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Rural Microinsurance Helping the Poor weather the storm
1. Richard Leftley
President & CEO
Microensure
2009 RBAP-MABS National Roundtable Conference
May 12-13, 2009
Hyatt Hotel and Casino
Manila
2. The poor do not buy insurance
Premiums per
Premiums (in Premiums in % capita (in USD)
USDmn) 2006 of GDP 2006 2006
North America $1,258,301 8.67% $3,804.0
Europe $1,484,881 8.27% $1,745.7
Asia $800,819 6.63% $205.0
Middle East and Central
Asia $18,901 1.37% $62.5
Africa $49,667 4.77% $53.6
The Philippines $1,443 1.48% $17.2
World $3,723,412 7.52% $554.8
Industrialised countries $3,390,180 9.18% $3,362.2
Emerging markets $333,231 2.69% $59.8
Source: Swiss Re, Economic Research &
Consulting, sigma No. 4/2007
3. Client Demand: Chutes & Ladders
• he poor face huge risk
T
• hey seek to mitigate risk
T
often informally
• nformal mechanisms are
I
poor value and insecure
• nsurance is safety net
I
• 4% entering hospitals
2
left below the poverty line
in India
4. Supply from insurers is available
• Commercial insurance companies are
interested in this market
• Life & property insurance is available
from local insurers
• Crop and health harder to secure
locally: need global reinsurers
5. Introducing MicroEnsure
• Started working on microinsurance in 2002
• MicroEnsure established in 2005
• Currently serving 3,500,000 lives globally
• Gates Foundation grant; $25m over 5 years
• Expand into 11 new countries
• Serve 25m people by 2012 – life, health, crop
9. So what products do the poor want?
What forces unplanned spending on the
poor?
• Funerals
• Medical emergency
• Fire or natural disaster
• School fees
• Weddings
• Crop failure in rural areas
10. Life Insurance
1. Mortgage Redemption – protects the lender
Borrower dies or is disabled during a loan period. The mortgage
redemption pays off the outstanding loan plus interest to the lender.
2. Term Life – excellent for funerals
Normally loan linked and can provide a fixed sum insured upon
death of borrower, spouse, children or parents.
3. Investment products – provides a saving return
Return of premium plus interest upon maturity – can be problematic
to collect the premium over 5 year term
11. Saturnina Santocildes, Iloilo
• 57 year old widow
A
fought for her children
• ook 15 loans, the last
T
was P9,000
• he died after
S
extracting her tooth
• he P100,000 was split
T
between the children:
The youngest remain at
school, the oldest started
a business; one bought a
cow
12. Property Insurance Products
• Philippines first micro housing product
launched last year (Bahay Asenso)
• Protects the house against fire and all natural calamities
• Provides cover for death arising from an accident
• Provides evacuation benefit to cover costs
• Sold in units of P50,000; maximum of three units
per borrower
13. Weather index products
• Demand from small hold farmers for inputs
• Agri-Agra law could unlock significant funds
• Rural banks are worried about climate risk
• Traditional insurance has issues; claims
payment
• Solution is weather index products
• Quick and transparent claims trigger
• Index available for a range of risks
14. Philippines Index Products
• Drought for rice farmers
• Too little rain triggers a payment
• Rainfall measured at an existing rainfall gauge
• Typhoon for rice farmers
• Farmers location captured with GPS
• Index uses windspeed and distance to measure impact
• Excess rain (in development)
• Pest & Disease available from PCIC
15. Livestock Insurance
• Protects against death of the animal
• Biggest issue is the cost of controlling
fraud which boosts pricing
• MicroEnsure working on new technology
which reduces fraud and price
16. Health Insurance Products
• High demand due to frequency of use
• Admin cost restricts us to in-patient
cover
• Out-patient addressed in normal cash
flow
• Needs to be a cashless facility – requires
TPA
17. Indian micro health product
• Provides P22,500 cover for family of four
• Service provided on a cashless basis
• In-patient only cover
• Costs P350 per year for family of four
• Pre-existing and maternity from day-one
• Working with SML – over 1.7m families
18. Why introduce micro insurance?
1. Provides a competitive advantage in an
increasingly competitive lending market
2. Reduced risk for clients leads to lower PAR
3. Additional revenue opportunity for the rural
bank from fee income
4. Provides access to new markets (e.g. farm
input lending)
19. How to choose the right product?
• Start by understanding client demand,
clarify what is already available and what
do regulations allow?
• Balance these three requirements
• Be realistic about operational capability
• Internal & external needs differ
20. Balancing the conflicts
• Lower premium = lower commission
• Better / cheaper products might attract
additional borrowers
• Revenue from insurance will always be
lower than from lending
• Insurers needs to make profit..how much?
• Its all about the client – right???
21. What's the bottom line?
• Revenues from insurance are low
• Range from P3 – P50 per policy
• Global average is P12 per policy
• Whilst this is incremental income, there is
a cost associated with administration
• Complex products require investment or
an able partner who can deliver
22. Communicating: Staff training
• oan officers need to
L
understand products
• oan officers train
L
clients
• icroEnsure uses its
M
own training teams to
educate branch staff
• here is no cost to the
T
rural bank
24. Conclusions
• The poor want to mitigate risk
• Insurance reduces lending risk and
generates revenue
• Demand for; health, life, property, crop
• Needs to be a partnership model
• Back office is key in reducing transactional
cost and providing good service
