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Microinsurance in Aceh

Feasibility Study

December 2006

By

Gabriele Ramm

Gerald Leppert

Kai Straehler-Pohl

Commissioned by Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GTZ Regional Unit: 402 Regional Group

Responsible: Dr. Michael Hamp / Svenja Paulino Rodriguez

Country Director: Ms Sabine Markert

Appraisal Team: Ms Gabriele Ramm (mission leader)

Mr Gerald Leppert

Mr Kai Straehler-Pohl

Date of Report: 01 December 2006

Table of Contents

ACKNOWLEDGEMENTS.........................................................................................................................................I LIST OF ABBREVIATIONS.................................................................................................................................... II EXECUTIVE SUMMARY....................................................................................................................................... IV 1 BACKGROUND .................................................................................................................................................. 1 2 METHODOLOGY............................................................................................................................................... 1 3 DEMAND FOR MICROINSURANCE............................................................................................................. 2

3.1 IDENTIFICATION OF RISKS........................................................................................................................... 2 3.2 CONCLUSIONS............................................................................................................................................. 3

4 EXISTING RISK MANAGEMENT STRATEGIES....................................................................................... 3 4.1 MICROSAVINGS AND MICROCREDIT PRODUCTS.......................................................................................... 3 4.2 TRADITIONAL RISK MANAGEMENT STRATEGIES......................................................................................... 3 4.3 INSURANCE COMPANIES.............................................................................................................................. 4 4.4 SOCIAL SECURITY PROGRAMS .................................................................................................................... 5 4.5 CONCLUSIONS............................................................................................................................................. 6

5 SCOPE FOR MICROINSURANCE ................................................................................................................. 6 5.1 THE ROLE OF MICROINSURANCE AS RISK MANAGEMENT STRATEGY.......................................................... 6 5.2 PRODUCTS AND WILLINGNESS TO PAY........................................................................................................ 8 5.3 DELIVERY CHANNELS ................................................................................................................................. 9

6 POTENTIAL PARTNER ORGANISATIONS .............................................................................................. 10 6.1 FINANCIAL INTERMEDIARIES .................................................................................................................... 10 6.1.1 Commercial Banks ................................................................................................................................... 10 6.1.2 Microfinance institutions ......................................................................................................................... 10 6.2 NON-FINANCIAL ORGANISATIONS ............................................................................................................ 12 6.2.1 Non-financial NGOs ................................................................................................................................ 12 6.2.2 Non-financial Cooperatives..................................................................................................................... 13 6.3 OTHER STAKEHOLDERS ............................................................................................................................ 14 6.3.1 Secondary structures................................................................................................................................ 14 6.3.2 Government institutions........................................................................................................................... 14

7 THE NEED FOR CAPACITY DEVELOPMENT ........................................................................................ 15 8 INTERNATIONAL ORGANISATIONS........................................................................................................ 17

8.1 OTHER GTZ SUPPORTED PROJECTS IN NAD ............................................................................................ 17 8.2 ILO ........................................................................................................................................................... 18 8.3 ADB ......................................................................................................................................................... 18 8.4 MERCY CORPS .......................................................................................................................................... 18 8.5 CARE INTERNATIONAL ............................................................................................................................. 18 8.6 SAVE THE CHILDREN ................................................................................................................................ 19

9 CONCLUSIONS AND RECOMMENDATIONS.......................................................................................... 19 9.1 PRODUCTS................................................................................................................................................. 20 9.2 DELIVERY CHANNELS AND PARTNER ORGANISATIONS ............................................................................ 20 9.3 CAPACITY BUILDING AND TRAINING ORGANISATIONS ............................................................................. 23 9.4 COOPERATION WITH OTHER INTERNATIONAL ORGANISATIONS ............................................................... 23 9.4.1 Interfaces with PPP Jakarta and India ................................................................................................... 23 9.4.2 Other GTZ supported projects................................................................................................................. 24 9.4.3 International Organisations .................................................................................................................... 24

10 NEXT STEPS...................................................................................................................................................... 24 11 APPENDICES .................................................................................................................................................... 26

1 METHODOLOGY ................................................................................................................................................... 26 2 LIST OF PRE-SELECTED POTENTIAL PARTNER INSTITUTIONS ............................................................................... 28 3 COST OF HEALTH CARE SERVICES........................................................................................................................ 30

4 HOSPITALS IN NANGGROE ACEH DARUSSALAM ................................................................................................. 32 5 PROPOSED PILOT REGIONS FOR MICRO HEALTH INSURANCE ............................................................................... 33 6 ALTERNATIVE DELIVERY MODEL ........................................................................................................................ 34 7 OVERVIEW OVER MULTILEVEL ADMINISTRATION STRUCTURE IN NAD ............................................................. 35 8 CRITERIA FOR MICROINSURANCE ORGANISATIONS ............................................................................................. 36 9 TOR GABRIELE RAMM ........................................................................................................................................ 38 10 CONTACT DETAILS OF PEOPLE MET DURING THE MISSION................................................................................. 40 11 BIBLIOGRAPHY .................................................................................................................................................. 44

Microinsurance in Aceh Feasibility study

I

Acknowledgements The appraisal team takes this opportunity to thank all individuals and organisations for their constructive contributions to this report and the time they spend for providing all the relevant information and sharing their experience.

Especially, the authors would like to thank the staff and members of Baitul Qiradh Cut Nyak Dien, BQ Amanah Nanggroe Beurawe and BQ Surya Madinah in Banda Aceh for the kind support in conducting focus group discussions and for long hours of interviews. Furthermore, we would like to thank fishermen and Tambak farmers in the village of Kuala, Aceh Utara, for their time discussing risks and tradition risk coping mechanisms.

We would particularly like to thank Pak Ridwan for his support and his valuable background information. Without his inputs it would not have been possible to write this report.

The authors wish to sincerely thank Ibu Eva and all others from the GTZ supported ‘Economic Recovery and Microfinance Program’ for their assistance in organising the stay. Special thank is expressed to Michael Hamp, ProFI, and Svenja Paulino Rodriguez, Economic Recovery and Microfinance Program (ERMF) of GTZ. Without their initiative the mission would not have been materialized.

The kind support given by Allianz Life Indonesia whose donations made this feasibility study possible is gratefully acknowledged.

The authors

Gabriele Ramm

Gerald Leppert

Kai Straehler-Pohl


II

List of abbreviations ADB Asian Development Bank ASKESKIN Asuransi Kesehatan subsidi untuk masyarakat miskin BA Banda Aceh BI Bank Indonesia (central bank of Indonesia) BKKBN Badan Koordinasi Keluarga Berencana Nasional (National

Family Planning Board) BKM Bantuan Khusus Murid BMZ Bundesministerium für wirtschaftliche Zusammenarbeit

und Entwicklung BOS Bantuan Operasional Sekolah (school operational aid) BPD Bank Pembangunan Daerah (regional development bank) BPR Bank Perkreditan Rakyat (People’s Credit Banks, some-

times referred to as rural banks) BPRS BPR following Sharia banking rules BQ Baitul Qiradh (saving and credit cooperative following Is-

lamic principles) BRI Bank Rakyat Indonesia BRR Badan Pelaksana Rehabilitasi dan Rekonstruksi, NAD (Re-

gional Rehabilitation and Reconstruction Agency) BYTRA Bina Rakyat Sejahtera, Institute for Strengthening Social

Capacity CB Commercial Bank CCDE Centre for community development and education CGAP Consultative Group to Assist the Poor CU Credit Unions DSP Danamon Simpan Pinjam EPOS EPOS Health Consultants GmbH ERMF Economic Recovery and Microfinance Program FGD Focus Group Discussion GAM Gerakan Aceh Merdeka (Aceh movement for independence) GFUSA Grameen Foundation USA GTZ Gesellschaft für Technische Zusammenarbeit IDR Indonesian Rupiah (national currency) ILO International Labour Organisation INGO International Non-Government Organisation Jl Jalan (street) JPKMM Program Jaminan Pemeliharaan Kesehatan Masyarakat Mi-

skin (health service guarantee for the poor) KSP Koperasi Simpan Pinjam (single purpose cooperative) MC Mercy Corps MFI Microfinance Institution MICRA Microfinance Innovation Center for Resources and Alterna-

tives MI Microinsurance


III

MIS Management Information System NAD Nanggroe Aceh Darussalam (Aceh province) NGO Non Governmental Organisation PERBARINDO Persuatan Bank Perkreditan Rakyat Indonesia (association

of Indonesian BPRs) PNM Permodalan Nasional Madani PPP Public Private Partnership ProFI Promotion of Small Financial Institutions PRSP Poverty Reduction Strategy Paper RMS Risk management strategy RS Rumah sakit (hospital, here referred to private hospitals) RSIA Rumah sakit ibu dan anak (women and child hospital) RSU Rumah sakit umum (public hospital) SD Sekolah dasar (elementary school) SHG Self Help Group SMA Sekolah menengah atas (senior high school) SMK Sekolah menengah kebangsaan (senior secondary school) SMP Sekolah menengah pertama (junior high school) ToR Terms of Reference UPPKS Usaha Peningkatan Pendapatan Keluarga Sejahtera

(self help group of BKKBN) USP Multi Purpose Cooperative YAMIDHA Yayasan Mitra Dhuafa YDS Yayasan Dinamik Sistim YDUA Yayasan Daur Ulang Aceh YKBS Yayasan Karya Banda Sejahtera

All currency conversions from Indonesian Rupiahs (IDR) to Euro (EUR) are based on the ex-change rate of Oct 18 2006: 1000 IDR = 0.8697 EUR1

1 Exchange rate based on interbank rate, www.oanda.com/convert/classic


IV

Executive summary In reaction to the dramatic loss the Acehnese population suffered due to the Tsunami disaster, Allianz AG and GTZ decided to explore the opportunities to extend the current public-private partnership (PPP) microinsurance project operated in Java to Aceh province.

The study team identified the demand for microinsurance in Aceh province (NAD), analysed potential partner institutions and formulated recommendations regarding suitable products, delivery channels, capacity development needs and the cooperation with other organisations.

During the field research information was obtained from individual potential clients, representa-tives of microfinance institutions (MFIs) and local non-governmental organisations (NGOs), insurance providers, government agencies as well as international organisations in Banda Aceh, Aceh Besar, Lhokseumawe, Aceh Utara and Jakarta.

In Aceh province, similar to the UNDP-GTZ-Allianz study “Microinsurance Demand and Market Prospects - Indonesia” (2005), the risk of severe illness is perceived as the major burden fol-lowed by the concern about education expenses for the children. Business risks, such as bankruptcy or losses due to business relocation, ranked third. Surprisingly, loss of assets caused by natural hazards, accident and death are perceived as less severe – the latter risk probably due to the existence of credit life insurance products. The first three important risks correlated with the risks that people are least prepared for and have insufficient means to manage those expenses.

The discussions revealed that risk coping mechanisms are limited and inadequate to protect low-income groups in case of an adverse event. Apart from depletion of personal savings and selling of valuables (in particular gold) borrowing from family members is the most important strategy. If those sources are exhausted, emergency loans from moneylenders and occasion-ally from banks are taken. Social security systems or Muslim social solidarity funds do not play a relevant role as coping mechanisms. Although many insurance companies operate in the Aceh province, only a few approaches the lower segment of the middle-income groups – none of them tap into the low-income market yet. This indicates a scope for microinsurance.

However, the analysis of the institutional landscape in Aceh province revealed challenging results. Because of the long conflict with the “Aceh movement for independence” (GAM) and the Tsunami disaster, the few existing groups are weak. Group lending plays only a minor role, whereas individual lending and saving is common with low-income households. With some exceptions, most of the microfinance institutions (MFIs) and cooperatives are small, have a limited outreach and are of low organisational strength. While secondary structures, such as the Apex organisations Dekopinwil (cooperatives), the BQ center, and Perbarindo (BPRs) are weak or not yet fully operational, efforts are made to strengthen their capacity. Overall, only 31 MFIs in the entire Aceh province fulfil basic selection criteria and could be taken into consideration when selecting potential partner organisations. Without substantial capacity building at all the levels, microinsurance will not achieve the ex-pected results. This applies in particular to the MFIs (and other intermediary organisations) and includes organisational strengthening beyond microinsurance knowledge. Since the out-reach of the organisations is very limited, the new PPP project should cooperate with other (international) agencies for strengthening the few existing Apex organisations. Although more than 300 international NGOs are listed as being active in NAD, none has im-plemented microinsurance in this region – hence, even their experience is limited and requires some introduction into microinsurance. Safe the Children and the ILO have indicated a strong interest to introduce microinsurance. The ADB showed some interest and should be ap-proached again as well as Care International and Mercy Corps. As most of the international organisations may close their project support by the end of 2008, it is recommended to particu-larly cooperate with those, which intend to extend their projects beyond 2008.


V

Due to the critical factors mentioned above, the expectations on microinsurance may strive towards an innovative pilot approach rather than reaching out to a large number of clients and providing a range of products for ensuring a high degree of (social) protection. The latter can-not be achieved under the given circumstances and within the limited duration of the project (most probably until the end of 2008).

However, substantial progress seems to be possible with a new approach covering critical illness/hospitalisation. The envisaged simple product, a kind of “index-based” microinsurance in the event of hospitalisation, could provide a two-tier lump sum benefit. Regardless of the actual loss incurred the predefined lump sum payouts would come into effect when the client is enrolled in the partner hospital: 1) the lower amount for the first few days, 2) the higher amount for in-patient care with surgery.

This product should not be perceived as a “proper” health microinsurance but as an “index-based” insurance instrument (with two triggers as mentioned above) relieving some of the fi-nancial burden in the event of hospitalisation. A product like this offers the potential for appli-cation in other project regions of the PPP project. Furthermore, strengthening Apex bodies such as Perbarindo in order to reach out to a large number of organisations and clients would have a tremendous impact not only for microinsurance operations but also as an institutional basis for other development activities.

Dealing with health risk requires the collaboration with health care providers. As the accep-tance of any type of health insurance depends on the quality of health services, it is recom-mended to select those hospitals, which provide satisfying treatment and as much transpar-ency and good governance as possible under the given circumstances. In this respect the col-laboration with the GTZ, EPOS/KfW supported hospitals would be an asset.


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1 Background Recognizing the adverse impact of risks and the limitations of existing risk management strategies applied by low income groups in the informal economy, the United Nations Devel-opment Programme (UNDP), Allianz Group, and the Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) commissioned three studies which were carried out in 2005. In Indo-nesia, India and Lao PDR the research team assessed the demand for microinsurance as well as the potential supply of microinsurance in terms of risk takers (regulated insurers, the gov-ernments, and others) and various delivery channels.

