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AIRDC Seminar 7 th September 2012 Manila, Philippines Development of Microinsurance in Sri Lanka Presenter : Jagath Alwis B.Sc. FIII, FCII, FIoD (UK) Director.

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Presentation on theme: "AIRDC Seminar 7 th September 2012 Manila, Philippines Development of Microinsurance in Sri Lanka Presenter : Jagath Alwis B.Sc. FIII, FCII, FIoD (UK) Director."— Presentation transcript:

1 AIRDC Seminar 7 th September 2012 Manila, Philippines Development of Microinsurance in Sri Lanka Presenter : Jagath Alwis B.Sc. FIII, FCII, FIoD (UK) Director (Technical) Director (Technical) Ceylinco Insurance PLC Ceylinco Insurance PLC Sri Lanka Sri Lanka

2 Facts about Sri Lanka Population 21.5 M (growth rate 0.91%) Population 21.5 M (growth rate 0.91%) Literacy rate 91% Literacy rate 91% Per capita Income US$ 2,835 Per capita Income US$ 2,835 GDP Growth rate 8.3% (2011) GDP Growth rate 8.3% (2011) Size of the Insurance Industry US$ 730 M. Life Insurance Market US$ 320 M and Non-Life Insurance Market US$ 410 M for Size of the Insurance Industry US$ 730 M. Life Insurance Market US$ 320 M and Non-Life Insurance Market US$ 410 M for Insurance penetration 1.2% Insurance penetration 1.2% Insurance density US$ 34 per person Insurance density US$ 34 per person Average growth of the Insurance Industry for the last 5 years 20% Average growth of the Insurance Industry for the last 5 years 20%

3 Microinsurance Microinsurance is a class of Insurance that is accessed by low income earners, provided by a variety of different entities but run in accordance with general principles of insurance and funded by premiums Microinsurance is a class of Insurance that is accessed by low income earners, provided by a variety of different entities but run in accordance with general principles of insurance and funded by premiums Microinsurance activities should fall within the preview of the domestic insurance regulator unless excluded by the relevant laws Microinsurance activities should fall within the preview of the domestic insurance regulator unless excluded by the relevant laws

4 Designed to be appropriate to low income households Designed to be appropriate to low income households Comparatively low premium Comparatively low premium Coverage is simple and straight forward Coverage is simple and straight forward Distribution channels are different Distribution channels are different Non complex methods of claim settlement Non complex methods of claim settlement Simplicity in relation to documentation process Simplicity in relation to documentation process Special features of Microinsurance products

5 The insurance penetration is 1.2% and the insurance density is US$ 34 which is very low compared to the per capita income which is US$ 2,835 The insurance penetration is 1.2% and the insurance density is US$ 34 which is very low compared to the per capita income which is US$ 2,835 Recent studies among the low income groups have shown that Recent studies among the low income groups have shown that –41.4% trust insurance and believe in the benefits of insurance –33.3% believe that insurance is expensive and has no benefits to their income group –25.3% do not trust insurance and think it will not help them Demand for Microinsurance in Sri Lanka

6 The low income groups believe in health, life insurance and funeral expenses The low income groups believe in health, life insurance and funeral expenses Very low demand for property insurance Very low demand for property insurance Always expect maturity benefits even on non-life insurance as well Always expect maturity benefits even on non-life insurance as well However, Tsunami 2004 changed the perception of insurance to a very great extent However, Tsunami 2004 changed the perception of insurance to a very great extent Demand for Microinsurance in Sri Lanka

7 Sri Lanka is a country where Microinsurance is widely recognized as a risk mitigation of the poor and practiced for a long time Sri Lanka is a country where Microinsurance is widely recognized as a risk mitigation of the poor and practiced for a long time At present Microinsurance products are offered by At present Microinsurance products are offered by –Public sector –Informal sector –Private sector Sri Lanka making it work……

8 Agriculture and Agrarian Insurance Board was set up in 1973 Agriculture and Agrarian Insurance Board was set up in 1973 Social Security Board of Sri Lanka Social Security Board of Sri Lanka Samurdhi Authority set up to financially assist the unemployed people below the poverty line Samurdhi Authority set up to financially assist the unemployed people below the poverty line National Insurance Trust Fund which was set up in 2006 National Insurance Trust Fund which was set up in 2006 Public sector organizations offering Microinsurance

