1. MATS SCHOOL OF BUSINESS, BANGALORE1 MICROINSURANCE a presentation at the 5 th Annual Microfinance Conference and Entrepreneurship Award For the Central Bank of Nigeria by: Mosleh U Ahmed FCA GIZ Consultant mosleh.ahmed@btinternet.com

2. MATS SCHOOL OF BUSINESS, BANGALORE2 Outline Microinsurance basics The demand side of microinsurance The supply side of microinsurance Some innovative microinsurance programmes A few cautions World Bank/GIZ Microinsurance Survey in Lagos and Kano Regulatory issues

3. MATS SCHOOL OF BUSINESS, BANGALORE3 Microinsurance is not…….. Charity Prevents risk Provided by only small insurance companies Down-scaled existing product A “MAGIC BULLET” and a cure for all problems of the poor people

4. MATS SCHOOL OF BUSINESS, BANGALORE4 Microinsurance is………. Risk management tool Loss protection mechanism

5. 5 MICROINSURANCE Microsavings Microcredit Microfinance Emergence of microinsurance is an important development within the field of microfinance and challenges the widely held belief of the "non-insurability" of the poor. Introduction to Microinsurance

6. 6 Microinsurance refers to the insurance products that are designed to be beneficial and affordable to low-income individuals or groups. Microinsurance can help to improve a person’s quality of life by allowing that person to better manage potential problems while empowering that person to be more proactive as to the future. Defining Microinsurance

7. 7  Insurance with small benefits.  Insurance with:  Simple, easily understood contracts;  Little underwriting;  Few if any exclusions;  Simple claim process while still controlling for fraud;  Innovative premium collection’ and policy delivery models;  Multi-task intermediaries;  Often community or group pricing;  Insurance for low-income people.  Insurance involving low levels of premiums.

8. 8 Microinsurance Basics  The microinsurance business model is ‘social’ business where solving social problems is motivating the business instead of maximizing profits.  Microinsurance products typically have a low return on equity  It is a contract to prevent low income people from facing severe financial problems when faced with unexpected risks events.

9. 9 Microinsurance Basics  The government or the donors would not subsidise any part of the premium.  In exchange for insurance protection, the low- income people pay a small premium.

10. MATS SCHOOL OF BUSINESS, BANGALORE10 Risk Pooling Risk Pooling is bringing together resources from a large number of people to share in the losses of a few In case of an MFI the cost to the insured is the average loss experienced by its “risk pool” In case of an insurance company the cost to the insured is the premium calculated actuarially for its “risk pool”

11. MATS SCHOOL OF BUSINESS, BANGALORE11 Why Microinsurance Microfinance helps people to move out of poverty: Credit Savings Leasing Microinsurance helps people to protect the gains they make through microfinance

12. MATS SCHOOL OF BUSINESS, BANGALORE12 Life Cycle Need of the Poor Birth (C, H, I, S) Marriage (C, S, Sc) Death (C,I, Sc) Training & Education (E, Sc) Health (C,S,I) Fixed Asset Acquisition (C) Old Age (H, I, S, Sc) Asset Protection (I) Religious Ceremony (C,S, Sc) Working Capital (C) Investments (S) C = Credit; E = Education; H = Healthcare; I = Insurance; S = Savings; Sc = Social

13. MATS SCHOOL OF BUSINESS, BANGALORE13 Destitute Loan Cycles and Impact of Losses Economic Levels Wealthy Non-poor Moderate poor Poverty Line Impact of Microcredit and Losses Extreme poor Vulnerable non-poor

14. 14

15. MATS SCHOOL OF BUSINESS, BANGALORE15 Destitute Extreme Poor Moderate Poor P O V E R T Y L I N E Vulnerable Non - Poor Non - PoorWealthy Not insured by anyone Micro- Insurance Clients Microinsurance Clients Traditional Insurance Clients

16. MATS SCHOOL OF BUSINESS, BANGALORE16 Delivery Channels Insurance Companies MFIs NBFIs Banks Insurance Agents Self-help Groups Low-income Households Field Workers Health Workers Volunteers Cr. Unions On-line, ATM Mobile Phones Employees Existing and new channels of delivery for microinsurance products Adopted from a presentation made by Dr. B Helms, CGAP

17. MATS SCHOOL OF BUSINESS, BANGALORE17 Different Microinsurance Models Community-Based Model (UPLIFT, India) Owned and Managed by Members Insurer/Limited Provider Model (GRET, Cambodia) GRET insures, and provides primary medical care Insurer/Full Provider Model (Grameen, Bangladesh) MFI is the insurer and owns healthcare clinics Bundled Insurance Package (SEWA, India) Partnership Model (AIG-FINCA, Uganda) Full Insurer Model (Delta Life, Bangladesh) PPP Model (GOP, Insurer and MFI, Pakistan)