On the basis of those studies, GTZ and Allianz Life Indonesia started their cooperation in 2005. The agreed public-private partnership (PPP) project aims at designing microinsurance products, and strengthening MFIs such as BPRs. The first product, ‘Credit Life Plus’, was field-tested and is currently offered in the greater Jakarta area.

In addition, GTZ and Allianz entered into an agreement for supporting the Tsunami affected population and the reconstruction work in Aceh province through various joint projects, three of them microfinance activities.

The current Microinsurance Appraisal Mission was conducted as an integrated activity within the PPP between GTZ ProFI and Allianz Life Indonesia in close cooperation with the GTZ ‘Economic Recovery and Microfinance” (ERMF) program in NAD, which is not covered by the PPP facility of the BMZ.

2 Methodology The Microinsurance Appraisal Mission was supposed to explore the needs and the demand for microinsurance and identify potential partner organisations in Aceh province, both for provision and capacity development. In this context the present appraisal mission ought to explore the opportunities to extend the PPP with Allianz Life Indonesia and establish the potential for co-operation with the GTZ-Allianz pilot project in the Jakarta region in order to guarantee synergy effects between the different field activities

The team members received information on the microinsurance potential to protect the liveli-hoods of the poor in the region (the ToR are given in Appendix 9). They were supposed to formulate recommendations regarding target groups, implementation mechanisms for micro-insurance, required capacity development and the cooperation with other projects and organi-sations.

In order to retrieve the relevant data qualitative techniques were used including focus group discussions (FGDs) and individual interviews. Structured and semi-structured interviews were taken from potential clients through two FGDs in Banda Aceh, and in Kuala, in the vicinity of Lhokseumawe. A local interpreter facilitated both meetings. 10 female and male loan takers of three Baitul Qiradhs (BQs) attended the first FGD. The second FGD was held in a rural area with a group of fishermen and traditional hydro culture prawn and fish farmers (Tambak) (for details please see Appendix 1).

As an additional source of information, semi-structured interviews were held with representa-tives of microfinance institutions (MFIs) and local non-governmental organisations (NGOs) in Banda Aceh, Aceh Besar, Lhokseumawe, Aceh Utara. The primary database of microfinance institutions in NAD developed by the MFI mapping project of the GTZ ERMF program has been analysed. The database served as a basis for the selection of organisations to be visited. Furthermore, the knowledge available in the ERMF program (primary data, assessments and reports) were utilized for assessing BPR(S)s and microfinance NGO (for details please see Appendices 2, 10).

All existing secondary structures, the Apex bodies of MFIs/Banks, NGOs, and cooperatives, were approached. The supply side was explored through key person interviews from insur-


2

ance providers, banks, and government agencies. Additional data were obtained through meetings with multilateral organisations, international NGOs and other GTZ supported pro-jects. Details of the research methodology are mentioned in Appendix 1.

3 Demand for microinsurance

3.1 Identification of risks

According to the focus group discussions (FGD) and the information obtained from the organisations mentioned in Appendix 10, the most important risks are given in Box 1, ranked by their perceived importance.

This ranking confirms the findings of the GTZ-Allianz-UNDP “Microinsurance Study Indonesia” (2005).

The outcomes of both FGDs were similar, although edu-cation ranked lower among the fishermen, who were less educated. Most of the fishermen’s business risks were related to natural hazards and the loss of productive assets.

Health Health ranked highest in both groups. Women as well as men were very concerned about the possibility of falling sick. Costs of treatment of hospitalisation, especially surgery, cause sub-stantial threats to the financial well being of families. The financial burden of out-patient treat-ment and medication was not as worrisome, unless these costs occur frequently (e.g. due chronic illness) and/or for prolonged diseases. Furthermore, loss of income due to sickness of the main breadwinner is a main concern - though the participants of the FGD were not in a position to precisely estimate the costs of illness. Of the 10 participants in the first FGD, only one had been admitted in hospital over the preceding 12 months.

Other sources such as medical doctors, indicated approximate costs of treatment of € 1.70 -2.20 for a standard third class hospital bed, € 0.90-1.70 for the consultation of doctors, and € 61-174 for most common “simple” surgeries. However, complicated operations are significantly more expensive. Prices in private hospitals are generally higher than in public ones, but the quality is perceived to be higher, too (a list of cost estimates of in- and out-patient treatments is provided in the Appendix 3.). As the main diagnosis, consultations, and tests are carried out during the first 2-3 days, a risk mechanism for covering these initial costs would be of prime importance followed by some contribution in the event of severe surgery.

Education Although not commonly considered to be a risk, education is among the highest ranking finan-cial worries of the FGD participants, especially among the better-educated participants of the first FGD. Education is considered crucial for professional and social progress of the children. Therefore high priority is placed on keeping them in school as long as possible.

There are no official tuition fees in Indonesia, but schools charge registration fees. According to the interviews compulsory education includes SD (elementary school, 6 years) and SMP (lower secondary school, 3 years), with total registration costs of € 174 for the whole period. Additional fees arise for voluntary education: € 174 for SMA (higher secondary school, 3 years), € 235 p.a. for Kindergarten. University costs are much higher at € 217 as registration fee plus € 696 per semester. These costs do not include books, uniforms or other related ex-penses.

Business risks A number of risks related to business operations were mentioned by the groups: business re-location, business development, bankruptcy (first FGD), loss of productive assets and bad

Box 1: Most important risks

1. Health / Serious Illness 2. Education 3. Business risks 4. Assets (Natural hazards) 5. Accident 6. Death


3

catch / prawn harvests (second FGD). Business relocation meant the forced moving of kiosk or shop, which occurs when the location was not approved of by the authorities prior to setting it up. Business development referred to the lack of investment capital for expansion, and bank-ruptcy to any case of business failure, including the aforementioned risks. These risks are not insurable. Loss of productive assets like boats and nets, bad catch and prawn harvest were also primarily related to adverse natural hazards like bad weather.

Other risks Loss of household and productive assets due to natural catastrophes such as flood and fire, accident, and death were mentioned only a limited number of times when ranking the risks and are therefore not discussed in greater detail. Accidents seemed to be such rare events that they were not regularly on people’s minds. Financial crises caused by death had a low priority – probably because credit life insurance is available and often even a compulsory part of the loan agreement in Aceh. Two of the participants in the first FGD had a life insurance with ManuLife Asuransi. Surprisingly, the Tsunami disaster has not changed this concern. The group members did not show reluctance talking about death, even within their families.

3.2 Conclusions

In line with experiences in other countries and the UNDP-GTZ-Allianz study in Indonesia, health is the most important risk low-income people face. Hospitalisation causes a greater financial burden than out-patient treatment, though the latter can be a strain if high medication costs are involved or the illness is prolonged and causes income losses. Education and busi-ness risks are the next important financial worries. While education could be considered for insurance (as a savings-insurance combination package), the business risks mentioned can-not be insured. Loss of assets and accident occur at a low frequency and therefore are not a constant concern. But if they do occur, then the financial impact is often very high. Therefore it seems that these risks receive too little attention. The adverse consequences in the event of death did not pose a high distress, and if so people could have access to various life insurance products, however, more easily in urban areas than in rural regions.

4 Existing risk management strategies

4.1 Microsavings and microcredit products

Microsavings and microloans from MFIs are often used as basic risk coping mechanisms. De-pletion of savings in case of an adverse event may solve the financial crises for minor risks but is not sufficient for severe cases like surgeries. In those cases short term / emergency loans could reduce the financial burden. However, in Aceh province, most loans need collaterals and hence are not accessible for poor households. Some MFIs (e.g. BQ Cut Meutia and Sabee Pakat in Lhokseumawe) provide short-term emergency loans for the cost of funerals, illness, and for performing religious ceremonies. Usually, the minimum loan size is IDR 43-87 €. The loan duration depends on the MFI with a range of from 3 to 12 months minimum loan period.

4.2 Traditional risk management strategies

Apart from microsavings and microcredit products, people2 practise the following risk man-agement strategies (see Box 2). Costs that exceed savings are covered through selling valu-ables (in particular gold), consumer goods, and productive assets.

2 Due to the limited time o the mission, it was not possible to sufficiently consider the gender perspective and distinguish between the practices of women and men. This aspect must be taken into account when designing the insurance benefit package.


4

• Selling of gold • Depletion of savings at home • Selling of productive assets: land,

livestock, fabrics • Borrowing from (extended) family • Using personal relationships to pur-

chase necessities on credit • Income diversification • Access Baitul Mal (Muslim social

solidarity funds, at MFIs, mosques, etc.)

Box 2: Traditional RMS

The interviews emphasised the importance of strong family ties in Aceh province for borrowing from the (extended) family. In addition, other personal relationships play a significant role to purchase necessities on credit.

For people living below the poverty line and other vulnerable groups, income diversification is imperative in case the primary income source has been damaged or destroyed. For example, among fishermen, it seems common practice to pursue other businesses at the same time. This allows for shifting the business focus to these activities if fishing equipment is damaged and savings do not allow for immediate repair or replacement.

Muslim social solidarity funds, however, play a minor role. Moreover, the availability of these services is in most times restricted to local initiatives. In some villages, the Keuchik (village leader), who is the responsible body in this lowest administrative layer in Indonesia, has set up a basic emergency fund with monthly payments made by local households, in order to help poor families covering funeral expenditures. Most often, the case of death in the family is the only purpose of the solidarity funds.

4.3 Insurance companies

Most major Indonesian insurance providers are present in Aceh province. However, the overall insurance coverage of population in NAD is lower than the national average, to a large extent due to the conflict of the “Aceh movement for independence” (GAM) and the central govern-ment. The team visited the important insurance companies relevant to the issue and target groups: Bumiputera, Takaful, Ekalife and ManuLife. All of them offer group insurance, though with a strong focus on employees of the formal economy. Moreover, those products do not particularly target the low-income population. However Bumiputera, Takaful and Ekalife ex-pressed their willingness to enter this new market. As their experience with low-income group insurance is limited in Aceh province, cooperation with knowledgeable organisations is re-quired and with those, which could assist in microinsurance operations such as cooperatives, MFIs, and/or NGOs.

Bumiputera, the largest member-based life insurance company in Indonesia, offers individual and group insurance in Aceh province. Insurance products for individuals include life, accident, and health. Currently, credit-life insurance is the sole product serving the financially lower seg-ment of the population. Until 2002 Bumiputera offered individual life insurance for low-income population, but discontinued this product due to high operational costs. Credit-life insurance it the only product reaching the low-income population, since Bumiputera contracts with BPRs, and BQs.3 Bumiputera’s group insurance department is quite flexible in designing tailor-made insurance solutions for larger groups such as district governments and large organisations.

Bumiputera Group is in negotiations with Sabang district regarding health microinsurance. It is planned to cover all 50,000 residents with in-patient health care. Expected annual premiums are estimated about € 8.70 per person. The government of Sabang will hold one umbrella pol-icy for all people and therefore pay a flat amount of premium to Bumiputera. Government bod-ies will manage the claim processing. Bumiputera envisage a substantial demand for micro health insurance, because of the low coverage in Aceh province (approx. 8% of the total Acehnese population).

3 An example of their credit-life insurance product: Given a loan of 87 € (duration 1 year) for a 40 year old person. If the benefit is the initial loan size, the premium is at 0.43 €. If the benefit covers only the outstanding loan, the premium would be down to 0.26 €.


5

ManuLife offers individual investment insurance, but focus on life and health group insurance. Their group insurance program has only started in 2006 due to the GAM conflict in former years. With a minimum annual premium of € 304 for ten people, ManuLife’s group health in-surance does not target the low income market. ManuLife seemed to be quite inflexible in de-signing tailored products, but expressed general interest in microinsurance.

Ekalife offers group health insurance (Eka Medicare). Ekalife seems to be quite flexible re-garding tailored health insurance products depending on the selected benefit package and shows a customer-oriented approach. Ekalife made a careful attempt offering a product that had been sold to a group of 30 at an annual total premium of € 870. Although this product cannot be considered to qualify as health Microinsurance, Ekalife expressed willingness to work with any organisation even at lower premium rates.

Takaful Asuransi developed a wide range of products: life, credit-life, health, accident and others. Contrary to the insurance providers mentioned above, Takaful taps into the market for low- and middle-income groups and presents itself as flexible. Takaful offers a group accident insurance for a premium of € 2.17 per quarter/person for natural and accidental death, disabil-ity and medical treatment caused by accident.4 In the health insurance market, the Takaful Family Care product covers in-patient care and covers families as insurance unit. In the small-est variant of that product, the benefit package includes many in-patient services for an annual premium of € 15.22 for adults and € 7.83 for children. This product targets the lower middle income-market. Another product of Takaful, the age-based credit-life insurance is comparably expensive for short term and small credits, especially for younger people, as a minimum pre-mium is set at € 0.87. This price is only for larger and longer credits to older people competi-tive.

4.4 Social security programs

The nationwide public ASKESKIN Medicaid scheme aims at supporting Indonesia’s poor population working in the informal economy. The ASKESKIN scheme, which was introduced mid of 2005, is designed to replace the former program Jaminan Pemeliharaan Kesehatan Masyarakat Miskin (JPKMM) social health care scheme. The benefits of the scheme include the provision of primary care in public health centres (Puskesmas) free of charge. Moreover, ASKESKIN cardholders are eligible for in-patient services, which are offered in third class rooms of public hospitals at no charge. Medication is provided on Askes (employer based health insurance) standard. The primary treatment should take place at the Puskesmas and only in cases, where the Puskesmas in unable to handle the illness, a transferral to a public hospital takes place.

The head of the village is responsible to select families that live below the national poverty line. Besides poor families, in Aceh province Ex-GAM combatants and Tsunami victims are eligible to the scheme. As of today, the awareness among the eligible groups about ASKE-SKIN is very low, although, for example, in the city of Banda Aceh about 60% of people are eligible to the scheme. The ASKESKIN card itself can be acquired from the sub-district. How-ever, the national criteria sometimes do not fit to the circumstances in NAD, which leads to confusion. Hence, it has been reported that not the poorest families of the villages receive an ASKESKIN card but those who have good relationships with the head of village. Although the ASKESKIN scheme is supposed to offer free services to the poor, apparently informal fees (up to 70% of usual treatment costs) seem to be quite common. Generally, administrative prob-lems and insufficient funding, which is borne by the Petrol Compensation Fund in NAD, of the ASKESKIN scheme were in the focus of criticism. However, it is too early to estimate the fu-ture successes of the ASKESKIN scheme. Possible linkages of microinsurance with the ASK-ESKIN scheme have yet to be observed.

