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What is Microinsurance?. Access to Insurance for the Poor May 2007 Rio de Janeiro, Brazil Craig Churchill International Labour Organization. What is the ILO?. Specialized UN agency created in 1919 Promotes social justice and human and labour rights - PowerPoint PPT Presentation

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  • What is Microinsurance?Access to Insurance for the PoorMay 2007Rio de Janeiro, Brazil

    Craig Churchill International Labour Organization

  • What is the ILO?Specialized UN agency created in 1919Promotes social justice and human and labour rightsForum for governments to engage with employers and workers organizations (tripartite structure)Formulates international labour standards (Conventions and Recommendations)Provides assistance to member states and social partners in implementing standards

  • ILOs interest in microinsurance The ILO is concerned about:The promotion of decent work: more and better jobsThe availability of social protection for workers and their families The impact of financial polices on social justice, i.e. toward more inclusive financial markets

  • The ILO: A microinsurance microcosmIn the ILO, and elsewhere, microinsurance can be seen from two complementary perspectivesA way of extending social protection to excluded populationsA new market for the insurance industry

  • The microinsurance continuumSocial Protection Benefits are a human right (e.g. health, pension) Contains a redistributive elementNew Market 4 billion persons living on less than $2/day Product and distribution innovations can make the poor a viable market for insurers

  • What is microinsurance?

  • Microinsurance is the protection of low-income people against specific perils in exchange for regular premium payments proportionate to the likelihood and cost of the risk involved ~ Draft Donor Guidelines, CGAP Working Group (2003) not a specific product or product line. It is also not limited to a specific provider type. Microinsurance is the provision of cover to a specific market segment, i.e. low-income persons. ~ IAIS Issues Paper (2007)

  • Who is insured by whom?

  • Characteristics of the insurable poorVulnerable to risksOften work in the informal economyIrregular cash flowsManage risks through myriad of informal means, including social networksLimited familiarity with formal insuranceMay not trust insurance companies

  • To what risks and economic stresses are low-income persons vulnerable?

  • What risks are they concerned about?Adapted from Cohen and Sebstad (2006)

  • What risks are they concerned about?Adapted from Cohen and Sebstad (2006)

  • How is insurance delivered to the poor?

  • Microinsurance delivery channelsPartnerships between insurers and distribution agents like cooperatives and MFIs (e.g. Zurich Bolivia and BancoSol)Self-insuring MFIs that assume the risk of offering insurance to their clients (e.g. Spandana, India)Informal mutual assistance schemes (e.g. burial societies, South Africa)Healthcare providers offering health care schemes (e.g. Nkoranza Community Health Insurance Plan, Ghana) Continued

  • Regulated insurance companies that serve the low-income market directly (e.g. Delta Life, Bangladesh)

  • Regulated insurance companies that serve that have created microinsurance agents (e.g. Tata-AIG, Bangladesh)

  • Insurance companies that target the low-income market through retailers (e.g. Seguros Azteca and Electra, Mexico)

  • Community-based schemes that pool funds, carry risk and manage a relationship with a healthcare provider (LUnion Technique de la Mutualit Malienne, Mali)

  • Insurance distributed through cooperatives (e.g. Yeshasvini, India)

  • Mutual insurance companies created by credit union/cooperative federations (e.g. TUW SKOK, Poland; La Equidad, Colombia)

  • Most common types of microinsurance productsCredit lifeTerm life/Personal accident Savings lifeProperty insuranceEndowment lifeHealth insuranceAgriculture

  • Key differences between micro and conventional insuranceContinued

    Conventional InsuranceMicroinsurancePremium collected mostly from deductions in bank account Premium often collected in cash or associated with another financial transaction Regular premium paymentsPremiums should be designed to accommodate customers irregular cash flowsAgents and brokers are primarily responsible for sales Agents may manage the entire customer relationship, perhaps including premium collection Market is largely familiar with insurance Market is largely unfamiliar with insurance

  • Key differences between micro and conventional insurance (cont.)

    Conventional InsuranceMicroinsuranceScreening requirements may include a medical examinationIf there are any screening requirements, they would be limited to a declaration of good healthLimited eligibility with standard exclusionsBroadly inclusive, with few if any exclusionsSold by licensed intermediariesOften sold by unlicensed intermediariesLarge sums insuredSmall sums insuredPriced based on age/specific risk Community or group pricingComplex policy documentSimple, easy to understand policy document

  • Key stakeholders in the development of microinsurancePotential and current policyholdersActual and potential delivery channelsRisk carriers Industry associations, networksInsurance infrastructure: training, technical assistance, research, data warehousingPolicymakers, regulators and supervisorsDonors and development agencies

  • The challenge for all of these stakeholders is toCreate a culture of insurance among low-income personsConcluding Thought

  • Thank you!Craig Churchillchurchill@ilo.orgTel +41 22 799 6242

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