Microinsurance: Links to

Occupational Safety & Health

Workshop for OSH through provision of MI, MF & Banking Services

Cairo, Egypt – December 2009

Jeanna Holtz

The Microinsurance Innovation Facility

International Labour Organization, Geneva

Overview of Microinsurance Presentation

1. What is microinsurance?

2. Evolution & trends

3. Product development

4. Closing thoughts-way forward

Microinsurance is…

“…a mechanism to protect low-income people against specific perils in exchange for regular premium payments proportionate to the likelihood and cost of the risk involved”

Microinsurance is not…

• Regular insurance products with smaller sums insured and premiums

• Small insurance companies

• Just another product offered by MFIs

• Savings, credit, risk prevention

Definition

Characteristics of the insurable poor• Often work in the informal economy• Irregular cash flows• Manage risks through myriad of informal means,

including social networks• Limited familiarity with formal insurance• May not trust insurance companies• Vulnerable to risks…

Valuable, effective MI considers these characteristics

Conventional Insurance Microinsurance

• Complex policy document

• Limited eligibility with standard exclusions

• Regular premium payments as banking transaction

• Screening requirements may include a medical examination

• Large sums insured, longer terms

• Priced based on age/specific risk

• Agents and brokers are primarily responsible for sales

• Market is largely familiar with insurance

• Simple, easy to understand policy document

• Broadly inclusive, with few if any exclusions

• Premiums accommodate irregular cash flows, paid in cash or with another financial transaction

• Any screening requirements would be limited to a declaration of good health

• Small sums insured, often short terms

• Community or group pricing

• Distribution channel may manage the customer relationship, premium collection, claims payment

• Market is largely unfamiliar with insurance

Micro vs. Conventional InsuranceMicro vs. Conventional Insurance

Adapt to needs of target market

Microinsurance roots

Expansion of Microfinance

Extension of social protection

Business opportunity by insurers

Popular insurance by cooperatives

Micro-insurance

Investor interest

Microinsurance trends

• MI emerging out of the shadow of microfinance: business and social impact

• Greater variety of distribution channels• Growing interest from policymakers, regulators

and insurance companies• Increased focus by investors; some evaluate

social dimensions• Product innovations that provide better coverage

to more low-income people• Increasing experimentation with consumer

education on risk management and insurance

2009 Survey results

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Credit life Other life, funeral, PA Health Agriculture Other property

Microinsurance in AfricaILO survey data as of end 2008

outreach (lives covered)

penetration (%)

• 14.7 million people in Africa with microinsurance• USD 257 million in premiums received in 2008• 2.6% of the population living under USD 2 per day

Microinsurance product spectrumMicroinsurance product spectrum

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

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Products in greatest demand are least available

3. Products

Getting Started

• Start simple:– Life insurance, linked to loans, easy point of entry– Also: accident, disability

• Potential add-ons (later): income replacement, critical illness, hospitalisation cash…– Example: Microfund for Women, Jordan

• Caregiver product: covers certain costs during illness episode

Considerations to develop Microinsurance• Partnership with insurer, other stakeholders• Eligibility

– Mandatory or voluntary• Piggyback or standalone• Premium collection timing and mechanism• Benefit design• Claims payments• Client & employer education• Risk management and controls

– Important for accident cover

Checklist for workplace microinsurance

• Medium to large organizations (volume); growing• Accidents and deaths are frequent, volatile• Win-win for insurer/channel, employer and

employees• Efficient distribution (easy access) • Low transaction costs (enrolment, premium

collection, claims)• Simple, valued product

• Benefits of Microinsurance, Microfinance & Decent Work:

SOCIAL• Better jobs, safer workplace• Protection when accidents

occur• Employee Loyalty• Socially responsible• Improved access to financial

services

COMMERICIAL

• Higher loan repayment• Profitable business venture• Increased productivity• Lower absenteeism• Employee retention• Attract capital

Closing Thoughts

Closing Thoughts, cont.

• Successful products:– Overcome the wariness of customers

– Adapt to the socio-economic situation of the poor

– Create an insurance culture

– Consider social dimensions

• Scale up, by:– Start small: Build client interest and trust; organizational competency

– Leverage existing distribution channels such as MFIs (efficiency!)

– Build on lessons learned

– Innovate; add value to products

Risks: Accidents, Illness, Death, Property Loss, Disasters…

Innovation will drive development

Thank you!

Jeanna Holtz

For more information:

www.ilo.org/microinsurance

or email:

holtz@ilo.org

Tel +41 22 799 66 84

Extra slides

Learning about microinsurance

• Conducted 24 case studies, which draw lessons from 40 microinsurance providers, including risk carriers and delivery channels, primarily in Africa, Asia and Latin America

• Case studies are available on www.microinsurancefocus.org

• Published “Protecting the poor: A microinsurance compendium” with Munich Re Foundation