4 Benefit package: natural death € 435, accidental death € 870 €, disabilities due to accident € 435 and medical care of wounds as a result of accident € 43.


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The Bantuan Operasional Sekolah (BOS) is a fund for assisting schools and poor families providing education cost. It targets at primary and lower secondary (compulsory) schools. For higher education schools a similar system called Bantuan Khusus Murid (BKM) is available. The funds are taken from the Petrol Compensation Fund in NAD. The benefits for students consist of subsidies for registration fees, waiving of examination fees and school books. Schools are supported with library books, teacher training, laboratory equipment, school main-tenance, teacher salaries and support of students’ extracurricular activities.

4.5 Conclusions

Although the ASKESKIN scheme is the most ambitious effort undertaken so far in Indonesia, it has some serious problems. Therefore, it is necessary to combine several mechanisms corre-sponding with different strategies complementing each other. Taking the potential of micro-insurance into account and realizing the advantages and gaps of other existing risk manage-ment mechanisms the need for a multilevel strategy is obvious. Such an approach combines mechanisms at the household and community level (informal arrangements), formal private (insurance) systems and public social security programs at the macro level. Ideally an inte-grated strategy of social protection should be implemented in collaboration with the govern-ment, the private sector, organisations of civil society, and self-help groups or other commu-nity-based networks. In order to make use of government programs, microinsurance organisa-tions can link their insured members to public social protection schemes – although the bene-fits are limited, access sometimes time consuming, and people are hardly aware of the pro-grams.

5 Scope for microinsurance

5.1 The role of microinsurance as risk management strategy

There are no rules that determine a priori which risk management instruments are preferable over others. Some protection mechanisms (ex ante) are introduced by individuals and house-holds: prevention and precautionary measures such as diversification of income sources, building up assets and social networks. Other instruments require intervention from local or-ganisations: MFIs, NGOs, cooperatives, health care providers, etc. They support savings and credit programmes, mutual funds, microinsurance schemes and many risk reduction measures such as immunisation campaigns, etc. When a kind of employer-employee relationship exists, the employers can participate in the implementation of social security programs for the infor-mal economy such as welfare funds in India. The participation of the local and/or central gov-ernment is required for the implementation, supervision, financing and/or regulation of preven-tion programmes, social insurance systems, social assistance and universal benefits pro-grammes. These risk management instruments are essential in order to supplement micro-insurance risk coverage, increase its impact, and reduce the future expenses (claim reim-bursements) of the microinsurance.

When choosing mechanisms of protection ex ante arrangements are preferred since, unlike ex post ones, they reduce households’ insecurity and vulnerability. Preventive actions and pre-cautionary measures are all the more important as poor and low-income groups have a limited access to risks related information, are more exposed to risks than others, and have less funds for ex post coping mechanisms available. Although most of the preventive actions and precautionary measures cannot eliminate the risks, they can reduce their chances of occur-rence or their severity. If households rely mainly on ex post strategies, they incur a great stress when a risk occurs. Moreover, the response they give to cope with the shock often in-creases their vulnerability towards future adverse events.

The table below provides an overview about the effectiveness of risk management instruments of poor and low-income groups, ranging from less effective (- -) to most effective (+ +). The table distinguishes between risks/repeated risks and catastrophic risks such as earthquakes


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and analyses the effectiveness of the instruments accordingly. As can be seen, the same risk management mechanism may have a different impact depending on the severity of the risk. As a second step, the instruments are categorized according to their flexibility and adoption to different circumstances. This enables individuals to combine several instruments in the most suitable way aiming at utmost protection.

Efficiency in dealing with major risks and / or risks repeated over time - - + - + + Diversification of income sources

Building up assets Savings, credit programs and pre-payment mechanisms

Mutual and self help within solidarity net-works Mutual funds

(Micro)Insurance Social insurance Social assistance and univer-sal benefits

Resilience to covariant risks - - + - + + Building up assets

Mutual and self help within solidarity networks

Savings, credit pro-grammes and prepay-ment mechanisms

Insurance (with re-insurance and co-insurance arrange-ments) Social insurance Social assistance and univer-sal benefits

Adaptation to cases of emergency - - + - + + Building up assets

Mutual and self help within solidarity networks Mutual funds Credit programs

Savings programmes Insurance without any third-party payer mechanism

Prepayment mechanisms Insurance with a third-party payer mechanism

Box 3: The limited impact of existing risk management mechanisms: Source: Adoption of the table in the ILO-GTZ Guideline on Microinsurance in the Context of Social Protection (not yet published) Most of the respondents in Aceh perceived their risk reduction strategies as insufficient to handle large and sudden expenses (e.g. critical illness). Thus, for increasing protection a combination of several mechanisms seems most appropriate. For instance, health insurance could be provided in combination with preventive actions, since they can lessen the occur-rence of diseases and thereby decrease the average health care expenses. In addition, it can be offered in combination with health savings. Health savings could be used to pay for low cost high probability risks (such as consultations) while high cost low probability risks (e.g. hospitalisation) would be covered by the microinsurance product.

Low-income people benefit from income smoothing opportunities through the benefits of mi-crofinance. However, microfinance clients who improved their living standard fall back into deep poverty due to the lack of (social) protection. Access to (micro) insurance provides that safety-net and helps people secure the gains they have made with other financial products. But microinsurance schemes cannot meet all prime insurance needs of the target population, since they are particularly exposed to risks and have a very low and fluctuating ability to pay contributions. In addition, microinsurance is not in a position to include the extreme poor as they are unable to contribute, and it may not meet the specific needs of particular groups (e.g., the elderly, the disabled, some occupational groups).

Microfinance programmes are ideal for supplementing microinsurance. They are particularly appropriate for minor risks that entail moderate expense with a high probability of occurrence. Furthermore, as they are one of the prime instruments supported by GTZ and other interna-tional organisations, some linkages between both the mechanisms are highlighted:

• Saving products can provide protection against risks, which cannot be covered by mi-croinsurance: For instance, the protection against health risks would include health savings for minor risks (e.g., consultation with a general practitioner, the purchase of


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generic drugs) and health insurance for major risks (e.g., hospitalisation, complicated delivery).

• Emergency loan products supplement microinsurance benefit packages, which cover financial losses only partially (e.g. most asset insurances do not fully reimburse the costs for rebuilding destroyed huts due to natural disasters or fire).

• Savings can bridge the immediate financial requirement in case claim settlement takes longer than expected.

• The interests of savings could be used for the payment of an annual insurance pre-mium.

According to the principles, (micro-) insurance is particularly appropriate to protect individuals against risks which are not very likely to occur (low probability) and which cause severe nega-tive financial consequences. Taking the variety of risk management mechanisms into account it is important that the different actors should avoid duplications, act according to shared re-sponsibility and complement each other. However, as microinsurance is often put in place without a thorough risk and vulnerability assessment, this instrument is not complementing other risk management activities in the most effective way. This limits the impact and some-times even wastes the scarce resources of the poor. Hence the selection of appropriate pro-tection mechanisms can be an important device for reducing vulnerability.

For the identified two most important insurable risks, microinsurance offers the potential to complement microfinance and public health programs. Serious illness fits the proposed crite-ria. It does not occur frequently, but costs can quickly exceed the savings capacity of individu-als. ASKESKIN provides sufficient benefits ipso jure, but de facto seems to be of limited help – which may be partially overcome through strong community groups and civil society. Educa-tion is compulsory at the lower stages and a choice for higher stages, which means that there is no insurable risk. Instead, relieving the costs for education can be ideally achieved tying savings with microinsurance against “real” risk, e.g. life or accident, – a “combination” product.

5.2 Products and willingness to pay

The design of a microinsurance benefit package needs to take into account several criteria:

1. The coverage provided must be relevant: the coverage must effectively correspond to situations that members perceive to be a risk.

2. The protection afforded must be visible: a microinsurance scheme that chooses to cover only rare risks may stay inactive and unattractive leading to low renewal rates (if it is a voluntary product). A scheme that covers minor risks, on the other hand, will be very active and very visible.

3. The premium must be affordable. A premium that is too high will be prohibitive for the vast majority of the scheme’s members.

The acceptance of microinsurance products depend on the relation of visibility and afforda-bility. High visibility very likely means high costs, pushing up premiums and decreasing acces-sibility. To maximise the success and impact of any microinsurance scheme, it is necessary to walk the fine line of optimising the relation between the two.

The feedback gathered showed that low premiums and affordability seem to be crucial for most people. More worries were expressed about insurance not being affordable, than about limited coverage, i.e. visibility. Although protection must be encompassing enough to ensure customer satisfaction, low premiums should be high on the agenda.

Without a specific product, it is difficult to test the willingness to pay. The ability to pay for a health insurance product voiced in one focus group ranged from € 1.30 to € 8.70. It can be expected that the lower amount more accurately match the average ability to pay of low-income people, as some members of the focus group have crossed the low-income line. The precise willingness to pay will have to be tested for any product with defined benefits.


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5.3 Delivery channels

Among the different ways to provide insurance-services to the poor the following are the most relevant: The partner-agent model, the mutual model (community-based systems), and the provider-model.

In the partner-agent model, an intermediary organisation (agent), which can be a NGO, a cooperative, or any other microfinance institution, etc. ties up with an insurance company (partner) in order to provide the risk transfer. The risks of the insured are passed on to the insurer who pools the risk with other clients nationwide. The intermediary normally takes over sales, administration, servicing and assist in claims management. The insurance provider de-signs the insurance product, administers the contract(s) at their side, finalises the claim man-agement and takes care of reinsurance among other strategic tasks. They retain the profits (and pay losses). One advantage of working with a registered insurer is that these dispose of sufficient funds to cover virtually any deviation from expected claims. Moreover, only insurance companies have access to professional actuarial calculations crucial for a sustainable insur-ance scheme and they offer the scope for scaling up. Depending on the attitude of the insur-ance provider the rigidity of the benefit package can pose a disadvantage: Insurance compa-nies prefer simple and easily verifiable benefits (e.g. restriction to in-patient health benefits) whereas the insured prefer a holistic benefit package (e.g. inclusion of out-patient treatment).

In the mutual model (community-based systems), the risks of the individuals are shared in a risk pool that includes all and exclusively the members of the mutual scheme. The members pay their premium into a common fund and are eligible for the benefits in case of occurrence of risks. If there is a strong cohesion among the members, this model has the advantage of effectively limiting moral hazard and fraud through social control and the principle of solidarity. Therefore, more complex benefit packages can be dealt with. Administrative costs can be held at a comparably low level due to the community-based character of mutual schemes, thus short distances and willingness to voluntarily participate in the scheme. Since mutual schemes have limited outreach in terms of membership and therefore a small risk pool, fluctuations in risk occurrence and non-existence of reinsurance endangers the stability of mutual schemes. Moreover, product design can cause a problem, as thorough actuarial calculation is usually lacking – this can be even more critical as, in general, they do not have access to reinsurance.

If the insurance benefit can also be delivered in kind, as in health insurance, the provider-model can be applied. Health care providers can either offer insurance themselves, enter into an agreement with an insurance provider and a NGO/MFI, or be contracted by the mutual to provide the services. The health care provider can implement such an arrangement to in-crease the utilization of capacities and guarantee a certain cash-flow. Fluctuations in claim frequency can be dealt with in a flexible manner. Although fraud and ex-post moral hazard (over-utilization of care in case of illness with insurance) can be kept down to a minimum, ad-verse selection and ex-ante moral hazard (decreased prevention under insurance) are still an issue. One disadvantage is that the benefit package is restricted to the services and quality of the health care provider.

Summary Depending on the different models and the type of product to be offered, different stakeholders have to be involved. MFIs are the most common intermediary organisations entering into an agreement with the insurance provider (partner-agent model). Their qualification to deal with traceable financial transactions and often reaching out to a large number of groups prove to be an advantage. As microinsurance operations are shared between the MFI and the insurance provider according to core competence of both the organisations, the complexity of tasks is limited and the risk of failure for the MFI (and the clients) is present. Mutual schemes are member-owned cooperatives, which may be active in any activity. As they are taking all finan-cial risks and perform the entire insurance business, they have to be extremely experienced and professional. For health insurance it is common to sign three-stakeholder-agreements between the hospital(s), the intermediary organisation and the insurance provider. If the ser-


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vices of the hospital, however, are of low quality, people will not buy the health microinsurance product.

6 Potential partner organisations

6.1 Financial intermediaries

There is a range of microfinance actors in NAD. Both commercial banks and MFIs such as BPRs, saving and credit cooperatives and NGOs work in the field. Most common is (collateral-ized) individual lending, with group lending as the exception. Saving activities are common among the users of MFIs.

6.1.1 Commercial Banks Some of the banks offering microfinance in Indonesia are also active in Aceh province.

BRI has quite a strong presence in microfinance in NAD, just as in the rest of Indonesia. There are 114 branches with just about 50,000 clients according to data from June 2005. BRI also provides special Tsunami-recovery loans at reduced costs. BRI savings clients with a balance above € 43 automatically receive accident and hospitalization insurance. BRI’s insurance sub-sidiary “BRIngin Life” provides credit-life microinsurance to BRI and may expand to other MFIs soon. According to a BRIngin Life source, there are also plans to cooperate with cooperatives as insurance pools which are still at a very early stage.

Danamon Simpan Pinjam of Bank Danamon has one branch office in Banda Aceh. DSP offers individual loans, normally relying on collateral. Only for short-term lending this requirement is waved. DSP is not offering any microinsurance products and also has no insurance license.

Bukopin does not provide microfinance itself, but collaborates with microfinance cooperatives, called Swamitra units, providing usually individual loans. Bukopin provides assistance and liquidity, plans to establish a common IT-network, and appoints an insurer with which the Swamitra Units have to insure their credit portfolio. In August, there were 420 Swamitra units in NAD, and plans to more than double the presence by the end of 2006.

Bank Mandiri has not started to offer its microfinance products in Aceh province.

6.1.2 Microfinance institutions Microfinance Institutions (MFIs) in Aceh province include three different types of institutions; People’s Credit Banks (Bank Perkreditan Rakyat, BPR), Savings and Credit (S/C)-cooperatives in various forms, and non-governmental organisations. There are 20 BPRs and more than 1.200 other MFIs, most registered as cooperatives. An overview of the microfinance activities of NGOs is not available. The MFIs are looked at in the light of a number of topics of special importance for microinsurance, among them are work in group structures, financial and operational performance, outreach, and second tier structures.