18. 18 Different Microinsurance Products Life/Endowment/Credit Life India, Bangladesh, Sri Lanka, Nepal, Vietnam, Pakistan, Indonesia, Laos, East Africa, South Africa, West Africa Colombia, Guatemala, Mexico, Nicaragua Health/Critical Illness India, Bangladesh, Philippines, Cambodia, China East Africa, South Africa, West Africa Colombia, Mexico Georgia, Russia Group Personal Accident West Africa Unemployment East Africa Crop/Weather India East Africa, North Africa Mexico, Nicaragua Property/Livestock/Assets India, Mongolia, Nepal East Africa Albania Funeral Insurance East Africa, South Africa, West Africa Colombia, Mexico Bundled Insurance Package India Colombia Rural Insurance Schemes India Flood Insurance China, Indonesia, Vietnam

19. MATS SCHOOL OF BUSINESS, BANGALORE19 Relative Complexity of Microinsurance Products  Crop/Weather Insurance  Integrated Insurance Packages  Health/Disability Insurance  Annuities/Endowment  Property/Livestock Insurance  Indemnity/Personal Accident  Life/Credit Life Insurance More Complex More Simple

20. MATS SCHOOL OF BUSINESS, BANGALORE20 Vimo SEWA – INDIA a Bundled Insurance Package SEWA offers three different bundled insurance packages Covers life, healthcare and loss of assets Premiums are paid annually or through fixed deposit account

21. MATS SCHOOL OF BUSINESS, BANGALORE21 Vimo SEWA – an Integrated Insurance Package SPECIAL BENEFITS FOR FIXED DEPOSIT PREMIUM MEMBERS (Eligible after 1 year of membership) Maternity: $ 20.0 Dentures: $ 20.0 Hearing Aid: $ 20.0 Eye glasses : $ 10.0

22. MATS SCHOOL OF BUSINESS, BANGALORE22 Life Insurance with Flexibility Amparar Policy by La Equidad, Colombia Monthly premium US$ 1.00; basic coverage US$ 1,250.00 50% payout for treatment in case policy- holder contracts incurable disease while insured After policyholder’s death Child education expenses for 2 years Medical expense for dependents Monthly food vouchers Utility bills

23. MATS SCHOOL OF BUSINESS, BANGALORE23 Pre-paid Health Card – JAMII BORA In-patient Health Insurance with Photo ID in Kenya Mandatory for all borrowers Costs US$ 10 per year Covers borrower and up to 6 family members Named hospitals/clinics Up to secondary level treatment and surgeries Medicines and lab tests covered

24. MATS SCHOOL OF BUSINESS, BANGALORE24 Objectives: To identify the potential microinsurance clients’: Socioeconomic status Perception and understanding of insurance risks Risk mitigation measures Income and expenditure patterns Affordability of insurance premiums Constraints on access to microinsurance services Supply side Delivery channels World Bank/GIZ Microinsurance Survey in Lagos and Kano

25. MATS SCHOOL OF BUSINESS, BANGALORE25  Quantitative and qualitative survey carried out by Centre for Microenterprise Development (CMD)  604 urban households in Lagos state  405 rural households in Kano state  4 FGDs in Lagos state  5 FGDs in Kano state Methodology

26. MATS SCHOOL OF BUSINESS, BANGALORE26 Survey area LAGOS 604 Households KANO 405 Households

27. MATS SCHOOL OF BUSINESS, BANGALORE27 Sample distribution - Lagos № Survey areasNo of household 1Agege-Iyanpaja-Ogba119 2Badagry20 3Ikorodu71 4Ikeja65 5Ketu43 6Mushin28 7Orile Iganmu44 8Oshodi93 9Oworoshoki54 10Surulere68 TOTAL 604

28. MATS SCHOOL OF BUSINESS, BANGALORE28 Sample distribution - Kano № Survey areasNo of household 1Zango45 2Gwale70 3Kano Municipal5 4Nassarawa17 5Fagge22 6Dala22 7Kawo76 8Kabuga28 9Kofar Nassarawa16 10Ungogo1 Sub-total 302

29. MATS SCHOOL OF BUSINESS, BANGALORE29 Sample distribution - Kano № Survey areas No of household 11Ungwar Uku22 12Mariri27 13Tarauni25 14Badawa8 15Kofar Mazugal1 16Tudu Wada3 17Wudil6 18Danbata7 19Jambulo4 TOTAL405

30. MATS SCHOOL OF BUSINESS, BANGALORE30 Demography of households CriteriaHousehold HeadsLagos %Kano % Gender Male94.886.9 Female5.213.1 Marital statusSingle24.011.1 Married/with partner68.985.4 Separated/divorced3.31.5 Widowed3.82.0 Education levelNo schooling6.614.3 Primary5.316.8 Incomplete Secondary6.69.9 Completed Secondary31.326.7 Vocational/Special Secondary20.74.2 Higher29.528.1

31. MATS SCHOOL OF BUSINESS, BANGALORE31 Demography of households (continued) Criteria Household Heads Lagos % Kano % Age18 to 3434.435.3 35 to 4436.430.1 45 to 6525.831.9 Over 653.42.7 DisabilityHousehold heads0.73.2 All members0.61.6 Chronic illnessHousehold heads17.432.6 All members25.430.9 Household size4 or less62.032.5 518.023.9 More than 520.043.6

