Download - An Introduction to Microinsurances
![Page 1: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/1.jpg)
Microinsurances: From Vulnerabilities to Business Models?
Martin Herrndorfoikos PhD Fellow, Universität St.GallenInstitute of [email protected]+41(0)76 263 2601 | +49(0)163 431 1374
SeminarSummer School “Entwicklungspolitik” 31 August – 5 September 2009University of CologneTeaching and Research Center Latin America
![Page 2: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/2.jpg)
2
Seminar Microinsurances
Thursday: Ideas, Principles and Actors• Presentation 1: Ideas and principles
• Group Session 1: Case studies – selected projects
• Presentation 2: Actors and networks
• Group Session 2: Micro-insurance actors in focus
Friday: Actors and Networks on the country level
• Group Session 3: Country research ‘Colombia’
• Presentation 3: Jenny Hennig, GTZ
• Group Session 4: Strategies for microinsurances
• Final presentations
![Page 3: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/3.jpg)
3
Introduction Seminar Microinsurances
Presentation 1:
Microinsurances: Ideas and Principles
![Page 4: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/4.jpg)
4
Introduction Seminar Microinsurances
Vulnerabilities and the demand for microinsurances
![Page 5: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/5.jpg)
5
Poverty as a dynamic challenge
always poor| Usually poor| Churning poor| Occasionally poor | Never poor
Always poor
Usually poor
Churning poor
Occasionally poor
Never poor
Present Status
Sta
tus 1
0 Y
ears
Ag
o
Situationunchanged
Improvement of situation Poverty Reduction
Worsening of situation
No cases
Hulme, D, and A Shepherd. 2003. “Conceptualizing Chronic Poverty”. World Development 31:403-23.
![Page 6: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/6.jpg)
6
Poverty as a dynamic challenge
Hulme, D, and A Shepherd. 2003. “Conceptualizing Chronic Poverty”. World Development 31:403-23.
![Page 7: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/7.jpg)
7
The cause of poverty dynamics
Income gained
Hulme, D, and A Shepherd. 2003. “Conceptualizing Chronic Poverty”. World Development 31:403-23.
Income lost
Formal employment
RemittancesChildren have (urban) income
InheritancePublic subsidies
Death of household head
Long sicknessBusinessstart-up
Bad investment
House burned down
Landwashed away
Drug addiction
always poor| Usually poor| Churning poor| Occasionally poor | Never poor
Always poor
Usually poor
Churning poor
Occasionally poor
Never poor
Present Status
Sta
tus 1
0 Y
ears
Ag
o
![Page 8: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/8.jpg)
8
Microinsurances as a protection mechanism
Churchill, Craig, ed. 2006. Protecting the Poor: A Microinsurance Compendium International Labour Office (ILO), Munich Re
Foundation.
![Page 9: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/9.jpg)
9
Different social security mechanisms
Churchill, Craig, ed. 2006. Protecting the Poor: A Microinsurance Compendium International Labour Office (ILO), Munich Re
Foundation.
Self-insurance
Informal group-based mechanisms
Formal (micro-)insurance
Socialprotection
Money lenders(Family) savings
Welfare AssociationsFuneral AssociationsRotating Savings and Credit Associations (ROSCAs)
Partnerships between insurers and MFIs
Public provision / pensions
In case of „death“:
Diversifying income sourcesBuilding social capitalEx-ante reduction of vulnerability
![Page 10: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/10.jpg)
10
Feasibility of microinsurances
10
Lives affected
Diffi-culty
Risk
Life insurance An ideal and simple risk to insure, with proven demand and impact, easy to scale
***** ** *
Accidental death and dismemberment insurance
A simple risk, with proxy health elements, but providing incomplete protection
***** *** **
Healthcare cost indemnity insurance
Long-term, risky, complex, subject to abuse and fraud, historically many failures
*-*****
***** ****
Health savings vehicles
Support and financial discipline for routine expenses, no help for major events
*-*****
* *
Defined benefit health (major medical, hospital, critical illness)
Contribution towards healthcare costs or associated losses for major healthcare events
*-*****
**** ***
Agricultural (property) insurance
Risk management is a crucial component of agricultural development
***** **** ***Roth, Jim, Michael J. McCord, and Dominic Liber. 2007. The Landscape of Microinsurance in the World’s 100 Poorest Countries. Appleton, WI: The MicroInsurance Centre, LLC.