BPRs BPRs are the most formal MFIs. They are allowed to deal with the public in both credit and savings activities, as they are supervised by Bank Indonesia (BI). As can be seen from Table 1, the financial performance of BPRs supervised by BI Banda Aceh is not as strong as in the rest of Indonesia.

In total there are 20 BPRs, of which 8 are privately owned. A majority of these is working ac-cording to Islamic banking or Sharia principles. GTZ is cooperating with all of the 5 private BPRs in Banda Aceh and its vicinity and going to extend the support to two BPRs in Lhokse-umawe.


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The outreach of the BPRs ranges from about 300 to 8,000 saving clients. The number of loan takers is typically much lower (140-2.000). Two BPRs were visited, one offering conventional banking and one Sharia banking. Both were among the larger BPRs in Aceh province. The numbers of clients given in re-cent assessments (~3,200/1,600 savers, 270/130 creditors) differed markedly from the numbers the BPRs reported upon visit, however. This raises some doubts about how well informed the management is about current business.

The small numbers of loan takers are also reflected in the small number of staff. But still, one loan officer serves only a quarter of the clients that loan officer reaches in other parts of Indonesia. There may be spare capacities that could be used in providing microinsurance.

There is little group lending in the BPRs so far, most of the lending is done through collateral-based individual lending. ADB is introducing group lending in the 12 publicly owned BPRs it is working with, but only as an additional business line. NGOs working with BPRs also try to push group lending. Group lending is not a GTZ priority in Aceh province.

Savings and Credit Cooperatives The GTZ mapping identified 1,206 MFIs in Aceh province, most them cooperatives (for a se-lection see Appendix 2). Cooperatives are legally restricted to dealing with members and pre-members, while in practice many are also engaged in business with non-members. Coopera-tive principles that would make them member-driven institutions are often not applied.

Savings and credit cooperatives applying Sharia principles are referred to as Baitul Qiradh (BQ). The variation in size of S/C cooperatives is very large; a few have a significant outreach, while most of the others are fairly small institutions. Only 16 institutions have more than 1,000 savers or loan takers, and about 25 reach out to more than 500 savers or credit takers.5

The quality of operations of the cooperatives differs widely. Common weaknesses identified by GTZ include the lack of proper auditing procedures (sometimes not even internal auditing), lack of performance measuring indicators, and loan granting by one single person. At times, even the number of active savings and loan clients was not tracked exactly.

An example was a visited BQ that made a good impression and reported to have 1,200 clients. A prior assessment by GTZ showed, however, that they did not track the number of clients exactly. Such problems would be grave for microinsurance.

Group lending is not very common in the BQs assessed by the GTZ, though it does exist and in one case reached 70% of the lending activities. Unfortunately, there is no overview available about the lending procedures of different BQs. 5 “Flat” numbers reported by MFIs, such as 1,500, also indicate that some have estimated the size of their member/client base rather than given exact numbers based on lists of accounts.

Box 4: Strengths and weaknesses of BPRs Financial Performance Mostly weak (compared to other Indonesian BPRs) Outreach Relatively high for Aceh (but high variation) Group Lending Very limited Community relations Weak Relations to GTZ Strong cooperation Second-tier institution Currently weak, but Perbarindo has potential Others BI supervises and assesses BPRs regularly

Table 1: Rating of BPRs Rating Indonesia Banda Aceh Total 1951 14 Sound 1317

(68%) 2 (14%)

Quite Sound

320 (16%)

5 (36%)

Less Sound

178 (9%)

1 (7%)

Not Sound

136 (7%)

6 (43%)

Source: BI, June 2006


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BQs seem to have a close relation with their clients and are well informed about them. They were also very interested in microinsurance as a means of providing their clients/members with new services.

Microfinance NGOs Traditionally NGOs have not played a very significant role in Acehnese microfinance. After the Tsunami nevertheless, many donor organisations have set up microfinance units in supported NGOs or established new organisations to provide microcredits. These organisations rely most of the time exclusively on external funding for their credit activities as they normally do not - and are legally not allowed to - mobilize savings. The NGOs are normally working with group lending and focus on the lowest segment of the microfinance market.

Most of these NGOs are fairly small entities with a few hundred credit takers at a maximum, but there also exist a number of larger institutions. There is no overview of microfinance NGOs in NAD available. Information about individual NGOs is spread by word of mouth and the larger and efficient ones are often in cooperation with different donor organisations.

The visited MF-NGOs, YDS and Dian Mandiri, were quite interested in insuring their loan portfolio, but remained much more reserved about addi-tional products. Dian Mandiri had only recently started to operate in NAD and still needs some time to adjust core activities. Sometimes this was related to problems with the normal busi-ness, sometimes more a general reproach.

6.2 Non-financial organisations

6.2.1 Non-financial NGOs The development of local NGOs in Aceh province has been constrained by three major fac-tors: First, the GAM conflict caused severe problems of strengthening their organisational structure, because larger meetings were perceived as a risk factor by the government. More-over, mobility of people and equipment was restricted due to GAM activities.

Second, the Tsunami heavily hit local NGOs since most of them were located in the Tsunami affected coastal areas.

Box 5: Strengths and weaknesses of Savings and Credit Cooperatives Financial Performance Limited information available, mostly weak Outreach 25 have more than 500 clients, often very limited Group Lending Limited, but exceptions Community relations Comparably strong Relations to GTZ Strong cooperation Second-tier Institution Currently weak, but BQ-Centre has potential

Box 7: Strengths and weaknesses of Microfinance NGOs Financial Performance Little information available Outreach Limited number of large organisations Group Lending Yes Community relations Strong Relations to GTZ Weak Second-tier institution None Other Cooperate with other (donor-) organisations

Box 6: Large MF-NGOs

Loan accounts in MF-NGOs YKBS 1,500 YAMIDHA 1,500 CCDE 1,200 Dian Mandiri 300


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Third, as of 2006 there are over 300 international NGOs assisting in development and Tsu-nami relief listed as being active in Aceh province. This massive presence has ambivalent ef-fects on the local NGO sector: Since international NGOs import a lot of manpower, knowledge and money, they are crowding out local NGO activity. Also, due to increased networking with international NGOs, solidarity between local NGOs has decreased. On the other hand, many projects of INGOs have been channelled through local NGOs, increasing their human and financial capacities.

Hence, the NGO landscape is rather weak: The total number of local NGOs is estimated at about 100 in NAD. The very few NGOs with a staff of 30 active people are already considered as very large. The field of operation of local NGOs is typically restricted to 1-2 villages with an outreach of 1,000-2,000 people. Their financial capacities are estimated at 16,000 €.

Bina Rakyat Sejahtera (BYTRA), Institute for Strengthening Social Capacity, is a local NGO operating in Lhokseumawe and Aceh Utara. BYTRA’s major working areas are in com-munity development, livelihood and environmental health (sanitation, hygiene, preventive ac-tivities and mediation with ministry of health). BYTRA is operating in 11 villages, where they formed groups of about 10-25 members led by a volunteer. The volunteers’ assists people falling sick in order to cope with the situation and to access the benefits of the ASKESKIN government health scheme. Also, BYTRA aims to improve hygienic standards and to raise health awareness in order to reduce the burden of contagious diseases in villages by building sewage facilities and toilets. BYTRA, with 27 staff members, has a direct outreach of about 175 people, although benefiting much more people in the villages. BYTRA seems to be quite successful in networking with local authorities, Puskesmas health care facilities, village struc-tures and INGOs. They expressed interest in health microinsurance activities.

6.2.2 Non-financial cooperatives All constraints that inhibited the growth of other organisations also affected cooperatives. However, the history of those organisations is different, since many of them are set up by gov-ernmental bodies or in close connection to them. One of the most critical results of those gov-ernment policies is that in most cases the self-help character of cooperatives and cooperative principles do not play any role.

In May 2005, there were 4,827 cooperatives with 423,061 members registered in Aceh prov-ince. According to the cooperative bureau, about 798 cooperatives were inactive. Meetings with cooperative leaders in Jakarta revealed their number could be as high as 75% of the total due to the difficult environment during the GAM conflict. As the NGO sector, the cooperative sector was heavily hit by the Tsunami: 822 cooperatives in coastal areas were destroyed or heavily damaged.

Of those active in NAD, about 20% can be considered as viable with an estimated average size of 200 members. Just a few cooperatives in Aceh province have around or over 1,000 members.

Box 8: Strengths and weaknesses of non-financial NGOs Organisational strength Weak structures with few staff/volunteers Outreach Low, mostly a few villages Community relations Comparably strong Relations to GTZ Weak Second-tier institution None


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Summary MFIs in Aceh province are of very different capacity levels and sizes. Many of them do not qualify in any way as potential cooperation partners, but some of the larger and more capable organisations seem to be among the strongest institutions to be found in the province. They are already used to financial transactions and the better institutions already have staff that is accustomed to work with computerized management systems. This will be of advantage if in-surance policies need to be administered. The level of supervision varies from official BI su-pervision for BPRs over future informal supervision through a BQ-Center to no supervision at all for the Microfinance NGOs. A big number, especially among the larger MFIs is working ac-cording to Sharia principles. Non-financial NGOs are generally weak in terms of number, out-reach and membership. Due to the GAM conflict and the Tsunami, civil society is still in a nas-cent stage. Non-financial cooperatives are large in numbers, but are rather small and weak in terms of organisational strengths. Most do not apply cooperative principles.

6.3 Other stakeholders

6.3.1 Secondary structures Perbarindo, the Indonesian association of BPRs, formally exists in NAD, but it has not initi-ated activities yet. The ERMF program has recently started to provide assistance for the re-construction of Perbarindo Aceh. A project of common interest, e.g. microinsurance, could provide an incentive to strengthen cooperation.

Dekopinwil is the umbrella organisation of the cooperative sector at provincial level. Smaller entities on district level are called Dekopinda, whereas Dekopinwil itself is subsidiary to De-kopin Indonesia. Dekopinwil aims to be the umbrella for all cooperatives; due to insufficient funds and weak institutional capacities, however, it is able to maintain close connections to only less than 50 cooperatives. Dekopinwil also fosters the promotion of cooperative principles in Aceh province: Beginning in August 2005, a joint program of the International Co-operative Alliance and Dekopinwil has been revitalizing six model cooperatives that were heavily dam-aged by the Tsunami. In many other organisations, Dekopinwil has a negative image, because it is often seen as government influenced. Regarding microinsurance, Dekopinwil expressed high interest in order to roll out microinsurance to cooperative members, but is sceptical in reaching 1,000 policyholders in the first 2 years.

6.3.2 Government institutions BKKBN (Family Welfare Planning Board) All over Indonesia, the government set up the authority BKKBN (Family Welfare Planning Board). Before the Tsunami, there were about 500 active self-help and income generating groups (UPPKS), each consisting of 20-30 women. UPPKS is the body through which loans of BKKBN are channelled to group members. In mid 2006, all activities were still in very early stages. BKKBN, playing the role of a facilitator, has received a grant of € 217,000 by the Re-gional Rehabilitation and Reconstruction Agency (BRR). Four months ago, these grants were disseminated to 40 UPPKS. All other SHGs are dormant and will not meet before new grants are available. Since loans by BKKBN have been widely perceived as grants, and had compa-rably bad repayment rates, it is too early to estimate the sustainability of post-tsunami activi-ties. According to BKKBN, the repayments of those newly disbursed loans is “normal”; it is too early to judge, however, since the first three months after loan disbursement are free of re-

Box 9: Strengths and weaknesses of non-financial cooperatives Organisational strength weak structures with few staff (many destroyed by Tsunami) Outreach low, average size of 200 members Relations to GTZ weak Second-tier institution Dekopinwil, weak organisation with future plans Other Cooperative principles in most cases not applied


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payment and therefore repayment experiences refer to only one month. Generally, repayment within two years is part of the loan contract, but it seems that repayment does not play a major role in internal cash flow, and that BKKBN strongly relies on new external funds in order to issue more loans. Generally BKKBN receives 1% of loan amount as administration fee for the entire loan duration, no additional interests are raised. Regarding microinsurance BKKBN ex-pressed strong interest in credit-life, life and health insurance.

Health Care Providers In a health insurance product the availability and quality of health care providers is critical to its success. Fifteen private and nine public hospitals serve Aceh province (see Appendix 4). On district level, 218 Puskesmas exist. The market of health care providers shows some serious constraints:

1. Services of public health care providers are of (very) low quality; moreover, it is not clear whether quality improvements will be achieved in the near future.

2. Services in private facilities are more expensive but offer better health care service than public facilities.

3. Medical staff often works part time in a public facility and spends the remaining working hours in more lucrative private facilities.

4. The fix costs of public facilities are comparably high due to large permanent staff and complex bureaucracy. On the other hand, hospitals have low average utilization of their in-patient facilities.

The largest hospital in Aceh province, “Rumah Sakit Umum (RSU) Dr. Zainoel Abidin” in Banda Aceh, has 13.000 in-patient admissions a year (2004, pre-Tsunami figures). In 2004, 46% of in-patient patients in Hospital Zainoel Abidin were assisted by ASKESKIN scheme. A large district hospital such as the RSU Rumah Sakit Umum Dr. Fawziah Bireuen has 6,784 in-patient admissions a year. An overview over the cost of treatment of in-patient and outpatient health care services gives the table in Appendix 3.

7 The need for capacity development Since microinsurance is a relatively new concept, the target population most often lacks un-derstanding of this risk management instrument. It is often misinterpreted as microfinance. This often causes difficulties in selling insurance policies and results in low renewal rates, par-ticularly from insured persons that have not had a claim. Its intangibility adds to the difficulties in understanding the insurance principles – at the level of the insured as well as among the field staff. Often, policy documents are too complicated for the policyholders, some of whom are illiterate. Moreover, insurance providers have a poor image among low-income communi-ties, being seen as quick to sell and slow to pay. This requires substantial capacity develop-ment among all the actors.

In order to further identify training and advisory programs some success factors are mentioned below:

Institutional factors for success

• Stable and professional delivery structure

Yielding the benefits of being insured is a long time process, except for health (micro-) in-surance. This is even more relevant for certain life (micro) insurance products (term life, endowments, annuities) that can be materialized after 15 years or even later. This implies a stable and professional structure of the implementing organisation with a long term vision and ability to survive internal and external challenges in order to fulfil its commitments to-wards its insured members (and the insurance provider in case of a partner-agent model).


