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Microinsurance and MFIs
Craig Churchill Microinsurance Innovation Facility
International Labour Organization
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Outline of the presentation
1. Should an MFI offer microinsurance?
2. If so, through what institutional structure?
3. If they partner with an insurance company,
how to manage that relationship effectively?
4. What products should the MFI offer?
5. Concluding thoughts
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1. Should MFIs offer insurance?
Commercial Lower credit risk Enhance client retention Bolster product
profitability Diversify income streams Reach out to new markets
Social Help clients to reduce their
vulnerability Improve client welfare
For those that do, their primary motivations are:
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Inefficient or expensive way of addressing the risk of client death
Requires a different skill sets from savings and credit
Do not want to be distracted from core competencies
Wise to separate credit and insurance risks
Possible reasons for not offering insurance:
1. Should MFIs offer insurance?
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ReinsurerRisk CarrierPolicyholders(low-incomehouseholds)
DeliveryChannel
Administration platform
Broker
Microinsurance supply chain
2. Institutional options
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1. Self-insurance
2. Partner-agent model
3. Microinsurance broker
4. Create an insurance company
2. Institutional options
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1. Self-insurancea) only for basic products
b) if the MFI has > 10K clients
c) and technical assistance
d) and catastrophe cover for large losses
2. Partner-agent model
3. Microinsurance broker
4. Create an insurance company
2. Institutional options
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3. Making the Partner-agent model work
1. Tell them what you want
2. Choose a trustworthy insurer
3. Involve the insurer in understanding customer needs
4. Manage claims*
5. Create a review committee
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3. Making the Partner-agent model work
6. Eliminate exclusions
7. Maintain and analyse data
8. Determine the costs
9. Own the clients
10. Share the profits
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4. Products
Credit life Perhaps the best opportunity to expose
large number of low-income people to insurance
It is a lost opportunity if they did not know that they were covered, or if they had a bad experience with the product
It needs to cover more than just the loan to increase the chances that policyholders will have a positive experience with it
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Integrated vs. stand-alone products More efficient to “piggyback” insurance
transaction onto another transaction Link with credit limits value because
people do not always want to be in debt
Links with savings have high potential Does the MFI want to develop the
capacity to deliver stand-alone insurance products?
4. Products
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Health Often the product for which there is the
greatest demand Illnesses can cause a significant problem
for the MFI’s loan portfolio If MFIs do offer health, perhaps focus on
more basic products like hospital cash Can MFIs offer health savings accounts for
small, frequent health expenses?
4. Products
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Insurance for the MFI?• MFIs should consider their broader
insurance needs when negotiating with insurers
• If frontline employees have the same coverage, it will be easier for them sell it to clients
• Other coverage to consider: vehicles, property, fidelity, money storage and handling
4. Products
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5. Concluding thoughts
MFIs need to: Reflect on their objectives Develop in-house expertise Actively manage their microinsurance
scheme, even in a P-A model, because their reputation is at risk
Consider how ensure that low-income households appreciate insurance and are willing to pay for additional benefits
Persuade front line staff that insurance provides value for clients and the MFI
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Thank you!
Craig [email protected]
Tel +41 22 799 6242www.ilo.org/microinsurance
www.microinsurancenetwork.org
A member of the
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