An introductory presentation on microinsurances as a way to reduce poverty and vulnerabilities. Covers 1. general principles and approaches of microninsurances, including the linkage to poverty reduction and vulnerability; and 2. the value chains, actors and networks involved in making microinsurances work. Held at a summer school on Development Policy at the University of Cologne in September 2009 (http://www.lateinamerika.uni-koeln.de/summerschool2009.html). It targets students with a general knowledge of development economics and politics (but without prior knowledge of microinsurances). In the seminar, the presentation was the frame for work sessions on microinsurance case studies (from CGAP), texts from the Microinsurance Compendium and a one-day country workshop on Colombia to which Jenny Hennig, GTZ, gave an additional input. Details on the course are available on request to martin.herrndorf@oikos-international.org.

1. Microinsurances: From Vulnerabilities to Business Models? Martin Herrndorf oikos PhD Fellow, Universität St.Gallen Institute of Management [email_address] +41(0)76 263 2601 | +49(0)163 431 1374 Seminar Summer School “Entwicklungspolitik” 31 August – 5 September 2009 University of Cologne Teaching and Research Center Latin America

3. Introduction Seminar Microinsurances Presentation 1: Microinsurances: Ideas and Principles

4. Introduction Seminar Microinsurances Vulnerabilities and the demand for microinsurances

5. Poverty as a dynamic challenge always poor| Usually poor| Churning poor| Occasionally poor | Never poor Always poor Usually poor Churning poor Occasionally poor Never poor Present Status Status 10 Years Ago Situation unchanged Hulme, D, and A Shepherd. 2003. “Conceptualizing Chronic Poverty”. World Development 31:403-23. Improvement of situation  Poverty Reduction   Worsening of situation No cases

6. Poverty as a dynamic challenge Hulme, D, and A Shepherd. 2003. “Conceptualizing Chronic Poverty”. World Development 31:403-23.

7. The cause of poverty dynamics Income gained Hulme, D, and A Shepherd. 2003. “Conceptualizing Chronic Poverty”. World Development 31:403-23. Income lost Formal employment Remittances Children have (urban) income Inheritance Public subsidies Death of household head Long sickness Business start-up Bad investment House burned down Land washed away Drug addiction always poor| Usually poor| Churning poor| Occasionally poor | Never poor Always poor Usually poor Churning poor Occasionally poor Never poor Present Status Status 10 Years Ago

8. Microinsurances as a protection mechanism Churchill, Craig, ed. 2006. Protecting the Poor: A Microinsurance Compendium International Labour Office (ILO), Munich Re Foundation.

9. Different social security mechanisms Churchill, Craig, ed. 2006. Protecting the Poor: A Microinsurance Compendium International Labour Office (ILO), Munich Re Foundation. Self-insurance Informal group-based mechanisms Formal (micro-)insurance Social protection Money lenders (Family) savings Welfare Associations Funeral Associations Rotating Savings and Credit Associations (ROSCAs) Partnerships between insurers and MFIs Public provision / pensions In case of „death“: Diversifying income sources Building social capital Ex-ante reduction of vulnerability

10. Feasibility of microinsurances Roth, Jim, Michael J. McCord, and Dominic Liber. 2007. The Landscape of Microinsurance in the World’s 100 Poorest Countries . Appleton, WI: The MicroInsurance Centre, LLC. Lives affected Diffi-culty Risk Life insurance An ideal and simple risk to insure, with proven demand and impact, easy to scale ***** ** * Accidental death and dismemberment insurance A simple risk, with proxy health elements, but providing incomplete protection ***** *** ** Healthcare cost indemnity insurance Long-term, risky, complex, subject to abuse and fraud, historically many failures *-***** ***** **** Health savings vehicles Support and financial discipline for routine expenses, no help for major events *-***** * * Defined benefit health (major medical, hospital, critical illness) Contribution towards healthcare costs or associated losses for major healthcare events *-***** **** *** Agricultural (property) insurance Risk management is a crucial component of agricultural development ***** **** ***

11. Consumer demand for microinsurances

12. Effects – health micro-insurance Adapted from Blanchard-Horan, 2006 , In: Roth, Jim, Michael J. McCord, and Dominic Liber. 2007. The Landscape of Microinsurance in the World’s 100 Poorest Countries . Appleton, WI: The MicroInsurance Centre, LLC.

13. Introduction Seminar Microinsurances Definitions and Principles

14. Microinsurances - definition „ 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” Churchill, Craig ed. 2006. Protecting the Poor: A Microinsurance Compendium International Labour Office (ILO), Munich Re Foundation.

17. Introduction Seminar Microinsurances Supply of Microinsurances

18. Access to financial services

19. Number of microinsurance providers Roth, Jim, Michael J. McCord, and Dominic Liber. 2007. The Landscape of Microinsurance in the World’s 100 Poorest Countries . Appleton, WI: The MicroInsurance Centre, LLC.