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• Capacity and human resources

The complexity of insurance business requires long experience in development work, ef-fective management skills, efficient administration such as statistics, accountancy, market-ing, some underwriting-know-how, communication, and sufficient number of staff mem-bers. To develop relevant insurance knowledge and skills is expensive and may exceed the capacity of a civil society organisation, depending on the complexity of the product and the insurance model.

• Financial requirements

When the implementing organisation is not in a position to finance the setting up process and preliminary activities, financial support of external partner organisations is required. Thus, it is necessary to calculate the costs for establishing microinsurance and the running costs (financial projections) since the scheme must be sustainable after some years.

• Confidence in the implementing organisation

Microinsurance presupposes the regular payment and pooling of premiums. The target population cannot easily be persuaded to pool its premiums when it lacks full confidence in the intermediary organisation, or when its experience with “collective” activities was not successful.

Political factors for success

• Commitment towards social protection

Microinsurance cannot be in a position to reduce all major risks of low-income groups and the poor. However, the effectiveness of microinsurance schemes is strengthened when:

• It is an integral part of a social protection strategy for the informal economy and ex-tended to the excluded groups of the population.

• The commitment is reflected in the PRSPs, and/or in the public budget allocation.

• The government plays a promotional role towards drafting legislation for the infor-mal economy and regulatory conditions enabling all actors to comply with the regulation when implementing microinsurance programs.

• The State (including the regulatory authorities) plays a promotional role to accept or-ganisations of civil society as an official partner in social protection, in particular micro-insurance.

• Conducive conditions for the private sector

The cooperation between the government, insurance sector, health-care providers and civil society contributes to efficient implementation when:

• Public and/or private insurance companies are available and operate in a regu-latory and political environment enabling them to develop customized products and efficient claims settlement procedures.

• The government encourages the provision of a technical support to microinsur-ance schemes such as promoting training structures.

• Existing health care facilities are of acceptable quality (only for health micro-insurance).

• Enabling environment for the civil society

As microinsurance cannot be implemented without the assistance of civil society their role has to be officially recognized by the government and the private sector enabling micro-insurance organisations to operate efficiently:

• Civil society organisations involved in microinsurance have the freedom to organise and act without too much interference of the State or other forces and are not threat-ened by major insecurity (war, riots).


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• The legislative frameworks governing insurance practices are adapted to civil society organisations involved in the implementation of microinsurance programs (e.g. permis-sion to receive commissions of administrative fees for their services).

• For the protection of the policyholders a legal recognition of the implementing organisa-tions may be helpful (or other means of consumers’ protection shall be introduced).

Considering the requirements for operating microinsurance mentioned above and taking the low capacity of existing organisations into account substantial capacity building is required.

Table 2: Need for capacity building

Training Partner Do-nors

Financial Inter-mediaries

Clients

General MI information xx xx xx

Marketing & contracting x xx x

Premium collection xx xx x Data collection & transfer, MIS x xx x

Claims management ● Verification ● Documentation ● Payout

x xx xx

(xx)

xx

Monitoring and internal control ● Monitoring systems (incl.

financial cost calculation for MI operations)

● Control of adverse selec-tion, moral hazard, and fraud

● Customer satisfaction assessment

x x

xx

xx

xx

xx

Basic health training for the MFIs/NGOs, additional health care and health administration for the ombudsman

(x) xx x

8 International organisations Since the occurrence of the Tsunami all relevant multi- and bilateral Organisations are operat-ing in Aceh province. In addition, more than 300 international NGOs are registered as being active in Aceh province. The selected organisations mentioned below had either generally expressed their interest in microinsurance during the UNDP-GTZ-Allianz study and/or are playing a prominent role in microfinance (preferable in combination with health). Depending on the microinsurance product, the delivery channels and the project regions additional interna-tional agencies may be approached for future collaboration.

8.1 Other GTZ supported projects in NAD

The Project “Reconstruction and Rehabilitation of Health Management Systems in Banda Aceh and NAD Province” can provide linkages to health care providers if the introduction of health microinsurance is considered. The main activities are technical assistance to the hospi-tal RSU Dr. Zainoel Abidin in Banda Aceh and Assistance to the Health Districts Authorities in


18

10 districts at the east coast of Aceh province and 4 districts in the mountain area. The major goals of this project are (1) improving hospital management; (2) improving sustainable quality of health services, and (3) establish maintenance of medical equipment. While in hospitals the health care services are being improved, at district level, supervision of health services and quality management will be introduced at Puskesmas. Moreover, it is planned to build up vil-lage health posts for midwives (Polindes), who are qualified nurses, at village level.

8.2 ILO

The ILO supports an integrated approach with vocational and business planning training, combined with increased access to financial services in Banda Aceh and Nias, currently ex-tending their program to Sigli, Bireuen and Pidie. In these context cooperatives, BQs and BPRs are strengthened.

Many of the organisations are small (max. 80 – 100 members). However, the ILO suggested to jointly assessing the demand for microinsurance among the 22,000 members of the financial cooperative KSPTree on Nias Island with its 20 branches.

The advantages of collaborating with the ILO are twofold: 1) They provide training to the rele-vant intermediary organisations, and 2) the ILO could provide microinsurance expertise and experience from ILO supported projects in other countries.

8.3 ADB

The livelihood & micro-finance sub-component of the Asian Development Bank (ADB) sup-ports 12 public BPRs in NAD. Building up their core-business is seen as priority, since those institutions are weak in basic banking procedures.

In 2006, the ADB commissioned a study on the potential of microinsurance. Though the report revealed a demand for microinsurance, the ADB decided not to push this activity in Aceh prov-ince due to weak institutions and the necessity to focus on their priority area (microfinance). However, ADB stays still open for new ideas regarding microinsurance.

8.4 Mercy Corps

Mercy Corps (MC) has a strong presence in Aceh province. In 2005 they started their microfi-nance program providing substantial support to BPRs, BQs and 14 NGOs in three regions (earlier to BPD as well). Realising the weak capacity of organisations, MC incorporated a strong capacity building component into their microfinance program.

MC is interested in the topic of microinsurance but is reluctant to start it immediately, primarily due to the weak institutional capacity of partner organisations and the unknown demand of microinsurance if offered on a voluntary basis. As MC and GTZ interact regularly, the potential for microinsurance could be further explored at a later stage.

8.5 Care International

Care International supports two microfinance projects in Aceh province. The first is the finan-cial support of the two Grameen-replicators, Yamida and YKBS, through the Grameen Foun-dation USA (GFUSA). They aim at expanding their loan portfolio to up to 3,000 loan takers and thus creating two of the largest MFIs in NAD. At the same time, the GFUSA applies strictly the standard procedures of the Grameen model, which may limit the scope for cooperation in the area of microinsurance.


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Within the second project BISMA6 intends to support initially 17 organisations in Aceh prov-ince: 8 MFIs, BPR Ingin Jayah, 5 BQs and 3 NGOs. BISMA activities are funded donors that require the inclusion of disaster preparedness schemes in the activities of the MFIs. As micro-insurance could fulfill this criterion, the cooperation with BISMA may offer a channel through which MFIs can be approached.

8.6 Save the Children

Apart from Save the Children’s comprehensive support in Aceh province two projects are of particular relevance for microinsurance:

The Economic Recovery Assistance program aims to restore productive assets of Tsunami victims, which were available before the disaster. It is a mixed grant/loan-program (60% grant/ 40% loan), which will be converted into a microfinance program without the grant component, reaching out to 10,000 people.

The health program, aims at improving the quality of health care of the Puskesmas at sub-district level and qualifying nurses (Pustu) at village level.

Save the children expressed strong interest in linking microinsurance to both of their pro-grammes.

9 Conclusions and Recommendations Due to the long GAM conflict and the Tsunami disaster the situation analysis in Aceh province does not reveal ideal circumstances for the implementation of microinsurance in terms of low number of self-help/microfinance groups, weak institutional structure of civil society organisa-tions as well as governmental bodies and Apex organisations of cooperatives and MFIs. Moreover, low outreach and lack of microinsurance experience poses an additional challenge to microinsurance activities.

Any recommendation has to take note of this. Thus, the expectations on microinsurance may strive towards an innovative pilot approach rather than reaching out to a large number of cli-ents and providing a range of products for ensuring a high degree of (social) protection. The latter cannot be achieved considering the current environment and the limited duration of the project (most probably until the end of 2008).

Since the outreach of local organisations is limited, the new PPP project should cooperate with other (international) agencies for strengthening the few existing Apex organisations. This could have a tremendous impact not only for microinsurance operations but also as an institutional basis for other development activities. Substantial progress seems to be possible with a new approach covering critical ill-ness/hospitalisation, which was by far the highest ranked risk the people face. Details of the product are presented in section 9.1.

Another health microinsurance option was discussed operating high frequency/low cost health risks as a mutual (community group) model and linking low frequency/high cost health risks to an insurance provider and the partner hospital. This model is currently not recommended be-cause of the following reasons: The capacity of community groups is much weaker than those of MFIs/NGOs, at the same time the complexity of the tasks is increased as they have to op-erate the entire business for high frequency/low cost health risks and bearing the financial risk. Taking the weak institutional capacity into account, this option seems risky and premature for the Aceh province at this stage. However, as it may be an interesting alternative in a strong institutional environment and could be considered for other project regions, it is mentioned in

6 BISMA, a private APEX-organisation for MFIs of different types is wholly owned by Care International. BISMA refinances 85 MFIs in Indonesia through the allocation of time deposits


20

Appendix 6. Other insurance products such as credit life are already offered by Allianz Life Indonesia and other insurance companies in Aceh province.

Therefore, the recommended scenario uses a triple stakeholder approach, in which the par-ticipating institutions can perform their tasks according to their strengths focussing at their core business: Insurance company, microfinance institutions, and health care provider(s). NGOs, which operate health programs and are familiar with financial transactions, could be consid-ered as well.

9.1 Products

The envisaged customised product(s) shall comply with the following basic criteria:

• Affordability;

• Easy to understand;

• Easy to administer with respect to data management, claims verification and settlement;

• Simple control of adverse selection, moral hazard, fraud, cost escalation for health care services (see section 9.2).

Taking the specific conditions in Aceh province into account, the product has to be very simple and easy to administer - a kind of “index-based” microinsurance in the event of hospitalisation. Regardless of the actual loss incurred the predefined lump sum payouts would come into ef-fect when the client is enrolled in the partner hospital: 1) the lower amount for the first few days, 2) the higher amount for in-patient care with surgery:

• In-patient care for the first few days (without surgery): The first few days (2-4 days) causes a financial burden to the patients due to the initial consultations, diagnostic test, and medi-cation, bed, etc. Usually, the costs decrease after diagnosis is completed and (non-surgery) treatment follows. This benefit should cover average total costs of the hospital stay.

• In-patient care with surgery: If medical treatment requires surgery, a flat benefit is paid out. This benefit is based on the average pricing of surgeries charged by health care providers. It should cover (at least to a large part) the costs of a number of common lower priced sur-geries, but not be high enough to provide incentives for undergoing unnecessary surgery to receive the benefit (fraud).

The product offers the following major advantages: 1) It would reduce administration costs due to the simplicity of lump sum benefits. 2) It is easy to administer because no verification of bills is required (just documentation of enrolment in hospital and/or surgery treatment). 3) The lump sum payment offers an utmost flexibility for the clients. 4) Fast payout at the time when the treatment decision is taken.

This product should not be perceived as a “proper” health microinsurance but as an “index-based” insurance instrument (with two triggers as mentioned above) responding to the dire need providing some financial relieve to patients and their families in the event of hospitalisa-tion. An actuary and health experts will design the product as well as precautionary measures to avoid cost escalation, fraud etc., and the most appropriate delivery mechanisms. They should look into the gender perspective and possible compliance with Sharia principles. A product like this offers the potential for application in other project regions of the PPP project.

9.2 Delivery channels and partner organisations

The recommended model uses a triple stakeholder approach, consisting of the insurer, MFIs/NGOs (including an ombudsman), and health care providers. In this way, all participating institutions can contribute to the success of the scheme according to their strengths and their core business. The processes described below are general suggestions, which have to be further specified by an actuary and health specialists.


21

The insurance company develops the product, provides the risk transfer, maintains basic records, and transfers the claim payments (either to the client or to the MFI, which hand it over to the client). It contracts the health care providers on an annual basis in order to ensure qual-ity and non-excessive pricing. Moreover, the insurance company monitors the services of the participating hospitals and engages in (limited) sample verification to monitor sound work of MFIs.

The MFI (maybe even NGOs, if complying with the criteria mentioned under 9) provides a large part of the sales process, premium collection, data collection, claim management, and financial transactions with the insurance company. Moreover, it assists the clients in the hospi-tal through an ombudsman.

The ombudsman shall be placed in the hospital or at an umbrella organisation, representing the interest of the client, the insurance provider, and the MFI. He/she accompanies and assists the client in the hospital. All three, doctor, client/patient, and MFI employee have to sign the medical record attesting the patient’s illness and making him/her eligible to receive the insur-ance benefit (claim verification) immediately. The ombudsman may be employed by several MFIs and paid from premium and insurance commissions. Although it would increase the pre-miums and slightly minimize the profit of the insurance company both the parties would benefit in several ways, e.g. decreasing the administrative costs for the insurance provider, reducing the need to take high-interest loans from moneylenders through fast benefit payout.

The health care providers render medical services and take part in claim verification, since their doctors attest the illness, necessary treatment and sign the medical statement (jointly with the client and the ombudsman).

In order to avoid, or at least reduce, adverse selection, cost escalation of health care services, moral hazard and fraud the proposed model makes use of the different strengths of the par-ticipating institutions. The following control mechanisms aim at reducing common problems:

• Adverse Selection: If the introduction of compulsory health microinsurance is not ac-ceptable by the potential clients, the annual insurance policy will be sold to pre-defined percentages of existing group members, which are not formed for insurance purposes7. Considering the low outreach in Aceh province, the entire household may be insured.

• Moral Hazard / Fraud: Moral hazard will be minimized by the attestation of illness through three persons: doctor, patient, ombudsman. Since the MFI is interested in low premiums as to attract more clients or to increase profit margins, it will not normally at-test faked illness or agree to informal fees. In case of doubtful (increased) treatment, the ombudsman can contact the insurance provider for cross-check of appropriateness of the defined treatment protocol. The immediate information to the insurance provider sent by the ombudsman enables the insurance company to verify the stay of the pa-tient in the hospital, limiting the room for fraud. The non-replicable health care cards, identifying all insured persons living in the household, prevent fraudulent use8.

