Miguel solana presentation jornadas portugal seguro

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Microinsura nce Miguel Solana – Technical Officer ILO Microinsurance Innovation Facility Lisboa, Portugal. 27 May 2010 Jornadas Portugal Seguro

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Introduction to microinsurance, description of the users needs, difference between traditional insurance and microinsurance and presentation of key challenges.

Transcript of Miguel solana presentation jornadas portugal seguro

  • 1. Microinsurance Miguel Solana Technical Officer ILO Microinsurance Innovation Facility Lisboa, Portugal. 27 May 2010 Jornadas Portugal Seguro

2. 2007: Gates Foundation - $55M MI Investment Fund: Leapfrog - 2009 ILOs MI Innovation Facility - 2008 International Assoc. of Insurance Supervisors (IAIS) Issues paper - 2007 1st Munich Re Foundations MI Conference - 2005 Creation of CGAP Working Group - 2001 (now Microinsurance Network) Microinsurance Milestones Protecting the poor published - 2006 5th Munich Re Foundations MI Conference - 2009 (Senegal) 3. Microinsurance is

  • a mechanism to protect poor people against risk (accident, illness, death in the family, natural disasters, etc.) in exchange for insurance premium payments tailored to their needs, income and level of risk. It is aimed primarily at the developing worldslow-income workers , especially those in the informal economy who tend to be underserved by mainstream commercial and social insurance schemes.
  • ~ ILO, Microinsurance Innovation Facility (2008)
  • not a specific product or product line. It is also not limited to a specific provider type. Microinsurance is the provision of cover to a specific market segment, i.e.,low-income persons .
  • ~ IAIS Issues Paper (2007)

4. Microinsurance Roots Microfinance Extension of social protection BOP strategy by insurers Popular insurance by cooperatives Micro-insurance 5. Characteristics of the insurable poor

  • Often work in the informal economy
  • Irregular cash flows
  • Manage risks through myriad of informal means, including social networks
  • Limited familiarity with formal insurance
  • May not trust insurance companies
  • Vulnerable to risks

Valuable, effective MI considers these characteristics 6. Would you provide insurance here? 7. What are their risks? Risks Death Illness Accidents Loss of assets Business risks/unemployment Economic stresses Wedding Ceremonies Child birth Education Paying rent, utilities First step to product design Vulnerability Poverty 8. Microinsurance products

  • Credit life
  • Term life/Personal accident
  • Savings life
  • Property insurance
  • Endowment life
  • Health insurance
  • Agriculture

Products in greatest demand are least available 3. Products Difficulty Success 9. Micro vs. Conventional Insurance Conventional Insurance Microinsurance

  • Complex policy document
  • Limited eligibility with standard exclusions
  • Regular premium payments as banking transaction
  • Usually minimum of 12 months
  • Screening requirements may include a medical examination
  • Small and large sums insured
  • Priced based on age/specific risk
  • Agents and brokers are primarily responsible for sales
  • Market is largely familiar with insurance
  • Simple, easy to understand policy document
  • Broadly inclusive, with few if any exclusions
  • Premiums accommodate irregular cash flows, paid in cash or with another financial transaction
  • Period of coverage can be as short as 4 months
  • Any screening requirements would be limited to a declaration of good health
  • Only small sums insured
  • Community or group pricing
  • Distribution channel may manage the customer relationship, premium collection, claims payment
  • Market is largely unfamiliar with insurance


  • Main Message:
  • Microinsurance is not just a scaled down version of regular insurancethe product and processes need to be completely reengineered to meet the characteristics and preferences of the low-income market.

11. Self-help groups Low-Income People Banks Credit unions Smart cards Computer kiosks Service providers MFIs NGOs Retailers Link to existing transactions for efficiency Delivery Channels Labour unions Cooperatives On-line& ATM Employers Insurance companies Cell phones Utility companies 12. A few insurers providing microinsurance

  • Alternative Insurance Co, Haiti
  • La Positiva Seguros, Peru
  • Mapfre-Compartamos, Mexico
  • Colseguros, Columbia
  • Zurich, Bolivia
  • Guy Carpenter & Co (regional)

To stimulate new ideas and test new approaches to provide better products

  • LUnion des Assurances (UAB), Burkina Faso
  • Cooperatives Insurance Company (CIC), Kenya
  • Kenya Orient Insurance Ltd
  • Hollard Insurance, South Africa
  • Union des Mutuelles de Sant de Guine Forestire (UMSGF), Guinea
  • ASIA
  • ICICI Prudential, India
  • Max NY Life, India
  • TATA AIG, India
  • SANASA, Sri Lanka
  • Delta Life, Bangladesh
  • Allianz, Indonesia
  • PICC, China

13. Challenges

  • Developing sustainable products that meet the needs of the market -- especially more comprehensive health products
  • Reducing transaction costs (enhancing affordability)
  • Overcoming the markets natural resistance and educational barriers
  • Getting products to the market: distribution
  • Adopting a microinsurance approach to premium collections and claims payments

14. Challenges (cont.)

  • Creating microinsurance experts
  • Promoting an enabling environment for microinsurance
  • Having better data to price products
  • Developing a database of product and institutional performance benchmarks
  • Assessing the impact: do the poor really benefit from insurance, and if so, under what circumstances

15. Closing Thoughts

  • The micro market represents huge opportunities and challenges for insurers
  • Microinsurance is not just regular insurance with smaller premiums and sums assured
  • Successful products:
    • Overcome the wariness of customers
    • Adapt to the socio-economic situation of the poor
    • Createa new insurance mindset: help people manage risks
  • Pivotal time for sector development:
    • Increasingly rapid expansion
    • Key stakeholders joining forces with more resources
    • Higher standards are expected (products, value)
  • To capitalize on developments the sector must scale up, but:
    • Start small:Ensure product viability first
    • Build on lessons learned;apply rigorous and objective testing
    • Innovate to add more value to products

Innovation will drive development