9 Agriculture and Agrarian Insurance Board Set up in 1973 to offer agriculture and crop insurance Set up in 1973 to offer agriculture and crop insurance Extended to offer pension schemes to farmers and fishermen Extended to offer pension schemes to farmers and fishermen Agriculture and livestock farmers and fishermen aged 18 to 60 years are eligible to join the scheme which is individual and voluntary Agriculture and livestock farmers and fishermen aged 18 to 60 years are eligible to join the scheme which is individual and voluntary Public sector organizations offering Microinsurance

10 Agriculture and Agrarian Insurance Board Life time monthly pension benefits commence at the age of 60 Life time monthly pension benefits commence at the age of 60 In the case of death of the contributor, pension is payable to the spouse until death In the case of death of the contributor, pension is payable to the spouse until death A personal accident cover is also part of the scheme which has a death benefit of Rs 50,000 plus refund of contributions and funeral expenses, if the insured expires before the age of 60 A personal accident cover is also part of the scheme which has a death benefit of Rs 50,000 plus refund of contributions and funeral expenses, if the insured expires before the age of 60 Public sector organizations offering Microinsurance

11 Agriculture and Agrarian Insurance Board Permanent disablement and partial disablement is also covered Permanent disablement and partial disablement is also covered Half yearly premium is based on the age at entry Half yearly premium is based on the age at entry Premium could be paid through the Agrarian Service Centres throughout the country Premium could be paid through the Agrarian Service Centres throughout the country Standard exclusions are applicable Standard exclusions are applicable Public sector organizations offering Microinsurance

12 Social Security Board of Sri Lanka Offers a pension and social security scheme for self- employed persons Offers a pension and social security scheme for self- employed persons Self-employed persons aged 18 to 65 are eligible to enter the scheme Self-employed persons aged 18 to 65 are eligible to enter the scheme The scheme is individual and voluntary The scheme is individual and voluntary Entitled for a life-time monthly pension Entitled for a life-time monthly pension In the case of death of the contributor the spouse is entitled for pension benefits In the case of death of the contributor the spouse is entitled for pension benefits Public sector organizations offering Microinsurance

13 Social Security Board of Sri Lanka Personal accident benefits are also part of the scheme Personal accident benefits are also part of the scheme Premiums vary depending on the scheme and the age and could be paid through post offices and sub post offices Premiums vary depending on the scheme and the age and could be paid through post offices and sub post offices Public sector organizations offering Microinsurance

14 Samurdhi Authority Set up to distribute a monthly dole to unemployed people below poverty line Set up to distribute a monthly dole to unemployed people below poverty line Samurdhi beneficiaries below the age of 65 are entitled to join this group insurance scheme which is compulsory Samurdhi beneficiaries below the age of 65 are entitled to join this group insurance scheme which is compulsory The monthly dole is paid after deducting the premium The monthly dole is paid after deducting the premium Public sector organizations offering Microinsurance

15 Samurdhi Authority Benefits Life insurance benefits and hospital cash up to 30 days Life insurance benefits and hospital cash up to 30 days Ex-gratia payments at marriage, at the birth of first and second children and marriage of a child Ex-gratia payments at marriage, at the birth of first and second children and marriage of a child Public sector organizations offering Microinsurance

16 National Insurance Trust Fund Set up in 2006 to operate benefit schemes and insurance schemes for the benefit of more vulnerable segments of the society including Samurdi beneficiaries, Farmers, Fishermen and persons engaged in self-employment Set up in 2006 to operate benefit schemes and insurance schemes for the benefit of more vulnerable segments of the society including Samurdi beneficiaries, Farmers, Fishermen and persons engaged in self-employment Benefits are also extended to Public Officers, Provisional Public Officers, Local Government Service Officers and those who are retired from such services Benefits are also extended to Public Officers, Provisional Public Officers, Local Government Service Officers and those who are retired from such services The fund has already taken over the health insurance scheme of the Government servants which is called Agrahara The fund has already taken over the health insurance scheme of the Government servants which is called Agrahara It is likely that the insurance schemes run by the State will be consolidated into this fund for better management and control It is likely that the insurance schemes run by the State will be consolidated into this fund for better management and control Public sector organizations offering Microinsurance

17 These schemes heavily depend on funds from the government allocated from the national budget and not commercially managed These schemes heavily depend on funds from the government allocated from the national budget and not commercially managed Rates are not scientifically designed and there is no involvement of actuaries Rates are not scientifically designed and there is no involvement of actuaries Enrolment for the voluntary schemes are very low Enrolment for the voluntary schemes are very low High rate of lapses High rate of lapses The distribution systems are not very effective as their core business is not insurance The distribution systems are not very effective as their core business is not insurance Public sector organizations offering Microinsurance