• “Informal fees” and cost escalation are controlled by the ombudsman who knows the prices jointly agreed upon by the health care provider and the insurer. The invoice of the treatment contains the price paid by the client and, hence, is transparent for the client, ombudsman and insurer. Moreover, the evaluation form filled and signed by the

7 The number of policies should not be lower than a certain share of the number of the MFI’s clients (e.g. >66%). This way, adverse selection of insurance takers is limited, since empirically 10% of clients cause over 50% of health care costs. 8 Various options are possible to avoid misutilization of insurance operations and cost escalation of treatment, e.g. a stamp system to be purchased by the client. The stamp has a face value printed on it that is higher than the price the insurance company has charged the MFI, and which includes average expected administration costs and a profit margin for the MFI. This way, the client has information about a “fair” price of the insurance. In the absence of a competitive market, this is the only way the client can exercise some control over the pricing behaviour of MFIs.


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claimant should provide information on the quality of health care and the payment of “informal fees”.

• Quality of Health Care Services: Slack on health care quality by the hospital is re-duced by the possibility to change the hospital on an annual basis. When released from the hospital the patient ought to fill a customer satisfaction survey. Furthermore, the presence of the ombudsman and the interest of the hospital for an increased num-ber of patients may improve the health care services.

Nevertheless, the model has limitations that need to be considered:

• Hospitals: Problems may arise if customer satisfaction is low due to insufficient quality of health care. Public hospitals have a negative reputation and donor attempts to im-prove quality may be a longer-term process. A limited outreach of the insurance pro-gramme could weaken the negotiation power of the insurance company versus the hospital. In some areas, only one provider is available. Hence, it is recommended to select those hospitals, which provide satisfying treatment and as much transparency and good governance as possible under the given circumstances. In this respect the collaboration with the GTZ, EPOS/KfW supported hospitals would be an asset.

• MFIs: The number of MFIs involved in health issues is extremely low. Of the 31 MFIs in the entire Aceh province, which fulfil basic selection criteria for a microinsurance part-nership, none has experience with health activities. Since microinsurance has to be vi-able by the end of the PPP project, the MFI may incur losses, which have to be borne (most probably) by the clients - bearing the risk of low renewal rates.

• The recruitment of an ombudsman with basic health expertise is a challenge due to the additional costs. As far as the health expertise is concerned, training could be provided by the project. The additional costs have to be priced into the product. However, as mentioned the increased price is compensated by the significant advantages, which have to be communicated to the actors.

Hospital MFI

Insuree

Treatment Premium

Insurer

Trea

tmen

t stat

emen

t

Premiums

Claims reimbursement

Money and service flows

BenefitPayment for treatment

Ombudsmanmonitors service quality, assists patient

salary

Hospital MFIMFI

Insuree

Treatment Premium

Insurer

Trea

tmen

t stat

emen

t

Premiums

Claims reimbursement

Money and service flows

BenefitPayment for treatment

Ombudsmanmonitors service quality, assists patient

salary

Box 10: Money and Service flow in the proposed model


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9.3 Capacity building and training organisations

To insure the success of the proposed project, it is necessary that all parties involved have a general understanding of the basic principles of insurance. It is important that they are aware of the adverse effects cost-driving behaviour may cause. Without substantial capacity building at all the levels, microinsurance will not achieve the expected results (for details please see Table 2).

This applies in particular to the MFIs (and other intermediary organisations) and includes or-ganisational strengthening beyond microinsurance knowledge. It can be expected that the project partners will not be in a position to carry out the necessary capacity building leading to contracting training institutions and health experts. The study revealed the lack of such institu-tions for microinsurance training and recommends the following:

• Incorporate the participants into the training sessions carried out by the PPP project in Jakarta (ProFI-Allianz Life Indonesia);

• Cooperate with the GTZ supported project “Reconstruction and Rehabilitation of Health Management Systems in Banda Aceh and NAD Province” for health training;

• Support the initiatives for strengthening Apex bodies and incorporate relevant staff members into the microinsurance training programs of ProFI-Allianz Life Indonesia;

• Utilize the interfaces with the PPP microinsurance project in India regarding training manuals and the establishment of microinsurance training facilities (see section 9.3);

• Benefit from inputs to be developed by the CGAP Working Group on Microinsurance (subgroup capacity building) – ongoing long term process;

• Develop (or assist in the development) of training materials and training of trainers, if re-quired.

9.4 Cooperation with other international organisations

9.4.1 Interfaces with PPP Jakarta and India The following interfaces could be identified with the PPP microinsurance project (PPP 2004-143).

Apart from the PPP component in India, the partner organisations in Aceh province could benefit from additional activities implemented by other institutions:

• The joint Allianz-CARE cooperation in Tsunami affected areas consists of product de-sign, strengthening of MFIs and NGOs for offering microinsurance and capacity devel-opment. This project should be implemented in close interaction with the Allianz-GTZ PPP project. Training courses to be developed for those microinsurance organisations could be used for Aceh province as well.

• GTZ is in the process of developing an introductory guideline on microinsurance, which can be adapted to the conditions in Indonesia – building upon the training material of the Allianz Life Indonesia.

• Most likely GTZ will join hands with Bearing Point/USAID for establishing a microinsur-ance resource centre. The materials to be developed in the context of the centre could be useful to the partner organisations in Aceh province.

• The first UNDP-GTZ-Allianz study „Microinsurance: Demand and Market Prospects – India“ revealed a high demand for health microinsurance. As a number of qualified or-ganisations with large outreach can be identified, the new product health microinsur-ance may be also tested in India – under more conducive conditions.


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In Indonesia the newly designed ‘credit life plus’ product should be implemented first. If the education-endowment product will be developed next year it could be considered to offer this microinsurance product in Aceh province at a later stage.

Although training is carried out for the Credit Life product in Greater Jakarta, some principles of microinsurance may be relevant for the partners in NAD as well. Thus, it is recommended that the future partner organisations from Aceh province join selected capacity building pro-grams organised by ProFI and Allianz Life. Furthermore, the administrative systems for operat-ing the microinsurance products in Greater Jakarta could be adapted to the requirements of the health insurance product in Aceh province. Through systematic sharing of experiences and advisory services synergies can be created even beyond GTZ supported projects – Allianz Life and Bajaj Allianz may gain information which enables them to offer simple health microinsur-ance in both the countries.

9.4.2 Other GTZ supported projects As the acceptance of any type of health insurance depends on the quality of health services, it is recommended to select those hospitals, which provide satisfying treatment and as much transparency and good governance as possible under the given circumstances. In this respect the collaboration with the GTZ project “Reconstruction and Rehabilitation of Health Manage-ment Systems in Banda Aceh and NAD Province”, would be fruitful, since the GTZ project has strong relationships and experiences with the health sector. It aims at strengthening the ad-ministration and quality of health care services of Puskesmas and Hospitals, which is highly demanded by (potential) patients. Moreover, the project expressed strong interest in coopera-tion regarding health microinsurance. Furthermore, KfW and EPOS may be contacted again for exploring their willingness for cooperation in this area.

9.4.3 International Organisations Although more than 300 international NGOs are listed as being active in Aceh province, none has implemented microinsurance in this region – hence, even their experience is limited and requires some introduction into microinsurance. Save the Children and the ILO have indicated a strong interest to introduce microinsurance. The ADB showed some interest and should be approached again as well as Care International and Mercy Corps. As most of the international organisations may close their project support by the end of 2008, it is recommended to particu-larly cooperate with those, which intend to extend their projects beyond 2008.

10 Next steps In order to start the microinsurance project, the following steps are required (the numbering does not necessarily reflect a strict sequence as some tasks can be initiated simultaneously):

1. The decision of the delivery structure is crucial for selecting the potential partner organisa-tions and the project regions.

2. Selecting international organisations for cooperation is recommended at an early stage as this may affect the decision on MFIs/NGOs and project regions and the inputs expected by them.

3. Selection of partner organisations (MFIs/NGOs/cooperatives) and health care providers. Some of the pre-selected institutions, which are listed in Appendix 2 should be ap-proached. It is advised to realistically adopt the CGAP microinsurance criteria from the Donor Guideline on Microinsurance for assessing the potential organisations (see Appen-dix 8).

4. Selection of project regions (some criteria and suggestions are given in Appendix 1 and 5). Banda Aceh should be considered with caution as the high number of donor agencies cre-ates an artificial environment with its own disadvantages (e.g. receiver mentality, over-funding of NGOs based in Banda Aceh).


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Box 11: Next steps:

1. Decision about delivery struc-ture (scenario)

2. Cooperation with selected IN-GOs

3. Selection of partner institu-tions/MFIs

4. Selection of project regions 5. Specification of the demand for

the selected products and ob-taining further information

6. Training needs assessment 7. Product design - jointly by an

actuary, MFIs and clients 8. Selection of training institutions 9. Negotiation with health care

providers

5. Specification of demand for the product and ob-taining further information. In order to design the benefit package detailed data have to be col-lected from potential clients and future partner organisations. They should be screened vis à vis existing products in the market, including the pub-lic ASKESKIN health insurance scheme (supply side) for linkages and complementary solutions to the microinsurance project. Obtaining further de-tails on Sharia compliant products and systems will simplify the product design and may increase the acceptance of the product. Furthermore, the prices for medical treatment in public and private hospitals need to be collected as a precondition for designing the benefit package. In addition, le-gal and regulatory requirements for offering Mi-croinsurance (even as a partner) should be ac-quired.

6. Training needs assessment can be carried out simultaneously with the specification of demand and assessment of potential partner or-ganisations.

7. Product design has to be done by an actuary and health experts jointly with all stake-holders considering the aspects mentioned above.

8. Identification of training institutions will cause a challenge to the project. For an introduc-tion into microinsurance the expertise of Allianz Life Indonesia can be used. However, this is not a long-term solution. Both PPP projects are advised to invest into the identification and qualification of training facilities (e.g. institutions in Jakarta, maybe extending the port-folio of the CEFE-trainers of the GTZ supported “Microfinance and Economic Reconstruc-tion” project). Without training facilities scaling-up and sustainability is not possible.

9. Negotiation with health care providers shall be initiated already while further assessing the demand of the benefit packages and during the product design preferably in collaboration with the GTZ supported “Reconstruction and Rehabilitation of Health Management Sys-tems in Banda Aceh and NAD Province”.


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11 Appendices

1 Methodology

Qualitative Interviews During field research several qualitative research methodologies were applied. Individual in-terviews with representatives of BQs, BPRs, NGOs, INGOs, insurance companies and banks (in total 33) were semi-structured interviews (see Appendix 10 for list of interviewees). The selection of organisations was based on all information sources available (local knowledge, snowball-method, reports and assessments).

Focus group discussions Two focus group discussions were conducted using the most different case approach. One group should be consisting of members of a MFI and the other consists of either an NGO or no affiliation with an organisation at all. Both groups should belong to the low-income population with low probability of having an insurance policy.

During the study, two focus group discussions were conducted. The first discussion was held in Banda Aceh with 10 (6 male, 4 female) clients of different Baitul Qiradh in Banda Aceh and Aceh Besar. All of them have taken at least once a loan of particular BQ. The average educa-tion level was quite high, since the average level was at Senior High school (SMK) with 12 years of school. Most of the participants are traders; some produce food and one worked as tailor. The average age of the participants was at 37 years.

The second Focus group discussion was held in Kuala, a village close to Lhokseumawe in Aceh Utara. Most people in the village work as fishermen or Tambak fishers (Aquaculture). Therefore the group of 9 male persons consisted of 4 fishermen, 3 Tambak owners and 2 traders. Compared to previous group, the average education level was much lower at Junior High school (SMP) level with 9 years of school. The average age of the participants was at 34 years.

The first FGD was attended by 10 loan takers of three different Baitul Qiradhs (BQs). Through spreading participation in the FGD over 3 institutions it was hoped that individuals from both sexes and from different socio-economic and occupational backgrounds could be included. The group consisted of 4 women and 6 men, being active in different businesses, e.g. food production, door-to-door- or market-trade and clothes production; all where from Banda Aceh urban area. The education level was on average SMK (12 years). Some focus group mem-bers knew each other before, others met for the first time.

The second FGD was held in a rural area and was attended by a group of fishermen and tradi-tional hydroculture prawn and fish farmers (Tambak). 9 men took part in the discussion. Aver-age education level was SMP (9 years). All attendants were familiar with each other, either from working together or from living in the same village.

Pre-Selection of MFIs As primary data for microfinance institutions was the database of the MFI mapping project done by the GTZ program ERMF in NAD has been analyzed. As additional data sources, the knowledge available in the ERMF program (primary data, assessments and reports) could be utilized regarding BPR(S)s and NGO MFIs. Knowledge gathered during the study period has been used as well.

Criteria applied for the pre-selection of micro finance institutions have been modified several times during the field research, since many expectations have been set too high. The final selection criteria:

• The MFI has to have more than either 1000 loan clients or 1000 savings clients or 1000 members.


27

AND

• Last financial report not older than 2005

AND

• Latest general assembly in 2004 or later (this criteria has been relaxed due to tsunami related issues and is applied only to financial cooperatives)

Exceptions were made regarding financial report and general assembly for MFIs registered in 2005 or later. This was the case with USP Mitra Dhuafa, USP Babah Krueng and USP Peu-makmu Blang Mee, all in operation since 2005.

In total, out of over 1200 microfinance institutions, only 31 MFIs in NAD fulfil these basic selec-tion criteria. (See Appendix 2)

Hospitals All hospitals (private and public), officially registered with the health department of the national government, were acknowledged in selecting proposed pilot regions.