![Page 11: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/11.jpg)
11
Consumer demand for microinsurances
11
![Page 12: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/12.jpg)
12
Effects – health micro-insurance
12
Adapted from Blanchard-Horan, 2006, In: Roth, Jim, Michael J. McCord, and Dominic Liber. 2007. The Landscape of Microinsurance in the World’s 100 Poorest Countries. Appleton, WI: The MicroInsurance Centre, LLC.
![Page 13: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/13.jpg)
13
Introduction Seminar Microinsurances
Definitions and Principles
![Page 14: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/14.jpg)
14
Microinsurances - definition
14
„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”
Churchill, Craig ed. 2006. Protecting the Poor: A Microinsurance Compendium International Labour Office (ILO), Munich Re Foundation.
![Page 15: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/15.jpg)
15
Microinsurances - principles
15
• Same general principle as ‘normal’ insurance
• But different target group: The poor!• Double benefit:
• New, untapped market for businesses• Protection of the poor against risks:
Vulnerability• Different operational principles
Churchill, Craig ed. 2006. Protecting the Poor: A Microinsurance CompendiumInternational Labour Office (ILO), Munich Re Foundation.
![Page 16: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/16.jpg)
16
Microinsurance principles
16
Principles Key Question
Relevant to the risks of low-income households
What do we know about the risks the poor face?
As inclusive as possible
How can we reach the greatest number of poor people?
Affordable premiums
How much can the poor pay, when, in which form?
Grouping for efficiencies
How can we overcome transaction costs in rural and dispersed markets?
Clearly defined and simple rules and restrictions
How can everybody (even illiterates) understand the product offer?
Easily accessible claims documentation requirements
How can the poor claim insurance payments quickly?
Strategies to overcome the wariness of customers
How can ignorance of insurance as a principle be overcome?
Churchill, Craig ed. 2006. Protecting the Poor: A Microinsurance CompendiumInternational Labour Office (ILO), Munich Re Foundation.
![Page 17: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/17.jpg)
17
Introduction Seminar Microinsurances
Supply of Microinsurances
![Page 18: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/18.jpg)
18
Access to financial services
![Page 19: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/19.jpg)
19
Number of microinsurance providers
Roth, Jim, Michael J. McCord, and Dominic Liber. 2007. The Landscape of Microinsurance in the World’s 100 Poorest Countries. Appleton, WI: The MicroInsurance Centre, LLC.
![Page 20: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/20.jpg)
20
Microinsurances – total lives covered
20
Region Life HealthAccident
& Disability
Property & Index
Americas 7,545,057 445,876 105,000 600
Africa 2,036,141 3,053,778 1,603,000 1,600,000
Asia54,158,33
231,697,038
39,180,508
34,557,434
Total63,739,53
035196692 40888508 36158034
Roth, Jim, Michael J. McCord, and Dominic Liber. 2007. The Landscape of Microinsurance in the World’s 100 Poorest Countries. Appleton, WI: The MicroInsurance Centre, LLC.
![Page 21: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/21.jpg)
21
Access to microinsurances in Latin America
Roth, Jim, Michael J. McCord, and Dominic Liber. 2007. The Landscape of Microinsurance in the World’s 100 Poorest Countries. Appleton, WI: The MicroInsurance Centre, LLC.
![Page 22: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/22.jpg)
22
The context for microinsurances
Roth, Jim, Michael J. McCord, and Dominic Liber. 2007. The Landscape of Microinsurance in the World’s 100 Poorest Countries. Appleton, WI: The
MicroInsurance Centre, LLC.