18 Absence of actuarial evaluations on these products except for schemes for self-employed Absence of actuarial evaluations on these products except for schemes for self-employed Largely part of the social responsibility of the government Largely part of the social responsibility of the government However, creates awareness about insurance at grass root level However, creates awareness about insurance at grass root level Public sector organizations offering Microinsurance

19 Death Benevolent Societies Village level informal societies Village level informal societies Members contribute a minimal monthly agreed fee Members contribute a minimal monthly agreed fee In the case of a death of a family member, an agreed amount is paid for funeral expenses In the case of a death of a family member, an agreed amount is paid for funeral expenses These societies are being operated for more than 50 years These societies are being operated for more than 50 years Informal sector offering Microinsurance

20 Death Benevolent Societies Some societies have huge accumulated funds which they disburse as soft loans for the members in distress Some societies have huge accumulated funds which they disburse as soft loans for the members in distress Some societies are very active and even organize various events at village level Some societies are very active and even organize various events at village level Informal sector offering Microinsurance

21 Death Benevolent Societies Very often, they hire furniture, tents, sound systems etc. for their members at a nominal fee for various events such as weddings, parties, funerals etc Very often, they hire furniture, tents, sound systems etc. for their members at a nominal fee for various events such as weddings, parties, funerals etc These informal organizations are operating based on the principles of pooling the risks, the cardinal principle of insurance These informal organizations are operating based on the principles of pooling the risks, the cardinal principle of insurance Informal sector offering Microinsurance

22 Sarvodaya Economic Enterprise Development Services (SEEDS) Economic arm of the Sarvodaya Development which is the largest NGO working in Sri Lanka towards alleviation of rural poverty Economic arm of the Sarvodaya Development which is the largest NGO working in Sri Lanka towards alleviation of rural poverty The Mission of SEEDS is to eradicate poverty by promoting economic empowerment for a sustainable livelihood The Mission of SEEDS is to eradicate poverty by promoting economic empowerment for a sustainable livelihood SEEDS has more than 4,000 village level societies with around I million members SEEDS has more than 4,000 village level societies with around I million members They offer a loan protection scheme to members who are borrowing from them up to Rs 100,000 They offer a loan protection scheme to members who are borrowing from them up to Rs 100,000 Informal sector offering Microinsurance

23 Sarvodaya Economic Enterprise Development Services (SEEDS) In the case, the loan is above Rs. 100,000 they work with a locally registered insurance company In the case, the loan is above Rs. 100,000 they work with a locally registered insurance company In case of partial disability when the borrower is unable to perform his normal activities, the outstanding amount is written off In case of partial disability when the borrower is unable to perform his normal activities, the outstanding amount is written off In case of death or permanent disability of the borrower, the scheme writes off the outstanding balance of the loan and also repays the installments of the loan paid by the borrower to the family members In case of death or permanent disability of the borrower, the scheme writes off the outstanding balance of the loan and also repays the installments of the loan paid by the borrower to the family members Informal sector offering Microinsurance

24 Yasiru This is also a NGO involved in grass root level poverty alleviation. This is also a NGO involved in grass root level poverty alleviation. Offers its members life insurance cover up to 65 years. Offers its members life insurance cover up to 65 years. Dependants also could be covered for death. Dependants also could be covered for death. Cover could be extended for hospitalization. Cover could be extended for hospitalization. Informal sector offering Microinsurance

25 Women's Development Fund – Hambantota This is a NGO operating in the South of Sri Lanka with the vision of empowering the rural women This is a NGO operating in the South of Sri Lanka with the vision of empowering the rural women They also offer an insurance scheme for their member women They also offer an insurance scheme for their member women The basic cover includes death of the insured or a family member or hospitalization and damage to the house to a limited amount The basic cover includes death of the insured or a family member or hospitalization and damage to the house to a limited amount By paying an additional premium they could increase the hospitalization cover and cash payments at the time of marriage and child birth By paying an additional premium they could increase the hospitalization cover and cash payments at the time of marriage and child birth Informal sector offering Microinsurance

26 Other than the organizations mentioned, there are few other organizations offering insurance covers in the informal sector Other than the organizations mentioned, there are few other organizations offering insurance covers in the informal sector Most of the schemes are not operating on sound principles of insurance Most of the schemes are not operating on sound principles of insurance The Insurance Regulator has voiced his concerns about such organizations operating insurance schemes without a proper license The Insurance Regulator has voiced his concerns about such organizations operating insurance schemes without a proper license Some of these schemes have faced serious problems due to accumulation of claims after the Tsunami Some of these schemes have faced serious problems due to accumulation of claims after the Tsunami Informal sector offering Microinsurance