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2 List of pre-selected potential partner institutions

Name Type Kapupaten Kecamatan Members Savings clients

Loan clients

Al- Ikhlas Depag Sigli Cooperative, KSP Pidie Kota Sigli 1531 1531 1531 BQ Cut Meutia Cooperative, KSP Lhokseumawe Kota Lhokseumawe 1300 1300 372 BQ Nanggroe Baznas Madani Cooperative, USP, Baitul Qiradh Aceh Besar Panteriek 26 1270 294 BQ Suryah Melati Cooperative, KSP Lhokseumawe Kota Lhokseumawe 1500 1300 526 BQ Syirkah Ta'awuniyah Cooperative, USP Lhokseumawe Banda Sakti 1500 1500 1500 CCDE NGO MFI Banda Aceh 1120 Kapa Jaya Cooperative, KSP Bireuen Jeunib 5000 500 1500 Kop Syariah BQ Al-Istiqamal Cooperative, KSP Aceh Besar Lhoknga 56 1005 1500 Kop. BPR Ingin Jaya BPR, privately owned Aceh Besar Ingin Raya 5132 472 Kop.Primkopad Yon 113 JS Cooperative, USP, Other: Waserda Bireuen Juli 1052 1052 1052 Koperasi Al- Muslim Cooperative, KSP Aceh Tamiang Kuala Simpang 3154 3154 3154 Kopkar PTPN I "MON MADU" Cooperative, USP, Other: Menjual Barang Langsa Langsa Barat 6591 6591 6591 Kopontren Al_Barkah Cooperative, USP Bireuen Samalanga 1400 1400 20 Koptan Babah Krueng Cooperative, USP, Other: Trade Aceh Utara Nisam 1123 23 23 KPN Gusra Cooperative, KSP Aceh Tengah Bebesan 2016 2016 2016 KPN SMP Trienggadeng Cooperative, USP Pidie Trienggadeng 1200 1200 1200 KUD Ingin Jaya Cooperative, USP, Waserda, Pertanian Aceh Barat Daya Tangan-Tangan 4000 40 12 KUD Kuta Gle Cooperative Bireuen Samalanga 1299 1299 1299 KUD Meurah Jaya Cooperative, USP, Other: KUD Pidie Meureudu 2305 2305 Lkm Mitra Dhuafa Cooperative, USP Banda Aceh Syiah Kuala 1156 1156 1156 Peumakmu Blang Mee Cooperative, USP Aceh Besar Lhoong 3000 PT. BPRS Baiturrahman BPRS, privately owned Banda Aceh Peukan Bada 3213 273 PT. BPR Darul Imarah Jaya BPR, privately owned Aceh Besar Darul Imarah 1635 133 PT. BPR Sabee Meusampe BPR, privately owned Lhokseumawe Kota Lhokseumawe >1000 >300 PT. BPRS Hareukat BPRS, privately owned Aceh Besar Ingin Raya 9409 294 PT. BPRS Hikman Wakilah BPRS, privately owned Banda Aceh Syiah Kuala 2340 250 PT. BPRS Rahmah Hijrah Agung BPRS, privately owned Lhokseumawe Kota Lhokseumawe >5000 >400 PT. BPRS Teungku Chik Dipante BPRS, privately owned Pidie Kota Sigli 5000 >300 Puskopaddam IM (Pusat Koperasi Kodato Im)

Cooperative, KSP Banda Aceh Baiturrahman 14500 14500 7500


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YAMIDA NGO MFI, Grameen Replicator 1580 YKBS NGO MFI, Grameen Replicator 1547


30

3 Cost of health care services

Type of illness/service In/Out-patient Registration fee public Registration fee private Avg. cost public Avg. cost private Caesarean in-patient 0.87 € 1.74 € 305.26 € 610.53 € Delivery (no complica-tions) in-patient 0.87 € 1.74 € 98.71 € 175.68 € Appendix in-patient 0.87 € 1.74 € 153.07 € 306.13 € Cataract in-patient 0.87 € 1.74 € 109.58 € 219.16 € Tonsil in-patient 0.87 € 1.74 € 66.10 € 153.94 € Stroke in-patient 0.87 € 1.74 € 153.07 € 219.16 € Febril convulsion in-patient 0.87 € 1.74 € 70.45 € 99.58 € Malaria (severe case) in-patient (7 days stay) 0.87 € 1.74 € 74.79 € 153.94 € Dengue (DHF) in-patient 0.87 € 1.74 € 74.79 € 153.94 €

TBC in-patient (subsequent treatment is outpatient) 0.87 € 1.74 € 74.79 € 51.75 €

Asthma in-patient (1 day) 0.87 € 1.74 € 31.31 € 56.10 € Diabetes type 2 in-patient (wound care) 0.87 € 1.74 € 76.97 € 110.45 € Diarrhoea in-patient 0.87 € 1.74 € 66.10 € 99.58 € Measles in-patient 0.87 € 1.74 € 66.10 € 99.58 € Uterus removal in-patient 0.87 € 1.74 € 305.26 € 393.10 € Cancer related in-patient (up to 2 weeks) 0.87 € 1.74 € 196.55 € 306.13 € Hemorrhoids in-patient 0.87 € 1.74 € 218.29 € 306.13 € Head injury in-patient 0.87 € 1.74 € 218.29 € 306.13 € Myocardial infarction in-patient 0.87 € 1.74 € 153.07 € 219.16 € Hernia in-patient 0.87 € 1.74 € 218.29 € 393.10 € Sinus infection in-patient 0.87 € 1.74 € 153.07 € 219.16 € Pneumonia in-patient 0.87 € 1.74 € 131.32 € 175.68 € Hepatitis in-patient 0.87 € 1.74 € 131.32 € 219.16 € Asthma out-patient 0.87 € 1.74 € 2.83 € 10.44 € Stomach problem out-patient 0.87 € 1.74 € 2.83 € 10.44 € Diabetes type 2 out-patient (every 2 weeks) 0.87 € 1.74 € 3.70 € 10.44 € Hypertension out-patient (every 2 weeks) 0.87 € 1.74 € 3.70 € 14.78 € Heart diseases out-patient (every 2 weeks) 0.87 € 1.74 € 3.70 € 14.78 € Post Stroke out-patient (every 2 weeks) 0.87 € 1.74 € 3.70 € 14.78 €


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Post Fracture out-patient (once) 0.87 € 1.74 € 3.70 € 14.78 € Arthritis out-patient (every 2 weeks) 0.87 € 1.74 € 3.70 € 10.44 € Tooth related problem out-patient 0.87 € 1.74 € 3.70 € 10.44 € Hopital bed in-patient 0.87 € 1.74 € 2.83 € Anestesi in-patient 43.49 € Consulation fee GP in-patient 1.30 € Consulation fee specialist in-patient 1.74 € 3.48 € Blood-test in-patient 1.52 € Urine-test in-patient 1.52 € X-Ray in-patient 5.22 €

Remarks: Shown health care costs are based on the Askes price list and were double-checked by two medical specialists.

Registration fee for specialist treatment in private hospitals: € 3.48 – 4.35

Treatment costs in public hospitals refer to third class accommodation


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4 Hospitals in Nanggroe Aceh Darussalam

Hospital Type Address 1 RSU Tapak Tuan RSU (public) Jl. Jen.Sudirman Tapak Tuan 2 RSU Kutacane RSU (public) Jl. Blang Kejeran Kutacane 3 RS Cut Meutia RS JL Kebun Baru Langsa 4 RS Pertamina Rantau RS Jl. Cepu Rantau Kab.Aceh Timur 5 RS Cut Nyak Dhien Langsa RS Jl. T.M Bachrun No.1 Langsa 6 RSU Takengon RSU (public) Jl. Rumah Sakit Takengon 7 RSU Cut Nyak Dhien RSU (public) Jl. Gajah Mada Meulaboh 8 RSU Sigli RSU (public) Jl. Prof A.Majid Ibrahim Sigli 9 RSU Bireuen RSU (public) Jl. RSU (public) No.13 Bireuen 10 RSU Lhokseumawe RSU (public) Jl. Samudra Lhokseumawe 11 RS PTP IX Cot Girek RS Lhok Sukon Kab Aceh Utara 12 RS Rem 011 Lhokseumawe RS Jl. Samudra Lhokseumawe 13 RS PT Arun RS Komp PT Arun Lhokseumawe 14 RS Yayasan Kasih Ibu RS Jl. Merdeka No.17 Lhokseumawe 15 RSIA Bunda RSIA Jl. Darussalam 16 Lhokseumawe 16 RSU Dr Zainoel Abidin RSU (public) Jl. Tgk Daud Beureueh B.Aceh 17 RS Dam I Banda Aceh RS Jl. Kesehatan Banda Aceh 18 RS Jiwa Banda Aceh RS Jl. Kakap 25 Banda Aceh 19 RS Malahayati RS Jl. Cut Nyak Dhien 49B B. Aceh 20 RSIA Harapan Bunda RSIA Jl. Teuku Umar 181 Banda Aceh 21 RS Fakinah RS Jl. Sudirman 27-29 Banda Aceh 22 RSU Meuraxa RSU (public) Banda Aceh 23 RSU Sabang RSU (public) Jl. Teuku Umar Sabang 24 RS AL Sabang RS Jl. Tk Chik Ditiro Sabang


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5 Proposed pilot regions for micro health insurance


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6 Alternative delivery model

Mutual schemes tied up with insurance company Mutual schemes have certain advantages over other arrangements such as flexibility, low ad-ministration costs and low levels of moral hazard. These advantages play an important role when it comes to complex and service intensive products such as health insurance. However, in Aceh province, suitable cooperatives or microfinance institutions have very limited outreach in terms of membership. This would lead to very small risk pools (< 5,000 insured) with a need of very high safety loadings on top of the premium. An attempt could be made to cover high frequency/low cost health risks (out-patient treatment) through mutual schemes, preferably a network of institutions with a central board, consisting of the managers of the mutual schemes and some administrative staff.

Low frequency/high cost cases, could be transferred to an insurance company according to the main recommendation mentioned above. This would lead to increased stability of the in-surance schemes, since an insurance company is able to spread the risk over a larger pool and thus could handle the occurrence of low frequency/high cost claim through a larger portfo-lio of independent risk pools and also through inter-temporal risk spreading.

Advantages and Limitations Limitations of the proposed alternatives are the necessity of capacity building and training measures that need a long-term commitment of assisting organisations. Only a few coopera-tives apply cooperative principles, which are a prerequisite for functioning mutual systems. Therefore, trainings will play a crucial role in enabling the existing institutions in order to per-form microinsurance. Also, the implementation of democratic decision processes within the central board is crucial. The main advantages of the alternative is a contribution to out-patient treatment combined with low level of moral hazard and low administration costs, since coop-erative members are committed to their own institution due to the self-help character and soli-darity principle of mutual schemes. Moreover, mutual arrangements can be very flexible in reacting to changes of preferences of members and to changes in the market of health care providers.


35

7 Overview over multilevel administration structure in NAD

Kindly provided by Anne Terheggen


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8 Criteria for microinsurance organisations

In developing criteria to assist donors in finding the “most fertile ground” for these pro-grammes, assessments have been made of other institutions that have been both successful and unsuccessful. These lessons can be summarised into 11 elements: 1) environmental fac-tors, 2) ownership and governance, 3) culture, 4) capacity, 5) outreach, 6) structures, 7) client-appropriate products, 8) appropriate operating systems, 9) quality of services, 10) claims ser-vices, and 11) financial performance. It is possible to build even those that do not meet the minimum qualifications into successful microinsurance or social protection programmes, but it would require greater investment and oversight by the donor. MFIs without existing microinsurance Products

Key issues (MFIs)

Must have Should have Optimum

Stable macro econ-omy

Growing macro econ-omy, limited inflation

Growing macro econ-omy, limited inflation

Stable political struc-tures

Stable political struc-tures with active promotion of low- income market

Stable political struc-tures with active promotion of low-income market

Available insurance partners

Available insurance partners actively seeking MFI partners

Available insurance partners currently with MFI partners and actively seeking new partners

No conflict with exist-ing social protection policy

Conformity to exist-ing social protection policy

In line with existing and planned social protection policies

Regulatory require-ments allowing mi-croinsurance activity with a waiver

Regulator allowing microinsurance activ-ity

Regulations promote microinsurance activ-ity

Environmental factors

Potential client de-mand

Strong potential cli-ent demand

Strong potential client demand evidenced through specific re-search

Board of directors meeting regularly

Active board with some professional business people

Active board with mostly professional business people in-cluding members with insurance competence

Clear ownership Private ownership or member-owned

Registration with government

Registration as mi-crofinance NGO

Registration as a bank, MFI or credit union

Ownership and govern-ance

No significant contra-dictions of relevant regulations

Fully compliant with financial laws, able to obtain waiver to act as insurance agent

Fully compliant with financial laws; able to legally act as an in-surance agent


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Key issues (MFIs)

Must have Should have Optimum

Microinsurance gen-erally fitting within mission

Mission including specific references to aiding clients in their risk management efforts

Mission including spe-cific references and a budget has been allo-cated for microinsur-ance development

Focus on low-income market Culture

Occasional efforts to obtain client/member opinions

A demand-sensitive institution with regu-lar and periodic ef-forts to obtain cli-ent/member opinions

A demand-sensitive institution, regular efforts to obtain client opinions, a member representative on the board

Experienced and effective management team

Management aware of clients’ need for risk protection

Senior management with some under-standing of insurance

Senior management with experience work-ing with insurance

Some capacity to grow in client volume

Significant capacity to grow in client vol-ume

Action plans to achieve growth in client volume

Computer available for tracking micro-insurance

Computer system available with signifi-cant expansion capa-bilities

Integrated computer system with signifi-cant expansion capa-bilities

Capacity

Staff capacity to learn and offer new product

Staff as salespeople Staff as salespeople with an incentive sys-tem in place

A link with a network managing the micro-insurance

More than 10,000 potential low-income policyholders

More than 100,000 potential low-income policyholders

Some annual growth in outreach for the past three years

Significant controlled growth in outreach for prior three years

Significant controlled growth in outreach for prior three years

Outreach

Year-to-year reten-tion around local in-dustry norms

Year-to-year retention above industry norms

Processing of periodic manual financial transactions of cli-ents, with a computer available if scale is achieved

Processing of fre-quent client transac-tions with a comput-erized system

Management of sav-ings accounts for cli-ents using a comput-erized system

Contacts to refer cli-ents for emergency assistance

A risk-managing emergency loans service

Risk-managing emer-gency loans and spe-cialty savings services

Structures

Capacity to effec-tively partner with another organisation

A current partner for some activity without significant difficulty

A track record of suc-cessful partnerships


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9 ToR Gabriele Ramm

PROFI Program PN 2002.2578.9-001.00

Terms of References

Microinsurance Appraisal Mission Second Phase: Opportunities for Extension of the PPP with

Allianz Life Indonesia Background GTZ and Allianz are cooperating in a public-private-partnership program (PPP) on the provi-sion of microinsurance in India, Laos, and Indonesia. In Indonesia the PPP has led to the im-plementation of a microinsurance field test in the greater Jakarta area that is about to roll out the first insurance policies through partnering MFIs in August 2006. In addition, GTZ and Allianz are already cooperating in supporting the tsunami affected popu-lation and the reconstruction work of Aceh through various joint projects, three of them micro-finance projects. They will investigate microinsurance potential to protect the livelihoods of the poor in the region. They aim at establishing a microinsurance presence and the provision of targeted microinsurance products in Aceh. Based on the pre-feasibility study in 2005, an up-date and amendment of its recommendations might be necessary before the second imple-mentation step is made. The Microinsurance Appraisal Mission will be conducted as an integrated activity within the PPP between GTZ ProFI and Allianz Life Indonesia in close cooperation with the “Microfi-nance and Economic Reconstruction Project Aceh”, which is not covered by the PPP facility of the BMZ. Purpose of the Assignment The Microinsurance Appraisal Mission shall investigate the need and demand for micro insur-ance in Aceh by means of a field mission and identify potential partners in Aceh, both for pro-vision and capacity development. It shall also establish the potential for cooperation with the GTZ-Allianz pilot project in the Jakarta region in order to guarantee synergy effects between the different field activities. The mission shall formulate proposals regarding insurance prod-ucts, target groups, implementation mechanisms for microinsurance policies, required capacity development and cooperation with other programs. Activities of the Assignment To reach the above mentioned objectives, the mission shall investigate local conditions to

(a) identify priority risks, (b) evaluate existing coping strategies and their respective efficiency, (c) evaluate the willingness and ability to pay, (d) assess the demand for and understanding of microinsurance, (e) identify suitable cooperation partners for the implementation of a micro insurance pro-

gram, including the evaluation of the partner’s financial viability, administration capaci-ties, human resources, reputation, and growth rates (e.g. Aceh branch of Dian Mandiri. Dian Mandiri is already a partner in the GTZ-Allianz-pilot project in the Jakarta region),

(f) identify needs for capacity development and training and identify feasible modes of de-livery, including cooperation with the GTZ-Allianz-microinsurance activities in Jakarta and India,


39

(g) identify other relevant actors assisting the vulnerable population.