20. Microinsurances – total lives covered Roth, Jim, Michael J. McCord, and Dominic Liber. 2007. The Landscape of Microinsurance in the World’s 100 Poorest Countries . Appleton, WI: The MicroInsurance Centre, LLC. Region Life Health Accident & Disability Property & Index Americas 7,545,057 445,876 105,000 600 Africa 2,036,141 3,053,778 1,603,000 1,600,000 Asia 54,158,332 31,697,038 39,180,508 34,557,434 Total 63,739,530 35196692 40888508 36158034

21. Access to microinsurances in Latin America Roth, Jim, Michael J. McCord, and Dominic Liber. 2007. The Landscape of Microinsurance in the World’s 100 Poorest Countries . Appleton, WI: The MicroInsurance Centre, LLC.

22. The context for microinsurances Roth, Jim, Michael J. McCord, and Dominic Liber. 2007. The Landscape of Microinsurance in the World’s 100 Poorest Countries . Appleton, WI: The MicroInsurance Centre, LLC. Macro | The Enabling Environment Meso | Financial Infrastructure Micro | Business Models Commercial & mutual insurers, agents, brokers, intermediaries Actuaries, auditors, technical support, adjusters, insurance claims register, information technology Policy, legislation, regulation, supervision

23. Market development for microinsurances Qureshi, Zahid, and Dirk Reinhard. 2008. “Making Insurance Work for the Poor”. 4th International Microinsurance Conference 2008

24. Introduction Seminar Microinsurances Presentation 2: Microinsurances: Actors and Networks

25. Introduction Seminar Microinsurances The Micro-Insurance Value Chain

26. Value chain for insurances

27. Changes in the value chain Qureshi, Zahid, and Dirk Reinhard. 2008. “Making Insurance Work for the Poor”. 4th International Microinsurance Conference 2008

28. Work distribution – a pyramid model Reinsurer Insurer Insurer Insurer Channel Channel Channel Client Client Client Covered Life Covered Life Covered Life ‚ A few‘ ‚ Dozens‘ ‚ Thousands‘ ‚ Millions‘ ‚ Millions more‘

29. Work distribution Qureshi, Zahid, and Dirk Reinhard. 2008. “Making Insurance Work for the Poor”. 4th International Microinsurance Conference 2008

31. Value creation through local education Michael Anthony, Allianz SE, Presentation at Utopia Conference, Berlin Explain insurances and risks covered to the heads of village. To raise understanding and awareness about micro-insurances, mass rallies are being held by Care and local NGO. Village officials explain and discuss the concept of insurance with members of the village. During these awareness campaigns a puppet theatre and microinsurance song are shown to explain insurance. 1 2 3 4

32. Introduction Seminar Microinsurances Actors and Approaches

33. Key differences between the actors in the field Financial Performance Social Mission Large & Global Small & Local Weak / distanced Strong / embedded Primary interest / logic Scope of operations Outreach to the poor High / standardised Low / informal Operational & financial capacity High / stable Low / instable Risk-pooling capacity / reserves

34. Introduction Seminar Microinsurances Actors and Approaches Insurance Companies

35. Base of the Pyramid – A new paradigm Poor / extremely poor ‘Base of the Pyramid’ = 4 billion customers? Traditional business focus Neglected markets Middle class High income Inclusive business? Anwara Begum, Grameen 'telephone lady' (Credit: Nurjahan Chaklader) Based on Prahalad, C. K., and Allen L. Hammond. 2002. “What Works: Serving the Poor, Profitably”. Harvard Business Review 4-11.

38. Introduction Seminar Microinsurances Actors and Approaches (Agro-)Cooperatives

40. Kooperativen - Beispiele Churchill, Craig ed. 2006. Protecting the Poor: A Microinsurance Compendium International Labour Office (ILO), Munich Re Foundation.

41. Introduction Seminar Microinsurances Actors and Approaches Micro-Finance Institutions

44. Micro-Finance 2: Standardisation icrofinance? Vikram Akula Founder SKS Microfinance

47. How many people do different providers reach? Roth, Jim, Michael J. McCord, and Dominic Liber. 2007. The Landscape of Microinsurance in the World’s 100 Poorest Countries . Appleton, WI: The MicroInsurance Centre, LLC.

48. Which services do different providers offer? Roth, Jim, Michael J. McCord, and Dominic Liber. 2007. The Landscape of Microinsurance in the World’s 100 Poorest Countries . Appleton, WI: The MicroInsurance Centre, LLC.

49. Thanks for your attention! Martin Herrndorf martin. [email_address] skype: herrndorf mobil ch: +41(0)76 2632601 Mobil de: +49(0)163 4311374 www.facebook.com/herrndorf