32. MATS SCHOOL OF BUSINESS, BANGALORE32 Source of income Lagos %Kano % Employed Permanent Temporary 35.7 29.4 6.3 38.1 30.9 7.2 Self employed Trade Activities Skilled Labour Agriculture Services Livestock Manufacturing 53.8 41.3 5.7 2.4 3.4 0.6 0.4 57.4 36.5 6.2 9.3 2.6 2.3 0.5 Pensioners1.7 1.9 Social benefits/grants0.6 1.2 Remittances External Internal 8.4 4.4 4.0 14 0.7

33. MATS SCHOOL OF BUSINESS, BANGALORE33 Poverty level – by poverty scoring Lagos %Kano % Extreme poor -2.0 Poor 13.444.4 Vulnerable poor 66.652.4 Vulnerable non-poor 20.01.2

34. MATS SCHOOL OF BUSINESS, BANGALORE34 Monthly earning MONTHLY HOUSEHOLD INCOME Lagos %Kano % Below N 20,000 6.58.4 N 20,000 to N 30,000 5.340.8 N 30,001 to N 40,000 1.219.5 N 40,001 and N 50,000 2.013.8 Above N 50,000 4.017.5 Did not answer/could not decide 81.0-

35. MATS SCHOOL OF BUSINESS, BANGALORE35 Monthly disposable income MONTHLY DISPOSABLE INCOME Lagos %Kano % Below N 1,000 0.79.0 N 1,001 to N 2,000 1.310.9 N 2,001 to N 3,000 4.019.3 N 3,001 to N 4,000 2.511.1 N 4,001 to N 5,000 1.86.4 N 5,001 to N 6,000 1.22.2 N 6,001 to N 7,000 1.23.7 N 7,001 to N 8,000 0.54.0 N 8,001 to N 9,000 0.54.2 N 9,001 to N 10,000 0.53.0 Above N 10,000 4.826.2

36. MATS SCHOOL OF BUSINESS, BANGALORE36 Risk events faced – in past 3 years

37. MATS SCHOOL OF BUSINESS, BANGALORE37 Risk events faced more than once – in past 3 years

38. MATS SCHOOL OF BUSINESS, BANGALORE38 Risks most difficult to cope with - in past 3 years

39. MATS SCHOOL OF BUSINESS, BANGALORE39 Minor illness – number of times faced in past 3 years

40. MATS SCHOOL OF BUSINESS, BANGALORE40 Source of funds - in past 3 years

41. MATS SCHOOL OF BUSINESS, BANGALORE41 Knowledge about insurance products

42. MATS SCHOOL OF BUSINESS, BANGALORE42 Name of Insurers KANO 1 Capital 2 Law and Rock 3 Finin 4 Nicon 5 Union 6 Trustway 7 Leadway 8 Access 9 Royal Exchange 10 AIICO LAGOS 1 AIICO 2 Niger Insurance 3 IGI 4 Leadway 5 Nicon 6 Standard Alliance 7 Royal Exchange 8 Oasis 9 Cornerstone 10 Great Nigeria

43. MATS SCHOOL OF BUSINESS, BANGALORE43 Did you have any insurance – in past 5 years INSURANCE USAGE IN PAST 5 YEARS 81.1 10.9 7.1 0.9 8.4 2.5 0.5 88.6 - 20.0 40.0 60.0 80.0 100.0 NoUsed to haveHave nowHard to say Lagos Kano

44. MATS SCHOOL OF BUSINESS, BANGALORE44 What type of insurance you had – in past 5 years

45. MATS SCHOOL OF BUSINESS, BANGALORE45 Which concept product will you buy - % LAGOS %KANO % Health73.269.6 Property25.831.4 Life29.114.6 Funeral 22.5 7.2

46. MATS SCHOOL OF BUSINESS, BANGALORE46 Priority

47. MATS SCHOOL OF BUSINESS, BANGALORE47 Preferred frequency of payment

48. MATS SCHOOL OF BUSINESS, BANGALORE48 Health insurance – how many people

49. MATS SCHOOL OF BUSINESS, BANGALORE49 Attitude towards insurance

50. MATS SCHOOL OF BUSINESS, BANGALORE50 Attitude towards insurance - Kano Never thought about insurance, would like to know more about insurance, does not know where to buy insurance Insurance too expensive, no trust in insurers, long and difficult to collect claims from insurance company Believes in the benefits of insurance Insurance is a waste of money

51. MATS SCHOOL OF BUSINESS, BANGALORE51 Attitude towards insurance - Lagos Insurance is a waste of money Insurance too expensive, no trust in insurers, long and difficult to collect claims from insurance company Believes in the benefits of insurance Never thought about insurance, would like to know more about insurance, does not know where to buy insurance Other reasons for not buying insurance

52. MATS SCHOOL OF BUSINESS, BANGALORE52 Market development projection

53. MATS SCHOOL OF BUSINESS, BANGALORE53 Regulatory issues Insurance regulations in Nigeria How regulations can help growth of microinsurance

54. MATS SCHOOL OF BUSINESS, BANGALORE54 Thank you… for the Central Bank of Nigeria Mosleh U Ahmed FCA GIZ Consultant Mosleh.ahmed@btinternet.com