Microinsurance Seminar, Karachi 28 Nov 2011 Eamon Kelly

Microinsurance is...? Client Value is...? 1.What is client value and ways to assess it 2.Value creation examples 3.Conclusion What about the Business Case...?

 Based on work completed by the Microinsurance Innovation Facility and my own experience  No perfect answer, most MI operators are still learning...

Key AspectConventional insuranceMicroinsurance Clients Relatively l ow risk environment Reasonable insurance culture Higher risk exposure/high vulnerability Weak or no insurance culture Distribution Channel Sold by licenced intermediaries directly to high/middle income or corporate clients Sold by non-traditional intermediaries to clients with little experience of insurance Policy Features Complex policy documents Many exclusions Simple language Few, if any, exclusions Group policies Premium Calculation & collection Often good statistical data Pricing often based on individual risk characteristics Monthly to yearly payments Little or no historical data Group pricing Very price sensitive market Frequent and irregular payments Enrolment process Often Voluntary Enrolment via brokers, sales agents Mix of mandatory or voluntary sometimes with government involvement Direct face to face enrolment Risk control Limited eligibility Significant documentation required Screenings, such as medical tests, may be required Broad eligibility or mandatory enrolment Limited but specific controls are in place Insurance risk included in premiums, rather than exclusions Claims process Complicated processes Extensive verification documentation Simple and fast procedures for small sums Efficient fraud control

1 Assessing client value

Product and process design How do products meet client needs in relation to alternatives? Demand What factors influence the choices of low- income households? Product use What is client satisfaction, loyalty and feedback to improve products? Impact To what extent and how microinsurance improves risk- management and reduces vulnerability? 6

accessiblesimple affordable responsive 7 appropriate

PRODUCT Coverage & sum assured Exclusions & waiting periods Eligibility criteria Value-added services ACCESS Choice and enrolment Information & understanding Premium payment method Proximity COST Premium to client income Premium to benefit/cost Other fees & costs Cost structure and controls EXPERIENCE Policy administration & tangibility Claims procedures Claims processing time Customer care 8 Client value assessment tool - PACE

1.1 Coverage, quality of service, exclusions and waiting periods 0.35 Covers appropriate risks from a client perspective Integrates appropriate riders to main cover Provides adequate service quality (for health) Offers simple cover without many exclusions Provides limited waiting period 1.2 Sum insured in relation to cost of risk 0.35 Pays out adequate amount in relation to cost of risk Does not put many sub-limits on specific covers 1.3 Eligibility criteria0.15 Is inclusive, does not exclude groups of people unintended Value-added services0.15 Offers non-insurance benefits Offers preventive health services (for health) Offers value-added agriculture services Triggers positive behaviour changes 9 Unpacking one dimension - Product

10 Spectrum of Client Value tools KPIs PACE Client Satisfaction Study Market Study Impact Study MILK Client Math

11 2 Value creation examples

12 PACE pilot testing Kenya composite CIC Pioneer Britak Jamii Bora NHIF India health ICICI Lombard – MG Swath Bima Yojna Yeshasvini Bharti/AXA - PWDS VimoSEWA Uplift RSBY Philippines life FICCO CARD MBA CLIMBS TSKI - Microensure

13 Uplift in India: case study  Expanding member benefits Hospitalization product changes Network of over 300 care providers providing care at negotiated rates Access to health initiatives To be sustainable with volumes and technology  Claims administration Education & empowerment versus timely payments  Product and performance improved over time Claim Rejection ratio has decreased over time to 2% Claims ratio increased to 70% Renewal ratio has increased over time to 70% Out of Pocket expenses have reduced over time Reduction in claim cost about 3 million rupees in 2010

14 Philippines: case study TSKI Product Cover Amount Raised Community Pricing Includes borrower and spouse Definition of dependents extended Exclusions => Increasing benefits Documents Required Improved product

 Many value creation opportunities, small improvements that can make a difference  Balancing trade offs in a continuous improvement process ◦ Cost vs Product, Access and Experience  Contextualizing client value  Product and/or market maturity matters! 15

Thank You Eamon Kelly