Case Study Implementation of credit life in Senegal Mathieu Dubreuil, PlaNet Guarantee

Microfinance Institutions & other delivery channels Considerable knowledge of low-income populations Not able to bear insurance risks Standard insurance and reinsurance companies No knowledge and limited access to low-income populations Able to provide insurance activities Specialized Microinsurance broker & Third Party Administrator PlaNet Guarantee acts as a link between Microfinance Institutions, insurers and reinsurers

Credit life In Senegal  4 stakeholders : Reinsurance pool (Hannover Re, Mapfre Re & CCR), Local Insurer (Allianz Africa), MFIs (6 in Senegal) & PlaNet Guarantee  The product : basic credit life scheme  Death (illness, accident) & total & permanent disability (accident)  Coverage from 100% to 200% of the initial capital  Max amount without medical questionnaire : € (48 months).  Compulsory membership for borrowers  In case of claim : repayment to the MFI  Keeps the outstanding capital  Transfers to the family the amount already repaid

Credit life In Senegal : Implementation  Subscription of the policy between Allianz & the MFI  Management proxy signature between PlaNet Guarantee & the MFI  Fees : 27%, including  MFI : 7% of total premium collected + 80% profit sharing on net income  Training process :  1 training session to the management & some branch managers. Then the MFI shall spread the information & the documents.  Support material : information form, subscription guide, training support, leaflets, posters  Management process :  Each month, the MFI sends the list of disbursed credits with basic information & list of claims  PG control and sends the call for premium and checks the amount transferred on the insurer’s account  In case of claim :  few documents to send (scan of : ID, loan contract, death certificate, claim settlement form)  1st level of control by PlaNet Guarantee and payment by the insurer.

Credit life In Senegal  Some figures  17 MFIs signed the credit life policy in 9 countries / 7 in Senegal  people insured since 2007 / in Senegal  € of premiums / € in Senegal  Claims : most contracts have no claims.  Egypt : 1 contract with C/P > 100% in % 2010  Madagascar : 1 contract with C/P = 31%  Senegal : 1 contract with C/P = 9% in 2009 / 2% in 2010

Credit life In Senegal : Lessons learnt  Training  We noticed a very low level of information in the staff of MFIs  A much lower level of awareness in the insured population (also on the price)  Absence of support materials in branches  Sent someone to inform, train and provide the documents  Membership process  ID issue  Difficulty to have the information on every members of groups  Files transfer : technological & costs issues  The president of the group attests the age of the member  Test of a new MIS & changes in the MFIs’ loan contract / MIS  Complete change of management process

Credit life In Senegal : Lessons learnt  Claim settlement process  The MFIs find it difficult to gather all necessary documents. Long claim settlement process  We notice real mistakes in the information sent by the MFI in the membership file.  Waiting period : example in Madagascar  Weaknesses of the product  MFIs are not necessarily the best distribution channel for microinsurance  Credit life is a basic microinsurance scheme. How can we cover new types of risks without being a heavy burden for clients?  Interest for MFIs to distribute a product they can manage themselves?  Technical capacities to distribute basic schemes  What happens if the MFI decides to stop paying the premium? What if it has no financial capacity to disburse credit?  What if the MFI decides to work with several insurers at the same time on the same product?