the society of actuaries of mongolia the role of the actuary in microfinance ulan bator, mongolia...

THE SOCIETY OF ACTUARIES OF MONGOLIA

The role of the Actuary in Microfinance

Ulan Bator, Mongolia

14-15 November 2011

Kirsten Armstrong

МОНГОЛЫН АКТУАРЧДЫН НИЙГЭМЛЭГ


Agenda

• What is micro-finance?

• What is micro-insurance?

• What should actuaries do in the sector?

• A case study

• Specific challenges


What is Microfinance?

• Basic financial services to poor & excluded• Innovating to meet needs:

Eg: Mobile phone banking for remote communities

• Savings, credit, money–transfer, insurance

• Target groups:– Micro Entrepreneurs

– Small and medium-sized enterprises


Social Goals more important than profit

Mission: To contribute to the socio-economic development of the country while creating a fair value for its shareholders. This will be achieved by providing inclusive, value adding, and reliable financial services to all people and entities of Mongolia through establishing a leading financial institution that is equally concerned about Planet, People, and Profit.

XAC Bank


Microfinance in Mongolia

Loans US$914.7 million

Borrowers 390,000

Deposits US$1.2 billion

Depositors 1.8 million

MFIs 6Hugjil badrakh, VFM, TFS, Khan Bank, Credit Mongol, XacBank

Regulator Bank of Mongolia Source: Mixmarket 2010


What is Micro-insurance?

• Targetted protection for low-income people

• Simple

• Affordable

• Work best when supported with advice & innovation

* Microinsurance is still in development.*


Product Groups

Crop Insurance

Health / disability insurance

Annuities / endowment

Property

Term life

Credit life

Complexity


Micro-insurance in Mongolia

• To be updated!

THE SOCIETY OF ACTUARIES OF MONGOLIASlide 9

Case Study:Health insurance in India’s slums

62 million people live in India’s slums.300 million people in India live in poverty.

Health care is limited & basic.


Micro health insurance

• Covers insured people in Pune’s slums

• Annual premium: 60 rupees ($2)

• Reimburses max 5,000 rupees hospital costs

• Other benefits• health camps, discounts, 24 hour hotline

• More than 60,000 members

• Scheme expanded to other slums


Community-based decision-making helps manage risk.

Some benefits remain discretionary→ minimises solvency requirements.


Local systems can be basic – simplicity essential

Performance monitoring at the community level


What did I do?

• Supported product redesign

• Pricing model

• Performance monitoring tool

• Minimum Solvency requirements

• Reviewed accounting procedures

• Advised on data requirements…All in a three week visit….

•


Other roles for actuaries

• Identifying needs, gaps and opportunities

• Risk Management

• Reserving / outstanding claims valuation

• Forecasting


Original Benefit Structure

2007 2008

HMF Option 1 Option 2 Option 3 Option 4-

Contributed

Basis 60 100 150

Family 2+2 240 400 600

Child 60 100 150

Prem

ium

Individual 100 150 200

Max Benefit

5,000 15,000 45,000 35,000 50,000

Payable

80% of Health

Event Bills up to

80% of Health

Event Bills up to:

80% of Health Event Bills up to:

L1: 50% of Health

Event Bills up to:

L2: 80% of Health

Event Bills up to:

80% of Health

Event Bills up to:

Special 5,000 15,000 50,000 5,000 30,000 50,000

General 2,500 5,000 20,000 -5000RS deductible 5,000 15,000 20,000

Sub L

imits

One Day 1,000 1,000 3,000 3,000 5,000

Benefit

s

OPD Discounts

none 50% discount coupon on Consultations with local OPD provider

40,000 claim

5000 reimbursed

5000 claim

4000 reimbursed


2008

Option 2 Option 3 Option 4-

Contributed

Basis 100 150

Family 2+2 400 600

Child 100 150

Prem

ium

Individual 150 200

Max Benefit

45,000 35,000 50,000

Payable 80% of Health

Event Bills up to:

L1: 50% of Health

Event Bills up to:

L2: 80% of Health

Event Bills up to:

80% of Health

Event Bills up to:

Special 50,000 5,000 30,000 50,000

General 20,000 -5000RS deductible 5,000 15,000 20,000

Sub L

imits

One Day 3,000 3,000 5,000

Benefit

s

OPD Discounts

50% discount coupon on Consultations with local OPD provider

Option 2

40,000 claim

28,000 reimbursed

5000 claim

nil reimbursed


2008

Option 3 Option 4-

Contributed

Basis 100 150

Family 2+2 400 600

Child 100 150

Prem

ium

Individual 150 200

Max Benefit

35,000 50,000

Payable

L1: 50% of Health

Event Bills up to:

L2: 80% of Health

Event Bills up to:

80% of Health Event

Bills up to:

Special 5,000 30,000 50,000

General 5,000 15,000 20,000

Sub L

imits

One Day 3,000 5,000

Benefit

s

OPD Discounts

50% discount coupon on Consultations with local OPD

provider

Option 3

40,000 claim

29,000 reimbursed

5000 claim

2500 reimbursed


Unique aspects for Actuaries

• Poor data: how to price? How to manage uncertainty?

• Keep costs down : offer simple tools

• Short tail products; focus on

– Pricing

– Good monitoring systems

– Outstanding claims valuations are less important

• Design products with risk management levers

– Don’t want to end up needing big solvency reserves


Unique aspects for Actuaries

• Always ask: Is this meeting social needs?• Measure social outcomes as well as financial

outcomes• Do you understand the customer? • Data collection: What do they need for pricing and

evaluation?• Offer ideas from the industry – innovate!


Further Information…

Consultative Group Assisting the Poor

www.cgap.org

Microfinance Information Exchange

www.themix.org

www.microinsuranceacademy.org/

www.ilo.org/public/english/employment/mifacility/


The role of the Actuary in Microfinance

Ulan Bator, Mongolia

14-15 November 2011

Kirsten Armstrong

МОНГОЛЫН АКТУАРЧДЫН НИЙГЭМЛЭГ

the society of actuaries of mongolia the role of the actuary in microfinance ulan bator, mongolia...

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