Macro | The Enabling Environment
Meso | Financial Infrastructure
Micro | Business Models
Commercial & mutual
insurers, agents,
brokers, intermediaries
Actuaries, auditors, technical support,
adjusters, insurance
claims register,
information technology
Policy, legislation, regulation, supervision
![Page 23: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/23.jpg)
23
Market development for microinsurances
23
Qureshi, Zahid, and Dirk Reinhard. 2008. “Making Insurance Work for the Poor”. 4th International Microinsurance Conference 2008
![Page 24: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/24.jpg)
24
Introduction Seminar Microinsurances
Presentation 2:
Microinsurances: Actors and Networks
![Page 25: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/25.jpg)
25
Introduction Seminar Microinsurances
The Micro-Insurance Value Chain
![Page 26: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/26.jpg)
26
Value chain for insurances
![Page 27: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/27.jpg)
27
Changes in the value chain
27
Qureshi, Zahid, and Dirk Reinhard. 2008. “Making Insurance Work for the Poor”. 4th International Microinsurance Conference 2008
![Page 28: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/28.jpg)
28
Work distribution – a pyramid model
28
Reinsurer
Insurer Insurer Insurer
Channel Channel Channel
Client Client Client
Covered Life
Covered Life
Covered Life
‚A few‘
‚Dozens‘
‚Thousands‘
‚Millions‘
‚Millions more‘
![Page 29: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/29.jpg)
29
Work distribution
Qureshi, Zahid, and Dirk Reinhard. 2008. “Making Insurance Work for the Poor”. 4th International Microinsurance Conference 2008
![Page 30: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/30.jpg)
30
Microinsurances – product design tasks
30
Micro-Insurance Product Design (Example: Health)
Product manufacturing•Define benefit package •Identify providers•Pricing for sustainability•Controls for fraud, moral hazard, adverse selection
Product sales•Information provision•Underwriting
Product servicing•Assistance with claims •Manage relationship with care providers•Long-term relationship with clients
Product servicing•Maintenance of long-term stability•Financial management•Risk monitoring & management (reinsurance)
Churchill, Craig ed. 2006. Protecting the Poor: A Microinsurance CompendiumInternational Labour Office (ILO), Munich Re Foundation.
![Page 31: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/31.jpg)
31
Value creation through local education
31
Michael Anthony, Allianz SE, Presentation at Utopia Conference, Berlin
Explain insurances
and risks covered to the heads of village.
To raise understanding and awareness
about micro-insurances,
mass rallies are being held by
Care and local NGO.
Village officials explain and discuss the concept of
insurance with members of the village.
During these awareness campaigns a puppet theatre and microinsurance song are shown to explain insurance.
1 2
34
![Page 32: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/32.jpg)
32
Introduction Seminar Microinsurances
Actors and Approaches
![Page 33: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/33.jpg)
33
Key differences between the actors in the field
Financial Performance
Social Mission
Large & Global
Small & Local
Weak / distanced
Strong / embedded
Primary interest / logic
Scope of operations
Outreach to the poor
High /standardised
Low / informal
Operational & financial capacity
High / stable
Low / instable
Risk-pooling capacity / reserves
![Page 34: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/34.jpg)
34
Introduction Seminar Microinsurances
Actors and Approaches
Insurance Companies
![Page 35: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/35.jpg)
35
Base of the Pyramid – A new paradigm
Poor / extremely poor‘Base of the Pyramid’= 4 billion customers?
Traditional business focus
Neglected markets
Middle class
Highincome
Inclusive business?
Anwara Begum, Grameen 'telephone lady' (Credit: Nurjahan Chaklader)
Based on Prahalad, C. K., and Allen L. Hammond. 2002. “What Works: Serving the Poor, Profitably”. Harvard Business Review 4-11.
![Page 36: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/36.jpg)
36
Why poverty markets? Reasons for insurers
Internal factors External factors• Corporate social
responsibility • Risk diversification • Securing or growing
revenue• Push for new markets
and innovative products
• Growing competition in traditional markets
• Shrinking margins in traditional markets
• Regulatory requirements • Political and activist pressure • Liberalization of previously
closed markets
Churchill, Craig ed. 2006. Protecting the Poor: A Microinsurance CompendiumInternational Labour Office (ILO), Munich Re Foundation.