27 Till recently the Regulations did not provide institutional agencies and proposals were made to allow these informal organizations to act as Agents to registered insurance companies rather than operate on their own, illegally Till recently the Regulations did not provide institutional agencies and proposals were made to allow these informal organizations to act as Agents to registered insurance companies rather than operate on their own, illegally There is a Microfinance Institutions Act in draft stage which will provide provisions for licensing, regulating and supervision of institutions carrying on Microfinance activities There is a Microfinance Institutions Act in draft stage which will provide provisions for licensing, regulating and supervision of institutions carrying on Microfinance activities According to the proposed Act, Micro-credit Agencies cannot operate any insurance scheme without obtaining a license from the Insurance Board of Sri Lanka. According to the proposed Act, Micro-credit Agencies cannot operate any insurance scheme without obtaining a license from the Insurance Board of Sri Lanka. Informal sector offering Microinsurance

28 There are 12 composite insurance companies, three specialized life insurance companies and five specialized non life companies operating in the market There are 12 composite insurance companies, three specialized life insurance companies and five specialized non life companies operating in the market One composite company is a takaful operator One composite company is a takaful operator There are five multi–national companies operating in the country There are five multi–national companies operating in the country Companies offer various microinsurance products but only four companies have made a significant impact Companies offer various microinsurance products but only four companies have made a significant impact They are Ceylinco Insurance, HNB Assurance, Sanasa Insurance, and Co-operative Insurance They are Ceylinco Insurance, HNB Assurance, Sanasa Insurance, and Co-operative Insurance Private sector offering Microinsurance

29 The insurance schemes offered by the insurance companies are The insurance schemes offered by the insurance companies are –Loan protection schemes –Schemes covering life and funeral expenses –Insurance attached to savings accounts –Personal accident and health insurance –Insurance packages to farmers/fishermen –Insurance packages for house wives and teachers –Insurance packages for women –Special packages for self-employed persons Private sector offering Microinsurance

30 Benefits under schemes offered by insurance companies Benefits under schemes offered by insurance companies –Death and permanent disabilities –Partial disabilities –Funeral expenses –Payment of loan balances –Loss of yield –Loss of fishing boats and farming equipment –Loss of or damage to crop/livestock –Loss of income due to permanent disability –Loss of income due to damage to property by natural perils –Damage to house Private sector offering Microinsurance

31 Some products offered by Insurance Companies Co-operative Insurance Company Offered a product targeting the Tsunami affected families Premium is paid by donor agencies Policy period is for 5 years Coverage Personal Accident benefit for the Insured Funeral expenses for the family members Damage for the reconstructed house and contents against natural perils Product is initiated and promoted by a government authority called RADA (Reconstruction and Development Authority)

32 Some products offered by Insurance Companies HNB Assurance Limited Offers Microinsurance products for the micro credit customers of their sister bank 50% of the premium is funded by the bank Coverage Loan protection against death, permanent disability, total partial disability and sickness Life cover for the bread winner and spouse Health insurance for the family Funeral benefits for the family Property insurance with natural perils HNB Assurance also works with SEEDS

33 Some products offered by Insurance Companies Sanasa Insurance Company This Company was formed by Sanasa Federation which This Company was formed by Sanasa Federation which has more than 8,000 Sanasa Societies throughout the country. The total membership of Sanasa Societies exceed 1 Mn people The company offers : The company offers : Loan protection scheme for the members of the Loan protection scheme for the members of the Sanasa Societies. Sanasa Societies. Weather Indexed, Crop Insurance for paddy and Weather Indexed, Crop Insurance for paddy and tea. tea. Crop Insurance for limited commercial crops Crop Insurance for limited commercial crops

34 Some products offered by Insurance Companies Sanasa Insurance Company Funeral Expenses Insurance for the Death Benevolent Societies Funeral Expenses Insurance for the Death Benevolent Societies Health Insurance for family Unit for low income families Health Insurance for family Unit for low income families Exclusive Insurance plan for women Exclusive Insurance plan for women Life Insurance product develop for low income families Life Insurance product develop for low income families

35 Some products offered by Insurance Companies AVIVA NDB Insurance Company AVIVA NDB Insurance Company They are offering a product with the following benefits where they collect the premium on a monthly basis which is Rs. 100/- per month (less than one US$) They are offering a product with the following benefits where they collect the premium on a monthly basis which is Rs. 100/- per month (less than one US$) Personal Accident Death Benefit Rs. 75,000/- Personal Accident Death Benefit Rs. 75,000/- Funeral Expenses Funeral Expenses Hospital Cash benefits after 48 hours Hospital Cash benefits after 48 hours There are promoting the product to Estate workers through a NGO working in grass route level. There are promoting the product to Estate workers through a NGO working in grass route level. They are also promoting the product to farmers through a large fertilizer distributor. They are also promoting the product to farmers through a large fertilizer distributor.

