MicroInsurance
Not insurance as you know it! Gabriel Flores
Dr. Phyllis SantaMaria
Warm up! Walk around and introduce yourself to three other people
• Name • What you do • Why are you here tonight?
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After tonight’s session, you will be able to...
• Distinguish the benefits of microinsurance and how it differs from conventional insurance
• Describe how microinsurance helps people maintain and possibly improve their position on the economic pyramid
• Select a way to get involved with microinsurance
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What is insurance?
4 Lloyd’s of London
What is insurance?
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• Unemployment: Gov’t
• Disaster: Gov’t • Security: Gov’t &
Private • Injury: Corporate • Professional:
Individuals
• House • Life • Car & Consumer
Goods • Health: NHS &
Private
• Pensions: Gov’t & Private
What are your opinions about insurance?
– [insert photo of Lloyd’s building]
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Inside Lloyd’s of London (BBC photo)
Some opinions about insurance…
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Blind people describing an elephant…
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Catheryn’s story: UK vs US
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Different views of microinsurance
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Poor people
Donors Financial analysts
Insurers
Microfinance ins5tu5ons
Academics
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• A loan, NO insurance, NO savings
• 43, two sons, husband died
• NO assets, home, job, money, help from in-laws
• Moved to Dhaka, Bangladesh, seeking job and shelter
1998
Budi, a Borrower
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• A loan, NO savings • Insurance with Delta Life
on her husband’s life • 29, widowed, 3 young
children • Her in-laws demanded
the life insurance money • She refused, got thrown
out with her three children
1998
Jorina Bibi, a Borrower with Insurance
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2008: Budi and her children • She and her two sons
begged, scavenged food and slept on pavements in Dhaka
• US$ 0.50 a day • We lost contact
– Budi disappeared – probably victim of a human trafficking gang
– Elder son, then 16, in jail for robbery
– Younger son, then 13, breaking bricks at a construction site
Photo by courtesy of Mike Bedner, Alberta, Canada; Rotary GSE Member on visit to Bangladesh
1998
2008: Jorina Bibi, a Delta Life Policyholder
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• With help of friends and an NGO she moved into a home for destitute women
• With part of £80 from her husband’s life insurance – rented some land – built a hut to live in – set up a poultry
business A Delta Life Microinsurance beneficiary and her poultry farm
Photo by Gono-Grameen Bima Manager, Delta Life
2008
2008: Jorina Bibi’s and her children’s success
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• Today a micro entrepreneur – employs 4 people – earns Taka 8,000 (£64) per
month
• Her children are successful – Daughter got a teaching degree
and teaches at a local school – Both her sons finished college
and joined her business
Jorina Bibi’s daughter Nasreen (1st from left), a teacher, with some of her colleagues
Photo by Gono-Grameen Bima Manager, Delta Life
How does microinsurance help cushion the impact of shocks?
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Destitute
Loan Cycles and Impact of Losses
Econ
omic
Lev
els
Wealthy
Non-poor
Moderate poor
Extreme poor
Vulnerable non-poor
The 4 main microinsurance products
Health Insurance: needs health care providers
Life Insurance: oFen given by MFIs
Livelihood Insurance: machinery
Crop and livestock Insurance: needs sophisMcated data such as 50 yrs’ rainfall
How does microinsurance differ?
Needs based Groups Fast Response
EducaMon On your doorstep CollaboraMon
MARKET SIZE: 4 BILLION PEOPLE GLOBALLY (2-‐3 BILLION POLICIES)
Delivery channels
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Low Income People
Employers
Bank, Post office
Suppliers
Insurance companies
Hire Charge service providers
MFIs NGOs
On-line & ATM
Cell phones Smart cards
Retailers
Labour unions
Cooperatives
Mutuals
Life insurance with flexibility Amparar Policy by LA EQUIDAD, Colombia for their cooperative members only • Monthly premium US$ 1.00;
basic coverage US$ 1,250.00 • 50% pay out for treatment in
case policy- holder contracts incurable disease while insured
• After policyholder’s death for two years – Child’s education expenses – Medical expenses for dependents – Monthly food vouchers – Utility bills
Beneficiaries of a La Equidad AMPARAR policy by courtesy of La Equidad
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Indexed rainfall insurance BASIX- India • Collaboration: World Bank,
IFC, and ICICI Lombard Bank,
July 2003: benefits indexed to rainfall
• 3rd Year – 2005 – 23,080 policyholders
• 5th year – 2007 – 37,685 policies sold
• 8th year – 2010 – 97,700 policyholders
NOW IN 7 STATES in INDIA, PRODUCTS INCREASED Farmer in India waiting for rain by courtesy of BASIX
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Comprehensive healthcare with ID card
Microcare - Uganda • Provides in-patient and out-
patient treatment and prescription medicine
• Several thousand policy holders
• Started as a NGO; now a licensed Uganda insurance company
• A Microcare desk at a participating hospital has a third party administrator to reduce moral hazard by beneficiaries or the clinic
Photo courtesy of MIRT
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Integrated insurance package
Vimo SEWA co-op, India • Three packages: death,
sickness, loss of assets • Annual premiums or fixed
deposits • Special benefits for fixed
deposit members – Maternity $6.90 – Dentures $13.80 – Hearing aid $23.00
Marketing of SEWA through outdoor folk theatre. Photo courtesy of MIRT
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Key challenges Clients • Negative attitude • Don’t see the value • Low and irregular income
Delivery channels • Poor infrastructure • Low insurance competence • Slow claims handling
Insurance products and industry • Little knowledge of the
market • Low premiums • High transaction costs • Clients’ high expectations • Lack of data for pricing • Low retention rate • Few health care providers
to link with health products
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Cautions about microinsurance!
• NOT a ‘magic bullet’ • NOT the right risk
mgmt solution for all poor people
• Microfinance institutions – Don’t have all skills
required – Must assess expenses
and risks before offering Microinsurance
– MUST NEVER act as insurers unless they have huge resources
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What new things have you encountered tonight?
• What are the benefits of microinsurance?
• How does it differ from conventional insurance?
• How does microinsurance help people maintain and possibly improve their position on the economic pyramid?
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ARE YOU READY TO TAKE ACTION?
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How to get involved • Tweet your insights to @MicrofinanceWoB (We’ll Tweet
back!) • Sign up to our mailing list on your Smartphone
www.microfinancewithoutborders.com and get copies of tonight’s presentation
• Book for our free event: Practical Microfinance in Action!
Tue 13 Nov, 6.30-9 pm at Allen & Overy • Enquire about MWB’s
– Practical Microinsurance Consultancy Courses – Consultancy support for Insurers, Regulators and Microfinance
Institutions
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Contact Information
• Mosleh Ahmed – [email protected]
• Dr Phyllis SantaMaria – Mobile: +44 7715 004 303 – Landline: +44 207 839 0844 – Email: [email protected]
• Gabriel Flores – Mobile: +44 7834 528 966 – Email: [email protected]
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