![Page 37: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/37.jpg)
37
How? Agent vs. reinsurance-modell
Insurance company
Micro-finance
Coopera-tive
Insurance company
Micro-finance
Coopera-tive
„Agent“ „Reinsurance“General
• Insurer develop products and carry the risk
• Microfinance Institutions or cooperatives serve as distribution channels
• Claim settlement often through distribution partners
• Typical of life insurances
• Microfinance Institute or cooperative develop products
• Part of the risk is shifted to insurance company
• Claim settlement through distribution partners
• Typical of health insurances
Re-insurer
Insurer
Distribution channel
![Page 38: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/38.jpg)
38
Introduction Seminar Microinsurances
Actors and Approaches
(Agro-)Cooperatives
![Page 39: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/39.jpg)
39
Cooperatives - principles
The insurer is owned by the insured
•Incentive to keep premiums low and claims regulation high•Local control between the insured to reduce moral hazard
•Wide variation in terms of members• From a dozen to several millions
•As a consequence, similar variation in modes of operation
•Insurance often based on established service models:• Credit cooperatives Credit-life insurance• Health cooperatives Health insurance• Farmer cooperatives Crop / livestock insurance
![Page 40: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/40.jpg)
40
Kooperativen - Beispiele
Churchill, Craig ed. 2006. Protecting the Poor: A Microinsurance CompendiumInternational Labour Office (ILO), Munich Re Foundation.
![Page 41: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/41.jpg)
41
Introduction Seminar Microinsurances
Actors and Approaches
Micro-Finance Institutions
![Page 42: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/42.jpg)
42
From micro-credit to micro-insurance
Core business: Micro credit (and partly social services)
Credit protection through credit life insuranceDouble goal: More attractive credit products and improved risk profile of portfolio
Connection of savings and insuranceSavings similar to insurance („pay now, get back later“)High demand for savings products from target group
More insurance productsHealth, property, crop, livestock
1. Closer to customer demand (health!)
2. Rising complexity and risk
3. Danger of cross-subsidising and financial stability
![Page 43: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/43.jpg)
43
Micro-Finance 1: Local embeddedness
Muhammad YunusFounder Grameen Bank
• Not-for-profit / low-profit companies
• Financially sustainable• The goal is to create “social
businesses”
• Locally adapted• Long-term learning
processes• More socialisation then
training
• Alliances with profit oriented businesses in clearly-defined joint venture structures
![Page 44: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/44.jpg)
44
Micro-Finance 2: Standardisation
icrofinance?
Vikram Akula Founder
SKS Microfinance
![Page 45: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/45.jpg)
45
Micro-Finance 1: Local embeddedness
Akula, Vikram. 2008. Business Basics At the Base of the Pyramid. Harvard Business Review 86:53-57.
Akula / SKS approach
Traditionally
Adopt a profit-oriented approach in order to access
commercial capital.
• Not-for-profit / low-profit organisations• Financially self-sustaining• Establish “social businesses” (Yunus)
Standardise products, training
and other processes in order
to boost capacity — like „Starbucks and
McDonalds“.
• Locally adapted, learn on the ground• Process of socialisation, recruit officers
from former clients• Average training time: 4-6 months (2
months at SKS)
Use technology to reduce costs and
limit errors.
• Paper-based bookkeeping, local technology
• SKS: Handhelds, internet-linked, special software
![Page 46: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/46.jpg)
46
Step-wise development of business models?
Source : http://www.symbiotics.ch/en/microfinance-institutions.asp, Darius Capital Partners
Difficulty with microinsurances:
•Risk pooling requires a big and widely-distributed portfolio
•Lumpy investments into insurance knowledge, systems and accreditation
Starting microinsurance incrementally is difficult!
![Page 47: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/47.jpg)
47
How many people do different providers reach?
Roth, Jim, Michael J. McCord, and Dominic Liber. 2007. The Landscape of Microinsurance in the World’s 100 Poorest Countries. Appleton, WI: The MicroInsurance Centre, LLC.
![Page 48: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/48.jpg)
48
Which services do different providers offer?
48
Roth, Jim, Michael J. McCord, and Dominic Liber. 2007. The Landscape of Microinsurance in the World’s 100 Poorest Countries. Appleton, WI: The MicroInsurance Centre, LLC.
![Page 49: An Introduction to Microinsurances](https://reader036.vdocuments.mx/reader036/viewer/2022070301/5444d080b1af9f436c8b4570/html5/thumbnails/49.jpg)
49
Thanks for your attention!
Martin Herrndorf
[email protected]: herrndorfmobil ch: +41(0)76 2632601Mobil de: +49(0)163 4311374www.facebook.com/herrndorf