36 Ceylinco Farmers Insurance Package Individual farmers are entitled to obtain the product Individual farmers are entitled to obtain the product Business is channeled through Farmers Societies and Financial institutions offering Crop/Livestock Loans including Commercial Banks Business is channeled through Farmers Societies and Financial institutions offering Crop/Livestock Loans including Commercial Banks Product coverage Product coverage Crop Insurance Crop Insurance Insurance for Livestock Insurance for Livestock Personal Accident Insurance for Farmer and spouse Personal Accident Insurance for Farmer and spouse Funeral expenses for family members Funeral expenses for family members Insurance for farming equipment excluding Tractors Insurance for farming equipment excluding Tractors which could be covered under Motor insurance which could be covered under Motor insurance Hospital Cash Hospital Cash Some products offered by Ceylinco Insurance

37 Some Products offered by Ceylinco Insurance Ceylinco Livestock Insurance Individual Livestock farmers are entitled to obtain the product Individual Livestock farmers are entitled to obtain the product Business is channeled through Farmers Societies and Financial institutions offering Livestock Loans including Commercial Banks Business is channeled through Farmers Societies and Financial institutions offering Livestock Loans including Commercial Banks Product Coverage Product Coverage Livestock Insurance Livestock Insurance Personal Accident for farmer and the spouse Personal Accident for farmer and the spouse Funeral expenses for the family Funeral expenses for the family Equipment required for the trade Equipment required for the trade Hospital cash Hospital cash

38 Some Products offered by Ceylinco Insurance Deewara Udana for Fishermen Product is designed for Fishermen Product is designed for Fishermen Business is channeled through Fisheries Societies and Financial institutions offering loans to Fishermen including Commercial Banks Business is channeled through Fisheries Societies and Financial institutions offering loans to Fishermen including Commercial Banks Product Coverage Product Coverage Personal Accident for fisherman Personal Accident for fisherman Funeral expenses for the family Funeral expenses for the family Allowance for the family due to disappearance of Allowance for the family due to disappearance of fisherman upto 12 months fisherman upto 12 months Allowance for school going children due to Allowance for school going children due to disappearance of fisherman till they complete secondary disappearance of fisherman till they complete secondary education education Hospital cash Hospital cash

39 Some Products offered by Ceylinco Insurance Ceylinco Guru Paura for Teachers Designed for school teachers Designed for school teachers Business channeled through schools, teachers associations and also through direct canvassing Business channeled through schools, teachers associations and also through direct canvassing Product coverage Product coverage Personal accident including temporary total disablement Personal accident including temporary total disablement First loss insurance due to damage caused for the First loss insurance due to damage caused for the house due to house due to natural perils natural perils Funeral expenses Funeral expenses

40 Some Products offered by Ceylinco Insurance Ceylinco Support Line Designed for self-employed individuals Designed for self-employed individuals Personal Accident Insurance Personal Accident Insurance Life Insurance cover for one year Life Insurance cover for one year Funeral expenses for family Funeral expenses for family Allowance for educational expenses for children in the case of death of the insured upto the time they complete their secondary education. Allowance for educational expenses for children in the case of death of the insured upto the time they complete their secondary education. Loss of income due to insured being hospitalized or in the case of property use for business is damaged due to natural perils Loss of income due to insured being hospitalized or in the case of property use for business is damaged due to natural perils

41 Some Products offered by Ceylinco Insurance Ceylinco Pradeepa Insurance Term life insurance cover for 5 years Term life insurance cover for 5 years Single premium payment Single premium payment Cover is only for Rs. 100,000 (US$. 1,000) which could be increased to Rs. 400,000 Cover is only for Rs. 100,000 (US$. 1,000) which could be increased to Rs. 400,000 Offered to persons between the age 18 to 50 Offered to persons between the age 18 to 50 The policy could be issued over the counter The policy could be issued over the counter No medical examinations No medical examinations Simple proposal form Simple proposal form Sold by the Life Insurance Advisors Sold by the Life Insurance Advisors Premium varies with the age at entry, but between US$ 15 to US$. 35 Premium varies with the age at entry, but between US$ 15 to US$. 35

42 Thank You


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