Points (a) to (d) should be done through minimum two focus groups.

On the basis of this assessment the mission will make recommendations on (a) further questions to be discussed and clarified through focus groups, (b) possible products for which there is marketable demand, (c) procedures for the provision of a product, (d) capacity development schemes, (e) cooperation with third parties assistance, (f) the design of interfaces between the two projects ProFI in Jakarta and ERMF in Aceh, (g) cooperation with other projects.

Other activities will include

(a) briefing of the consultant by Michael Hamp, ProFI, and Martin Hintz, Allianz Life Indo-nesia, and comments by the consultant regarding the present field test of the GTZ-Allianz PPP in the Jakarta region (product, partners, progress), and briefing of the con-sultant by the team-leader of the GTZ-project in Aceh, Svenja Paulino-Rodriguez,

(b) coordination with ProFI and Allianz during the course of the mission, (c) de-briefing of ProFI and Allianz on the mission by Consultant after conclusion of the

mission in Jakarta, (d) recommendations regarding next steps in preparing the implementation of the second

phase of the GTZ-Allianz pilot project. The consultant shall be responsible for the organisation of her team and her work program in such a manner she can fulfill her obligations within the given overall conditions and timeframe. In particular, she has to determine to what extent the individual aspects of the ToR will be treated in the context of the appraisal mission. Neither are the ToR meant to be comprehen-sive nor does the list of activities claim to be exhaustive. It shall be the task of the consultant to modify the aspects of the ToR or their relative importance in close coordination with GTZ and Allianz.

The project team will include two GTZ-interns who will assist the expert in the aforementioned tasks. Amendments of the Terms of Reference These Terms of Reference may be amended in writing only, subject to the agreement of both parties. Duration of the Assignment The assignment will commence on the 10.09.2006 and must be completed at least by the 26.09.2006. Report/Result A report containing the results will be prepared jointly by the interns under the professional supervision and guidance of the consultant. The report will be in English and submitted not later than two weeks after having received comments of the project executing experts and Allianz Life Indonesia on the draft report to be submitted two weeks after completion of the appraisal mission in the field. Michael Hamp GTZ ProFI Program Advisor


40

10 Contact details of people met during the mission

Name Position Organisation Contact details Website Email Handphone

Abd. Basir SE Asuransi Bumiputera, Individ.

Jl. Tgk. Daud Bereueh SK IV / 8, Banda Aceh, Tel. 0651-27732

www.bumiputera.com

Amrin, Zulkifli President Director

BPR Darul Imarah Jaya

Jl. Soekarno Hatta, No. 5, Keutapang Dua, Aceh Besar, Tel. 0651-44934

Bp. Hanafiah Dekopinwil Jl. Bandara Sultan Iskandar Muda km 13, Cut Geundreut Aceh Besar, Tel. 0651-7428585

[email protected] 0813-60632636

Chairuwan, Yusri Unit Manager Manulife Financial

Jl. Jenderal Ahmad Yani No. 37, Peunayong, Banda Aceh 23122, Tel. 0651-638124

www.manulife-indonesia.com


Cognac, Matthieu

Microfinance Specialist

ILO Banda Aceh

Jl. Jend. Sudirman Mata I'e Lr. Ikhlas No. 6, Desa Lambheu Barat Ketapang II, Aceh Besar, Tel. 0651-47392

www.ilo.org/jakarta [email protected] 0812-6989350

Cordero, Mariano A. Team Leader ADB Livelihood

& Microfinance Jl. Gurami No. 2, Lampriek, Banda Aceh 23126, Tel. 0651-7401280 / 7401290 [email protected] 0813-60428990

Edi Argano Asuransi Bumiputera, Group

Bp. Elfi, SE President Direc-tor

BPR Baiturrah-man

Jl. Cut Nyak Dhien K. 12 No. 291-B, Peukan Bada, Aceh Besar, Tel. 0651-42624 0812-6977729

Habib, S.M. Ahsan

Technical Advisor

Grameen Foundation

Jl. Poeteumeurohom House No. 42, Lumb-huk Village, Ulee Kareng District, Banda Aceh, Tel. 0651-34304

[email protected], [email protected]

0815-34069480

Hadjarati, Dino V.

Operational Director

Dian Mandiri Foundation

Jl. Imam Bonjol Ruko Liga Mas Blok A2 No. 10-11, Karawaci Tangerang 15115, Tel. 021-5589323

www.dianmandiri.com

[email protected]


41

Hamid, Azwar (Champli)

APO Child protection unit UNICEF Jl. Masjid Ashadaqah No. 2-3, Lamlagang,

Banda Aceh 23243, Tel. 0651-40004

[email protected], [email protected]

0811-987255

Hasan, Hastati Field Underwriter

Manulife Financial

Jl. Jenderal Ahmad Yani No. 37, Peunayong, Banda Aceh 23122, Tel. 0651-638124

www.manulife-indonesia.com 0813-160010003

Hintz, Martin

Assistant Man-ager Business Process Reen-gineering

Allianz Life Indonesia

Summitmas II, 19th floor, Jl. Jend. Sudirman Kav. 61-62, Jakarta 12190, Tel. 021-52998888

www.allianz.co.id 0813-17829977

Ibu Icha BQ Cut Meutia Jl. Listrik, no. 9 Kompleks Pujasera Pasar Inpres, Lhokseumawe 0813-60582354

Irhas, Saifuddin Director BYTRA Jl. Tak Chik chi Tino 369, Bakit Panggoi, Lhokseumawe [email protected]

et 0813-60120974

Ismail, Husaini Microfinance Expert

Save the Children

Jl. St. Masyursyah No. 77, Tgk. Fakinah, Peuniti, Baiturahman, Banda Aceh hismail@savechil

dren.or.id 0812-8981160

Kurniawan, Ivan Prasidha

Business development manager

BISMA Jl. Mampang PrapatamVIII No. 13/2, Jakarta 12790, Tel. (021) 7996470 [email protected]

et.id 0812 101 3589

Manaf, Numan Rayadi

Relationship Manager PNM Jl. Asia Afrika No. 141-149, Bandung 40112,

Tel. 022-4240742-43 www.pnm.co.id [email protected] 0812-2010874

Mrs. Farida BKKBN, Aceh Jl. Tgk. Daud Bereueh, Banda Aceh 23126 [email protected] 0812-6524036

Muench, Sasha Aceh Deputy Director MercyCorps

Jl. St. Masyursyah No. 7, Tgk. Fakinah, Peuniti, Baiturahman, Banda Aceh, Tel. 0651

aceh.mercycorps.org

[email protected] 0813- 10080797

Nasiratuddin, SE (Ira) Branch Manager PT Asuransi

Jiwa Ekalife Jl. Nyak Arief No. 146, Beurawe, Banda Aceh www.ekalife.co.id 0811-680912

Poisson, Gregoire

Microfinance Specialist

Care International Banda Aceh 0812-6989489

Pyne, Lindsay Hospital Manager / Team Leader

EPOS Health Consultants

Gedung Kardiologi, RSU Dr. Zainoel Abidin, Jl. Tgk. Daud Beureueh No. 108, Banda Aceh, Tel. 06172-930370

www.epos.de [email protected]

0813-60238509


42

Bp. Rahmat BQ Sabee Pakat

Jl. Aceh-Medan no. 1 km 245. Pasar Inpres, Krung Mane kec. Muara Bantu, Aceh Utara 0813-61700560

Schmeling, Wolfgang GTZ Banda

Aceh Jl. Bakti, Lr. Muri No. 5A, Lamlagang, Banda Aceh 23239 0812-6992722

Schmitt-Degenhardt Senior Advisor GTZ

Lhokseumawe Jl. Pase No. 43A, Keude Aceh, Kota Lhok-seumawe 24351, Tel. 0645-43987 www.gtz.de

[email protected]

0811-674457

Servais, Gérard Senior Advisor

GTZ Health Service Man-agement Sys-tems, NAD

Ruang Kardiologi RSU Dr. Zainoel Abidin, Jl. Tgk. Daud Bereueh No. 108 PO BOK 672, Banda Aceh 23126


Setiadi, Mariana D

Micro Finance Director

Yayasan Dinamik Sistem (YDS)

Jl. Cut Nyak Dien 11-14, Simpang Ajun Jeumpeg, Banda Aceh, Tel. 0651-74100302 www.ydsindo.com setiadim@yahoo.

com 0812-8125791

Siahaan, Jeffry Andreas

Area Coordinator Sumtra


Jl. Tano Abee No. 3E. Kel. Keuramat, Kec. Kuta alam, Banda Aceh

www.dianmandiri.com


Silhombing, Meynar

Deputy Financial Access Program Manager

MercyCorps Jl. St. Masyursyah No. 7, Tgk. Fakinah, Pe-uniti, Baiturahman, Banda Aceh, Tel. 0651

aceh.mercycorps.org


Sulaiman, Jufri M.

Manager of Programs BYTRA Jl. Tak Chik chi Tino 369, Bakit Panggoi,

Lhokseumawe [email protected] 0812-6387401

Sulaiman, Sayuthi BQ Andra Puri Jl. Banda Aceh-Medan km 25, Pasar Indra

Puri 0812-698-3801

Terheggen, Anne GTZ Lhokseumawe

Jl. Pase No. 43A, Keude Aceh, Kota Lhok-seumawe 24351, Tel. 0645-43987 0812-6992721

Teuku Sabry Tab BQ Al Fatah Baznas Madani Jl. Sekarno Hatta, Aceh Besar 0813-86159709

Thenu, Monique Executive Director


Jl. Imam Bonjol Ruko Liga Mas Blok A2 No. 10-11, Karawaci Tangerang 15115, Tel. 021-5589323

www.dianmandiri.com


Tulus, Robby Co-operative Specialist

ADB Livelihood & Microfinance

Jl. Gurami No. 2, Lampriek, Banda Aceh 23126, Tel. 0651-7401280 / 7401290 [email protected]

a 0812-6992696

Widowati, Margareta Ari Director BISMA Jl. Mampang PrapatamVIII No. 13/2, Jakarta

12790, Tel. (021) 7996470 [email protected] 0811 966 263


43

Bp. Zulkarnaini Bancassurance Officer

PT Asuransi Takaful Ke-luarga

Jl. Teungku Cik Ditiro No. 3, Peuniti, Banda Aceh, Tel. 0651-24873 www.takaful.com zulkarnaini@takaf

ul.com 0812-6936652


44

11 Bibliography

AIPRD, GTZ and KfW on behalf of Rumah Sakit Umum Dr. Zainoel Abidin: Master Plan For Rumah Sakit Umum Dr. Zainoel Abidin, October 2005.

CGAP Working Group on Microinsurance: Preliminary Donor Guidelines for Supporting Micro-insurance, Geneva 2003.

BYTRA: Profiel, Statuta dan Program Kegiatan. Tahun 2005-2006.

Hammerich, Ursula; Hamp, Michael; Hartig, Peter; Primahendra, Riza: Joint GTZ-KfW Fact-Finding Mission in Nanggroe Aceh Darussalam Province (NAD), ‘Designing a Microfinance Development Strategy as Part of Economic Recovery and Employment Promotion in Post-Tsunami Aceh’. March 2005.

International Co-operative Alliance (ICA): Program Proposal: Revitalization of six model coop-eratives in three pilot areas in Nanggroe Aceh Darussalam (NAD), Indonesia. August-September 2005.

McCord, Michael; Ramm, Gabriele; McGuinness, Elizabeth: Microinsurance – Demand and Market Prospects Indonesia, Allianz AG-GTZ-UNDP, August 2006.

Mediconsult (commissioned by GTZ): NAD – 6 District Hospitals, HMIS Assessment Report, October 2006.

Ram, Indu Chandra: Inception Cum Progress Report, Asian Development Bank, Livelihood & Microfinance Sub-Component. April 2006.

UNDP Community Initiatives Unit: Civil Society in Aceh – An assessment of needs to build capacity to support community recovery, July 2005.

Wiedmaier-Pfister, Martina; Pantoro, Setyo: Promotion of Self-help groups and linkage bank-ing: Implementation of the Allianz Emergency Fund for the Recapitalisation of Women Self-help Groups and Project Strategy, May 2006.

Zander, Rauno: Project Appraisal Report, Reconstruction and Development of the Microfi-nance System in Nanggroe Aceh Darussalam, August 2005.

microinsurance in aceh: feasibility study · microinsurance in aceh feasibility study december 2006...

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