improvements that lay the foun-dation for future growth.

4 Most of the outreach fi gures cited in this chapter are derived from self-reported data, usually by the risk carriers. However, these estimates for Kenya, and the data from South Africa in Box 1.1, are based on FinScope, which analyses fi nancial service usage through large sample surveys and then applies the fi ndings to the total population. Th is explains the discrepancy between the supply data cited in Matul et al. (2010) and the usage data in Box 1.1.

Supply of and demand for microinsurance in South AfricaSupply of and demand for microinsurance in South Africa

Microinsurance in South Africa is quite diff erent from in the rest of the conti- Microinsurance in South Africa is quite diff erent from in the rest of the conti-nent, in part because there is both a supply of and a demand for cover. Due to nent, in part because there is both a supply of and a demand for cover. Due to the high social and cultural value placed on dignifi ed funerals, many low-income the high social and cultural value placed on dignifi ed funerals, many low-income households have funeral insurance, even multiple policies. On the supply side, households have funeral insurance, even multiple policies. On the supply side, many South African insurers are sophisticated and entrepreneurial – the country many South African insurers are sophisticated and entrepreneurial – the country has one of the highest penetration rates in the world (Swiss Re, 2011). Th e combi-has one of the highest penetration rates in the world (Swiss Re, 2011). Th e combi-nation of sophisticated insurers and the demand from low-income households nation of sophisticated insurers and the demand from low-income households results in a growing and innovative market.results in a growing and innovative market.

In South Africa, under the Financial Sector Charter that encouraged In South Africa, under the Financial Sector Charter that encouraged insurers to go down-market, the low-income market was defi ned as those insurers to go down-market, the low-income market was defi ned as those earning a monthly income below approximately US$400. Th e proportion of earning a monthly income below approximately US$400. Th e proportion of this population that has some form of risk cover (formal or informal) grew this population that has some form of risk cover (formal or informal) grew substantially from 33 per cent in 2006 to 38.5 per cent in 2010. Th is expansion substantially from 33 per cent in 2006 to 38.5 per cent in 2010. Th is expansion was almost exclusively driven by an increase in formal funeral insurance. was almost exclusively driven by an increase in formal funeral insurance. However, in absolute terms, the number of insured lives actually fell from However, in absolute terms, the number of insured lives actually fell from just under 6.5 million in 2006 to just over 4.5 million in 2010. From 2006 to just under 6.5 million in 2006 to just over 4.5 million in 2010. From 2006 to 2010, the population living below US$400 per month fell from just over 2010, the population living below US$400 per month fell from just over 19.5 million to less than 12 million people. Consequently, the drop in the 19.5 million to less than 12 million people. Consequently, the drop in the number of persons covered in South Africa can be perceived as a positive number of persons covered in South Africa can be perceived as a positive development outcome. development outcome.

Source: Adapted from Chamberlain et al., 2011. Source: Adapted from Chamberlain et al., 2011.

16 Emerging issues

Major leaps There are four factors that have contributed to this exponential expansion. The

first and by far the most significant factor is government support, notably in Asia, which has fostered considerable growth in several ways:

1) subsidies, for example in India aimed at extending health insurance to workers in the informal economy and protecting low-income farmers from weather risks and livestock mortality;

2) public-private partnerships to apply private-sector expertise to implement gov-ernment programmes;

3) mandates or targets for private-sector insurers (e.g. India, South Africa) to com-pel or entice them to reach under-served market segments; and

4) involvement of public-sector insurers such as the Life Insurance Company and Agriculture Insurance Company in India, and in China, PICC and China Life. While private-sector companies get attention for their innovative approaches, the public-sector companies are the ones achieving massive scale.

Indeed, without the leadership of the Indian Government, the growth story would be downgraded from extraordinary to only noteworthy.

