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 ResilienceAlfredo Lazarte Hoyle

CRISIS (ILO)

Microinsurance and Climate Change: understanding the Challenges

High Risks &

Vulnerability

Hydro/Meteor

.Events

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 & risks2. Review economic activities to tackle

the challenges and identify opportunities

3. Implement adaptation measures4. Plan for business continuity5. 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 responses2. Prepare plan for prevention and

preparedness3. Enabling the capacity of National and

local institutions for respond effectively4. 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

AdaptationPPP Sustainability

Living ExperiencesMirror Impact

Communication Campaigns

Change of Economic Culture

MicrofinanceSchemes

ImplementDRR & CC

Adaptation

Reduce of Portfolio

Risks

LINK

S WHAT LINK

S HOW LINK

S 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 type IP health, credit lifeMandatory, credit-linked

Coverage Unlimited IP, outstanding loan cover

Yearly premium KES 2,400 for family

Distribution MFI

Targeted segment Urban slum dwellersKES 10-20,000

Performance 600,000 lives (10.2010)80-120% claims ratio

Jamii Bora Trust CIC, Bima ya Jamii

Start date 2001 2007

Product type IP health, credit lifeMandatory, credit-linked

IP health (NHIF), hospital cash, AD&D, funeral; Voluntary, standalone

Coverage Unlimited 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 familyDistribution MFI SACCOs and MFIs

Targeted segment Urban slum dwellersKES 10-20,000

SACCO members and MFI clientsKES 10-15,000 (rural)KES 15-30,000 (urban)

Performance 600,000 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