1. Microinsurance Trends Craig Churchill Microinsurance Innovation Facility International Labour Organization October 2010 A member of the

2. Microinsurance is… “…not a specific product or product line. It is also not limited to a specific provider type. Microinsurance is the provision of cover to a specific market segment, i.e., low-income persons.” ~ IAIS Issues Paper (2007)

3. Break the cycle of poverty Vulnerability to risk Poverty Provide a safety net to complement efforts to create jobs and boost incomes.

4. 1) Insurance companies are increasingly interested in serving low-income households Seven microinsurance trends

5. International insurance players in microinsurance

6. 2) Microinsurance is emerging out of the shadow of microfinance Seven microinsurance trends

7. MFIs and MI A microfinance perspective on microinsurance A microinsurance perspective on microfinance (institutions) Another financial product to offer low-income clients Just another delivery channel for microinsurance

8. MFIs and MI MFIs remain a critical distribution channel for microinsurance but… They need to do a better job of intermediating – of negotiating better value products that benefit their clients… Not just offering insurance to generate commission revenue (or kickbacks) Microfinance institutions

9. 3) Greater variety of distribution channels are being used Seven microinsurance trends

10. Innovative Distribution Channels Key characteristics of effective distribution channels: Has an existing financial transaction with large numbers of low-income persons Has their trust Can benefit from the provision of insurance

11. Innovative Distribution Channels  Peruvian insurer is collaborating with national consumers’ association for rural water rights to develop insurance products for farming families, with premium payments collected with water bills  In South Africa, launching a property insurance product sold through retailers and suppliers of cell phone airtime  Sells funeral insurance to the supporters of the Kaiser Chiefs football club  Distributing life insurance and savings product for the families of Filipino migrant workers through churches and schools

12. 4) Product innovations are taking place to provide more valuable coverage Seven microinsurance trends

13. Microinsurance product irony Credit life Funeral insurance Term life/Personal accident Property insurance Endowment life Agriculture Health Difficulty Success Products in greatest demand are least available

14. Phase I: Mandatory; Credit linked (MFIs) Simple products: Life, funeral Easy to administer Phase II: Greater product sophistication; voluntary New distribution channels Increasing benefits, choice, outreach Phase III: Use of technology More complex products: health, agriculture, composite Multiple partners (e.g. hospitals, mobile phone provider, public- private partnerships) Product Evolution

15. Product innovation: Life  A simple, tangible savings and insurance product sold through small retailers  Includes death and accident coverage based on account balance, irregular savings as low as USD 0.22  Does not lapse

16. Product innovations: Health  Out-patient cover using hand held terminals for tele-medicine and insurance (India)

17. Product innovations: Livestock Livestock insurance testing RFIDs to reduce fraud Satellite index of vegetative cover for livestock insurance

18. Need to make insurance products more tangible Packaging so that customers can hold on to something Benefits in kind (e.g health and funeral services, seeds and fertilizer, payment of bills, food baskets) Providing “benefits” even if insured event does not occur (e.g. mosquito nets, SMS weather reports, outpatient counseling)

19. 5) Experimentation with consumer education tools and methodologies is beginning Seven microinsurance trends

20. Consumer education Needs to be a continuous process using a variety of interventions Focused on risk management, not just insurance What is the relationship between consumer education and marketing? If consumer education is a public good, who should be responsible for providing it? Need to assess costs and benefits of education efforts

21. 6) Recognition that there are limits to the BOP business model, consideration for public- private partnerships Seven microinsurance trends

22. PPP in India Government subsidized hospitalization scheme (RSBY) for the poor Insurers compete for the contracts to administer the schemes on a state by state basis Some microinsurers are offering supplementary benefits to complement the hospitalization cover Reaches nearly 100 million people

23. PPP in Kenya Bima ya Jamii: “Basket” product with the National Hospitalisation Insurance Fund (NHIF) Family coverage: In-patient health, AD&D, loss of income due to accident, funeral expenses Selling through MFIs, SACCOs and other cooperatives to reach workers in the informal economy

24. 7) Policymakers, regulators are showing a greater interest

25. Policy engagement Research-based approach to facilitate an industry dialogue to promote financial inclusion Analysis of supply, demand and regulatory issues Co-sponsored by the global standard setting body for insurance Currently active in more than 10 jurisdictions

26. Conclusion: Missing Trend Client Value Not seeing enough concern for the provision of value to customers Challenge: How can we ensure that insurance benefits the poor? How can we create a culture of insurance among low-income households?

27. Thank you! Craig Churchill churchill@ilo.org Tel +41 22 799 6242 www.ilo.org/microinsurance www.microinsurancenetwork.org A member of the