The second driver is automatic enrolment or mandatory cover. Group policies are a common means to make significant step-like increases in scale, as they are easy to manage, reduce adverse selection and create a larger risk pool. Automatic microinsurance also includes cover given for free, as a member benefit or loyalty incentive, such as the basic term life by Compartamos in Mexico that covers nearly three million persons (Qureshi and Reinhard, 2011); and the personal accident cover provided by IFFCO-Tokio with the sale of fertilizer, covering 3.5 million Indian farmers (Chapter 20). Similarly in China, all members of a village can become automatically enrolled based on a decision by the village’s leadership.

A recent incarnation of this approach has been adopted by mobile phone companies in Africa. In 2010, Trustco Mobile in Zimbabwe introduced life insur-ance as a loyalty incentive in partnership with EcoLife and First Mutual Life Assurance, and within one year it covered 1.6 million subscribers (Trustco Group, 2011). In Ghana, the specialized microinsurance intermediary MicroEnsure and a mobile phone company, Tigo, launched Tigo Family Care in 2011 and it is growing by more than 4 500 new lives insured per day (Gross, 2011b). With such products, it is not possible to know what percentage of those covered are poor, but given high levels of poverty and strong penetration of mobile phones into low-income markets, it is a fair bet that the vast majority qualify under the target-group definition of microinsurance.

17Current trends in microinsurance

A third key driver is the development of effective payment systems. Collect-ing microinsurance premiums can be a challenge, but emerging payment sys-tems, such as M-PESA mobile money in Kenya, are substantial drivers of growth. In environments where e-money is not allowed, bill payment systems, point-of-sale (PoS) networks and banking correspondents give insurers access to large numbers of low-income households. For example, Aon Affinity, a subsidi-ary of Aon, reports covering 12 million mostly low-income people through mass-market schemes in six Latin American countries that access the client bases and use the payment systems of electricity, telephone and water companies (Baptis-tini, 2011).

The experience of Aon highlights the fourth driver, the capacity of multi-national insurers and brokers to replicate their successes across jurisdictions. Brokers Marsh and Guy Carpenter are involved in government schemes in India covering tens of millions of low-income persons, and now they are taking those experiences to other jurisdictions (see Chapter 23). In 2010, Allianz covered six million low-income persons in eight countries (Coydon and Molitor, 2011), while Zurich had 2.3 million policies covering “emerging consumers” in seven countries, up from 1.8 million in 2009 (see Chapter 19).

Incremental improvements The expansion of insurance to protect millions of low-income people is not only

happening through major leaps forward, but also through incremental improve-ments that are gradually expanding microinsurance markets. Take-up continues to expand because of a confluence of factors that bolster both the supply of and demand for cover. Some incremental drivers include:

– The demonstration effect of positive claim payment experiences may have the greatest impact on helping people to appreciate and purchase microinsurance.

– Enabling regulatory environments for financial inclusion in several countries are removing barriers and even creating incentives for insurers to go down-market, while creating pathways for informal insurers to participate in the formal market (see Chapter 25). Unlike the government support described above, changes in the regulatory environment generally result in incremental improvements rather than major leaps forward, although there are some exceptions.

– Consumer education is reported to have helped people in some areas to better understand microinsurance and its role in household risk management (see Chapter 14).

– An improving value proposition for clients is resulting from insurers having greater exposure to and familiarity with the low-income market (see Chapter 15).

18 Emerging issues

Like the fable of the tortoise and the hare, these slow and steady incremental improvements are not as captivating as the major leaps, but they are perhaps more important for fostering a culture of insurance in low-income markets and creating a firm foundation for future expansion. Ultimately these incremental improvements are signs that stakeholders in some countries are getting the fun-damentals right – an enabling environment, an informed consumer and respon-sive insurers, which combine to produce a vibrant microinsurance market.

To avoid painting an overly rosy picture, it is useful to note that progress remains patchy. For every developing country that is experiencing significant growth, there are at least three or four that are stagnant or have limited microin-surance activity. The growth inhibitors are largely the converse of the enablers, including the lack of demand and limited capacity of the insurance industry to innovate. The process of creating a culture of insurance can take years, if not a generation.

1.3 Stakeholders in microinsurance are becoming more diverse

In the realms of public policy and international development, microinsurance is interesting because of its potential to support many different efforts. Few