Microinsurance Providing Meaningful

Protection

Microinsurance Providing Meaningful

Protection John BalmforthChairman

International Cooperative and Mutual Insurance Federation

2nd Annual General Insurance Exchange19-21 March 2013Sydney

John BalmforthChairman

International Cooperative and Mutual Insurance Federation

2nd Annual General Insurance Exchange19-21 March 2013Sydney

ICMIF Represents:ICMIF Represents:

Direct members• 219 members in 72 countries • Represents 6.1% of world’s insurance market by premiums• USD 241 billion in premiums• USD 1.35 trillion in assets• Over 300,000 staff employed by members

Indirect members• Includes members of mutual trade associations• 2,906 members• With USD 620 billion in premiums • Represents 14.5% of the world’s insurance market• Almost one third of membership involved in microinsurance and

Takaful

Direct members• 219 members in 72 countries • Represents 6.1% of world’s insurance market by premiums• USD 241 billion in premiums• USD 1.35 trillion in assets• Over 300,000 staff employed by members

Indirect members• Includes members of mutual trade associations• 2,906 members• With USD 620 billion in premiums • Represents 14.5% of the world’s insurance market• Almost one third of membership involved in microinsurance and

Takaful

Insurance and Poverty AlleviationInsurance and Poverty Alleviation

“The poorest citizens of the poorest countries are typically exposed to the greatest risks. Earthquakes, floods, drought, disease, crime all tend to hit the poor hardest. Vulnerability and poverty go hand in hand, but microinsurance holds out the promise of breaking a part of the cycle that ties them together.”

Jonathan Morduch 2006

“Microinsurance is the protection of low-income people against specificperils in exchange for regular premium payments proportionate to thelikelihood and cost of the risk involved”

Protecting the Poor: a microinsurance compendium (Volume II) 2012

“The term “microinsurance” typically refers to adapting insurance servicesmainly to clients with low income and no access to mainstream insuranceservices.”

Microinsurance Network “Microinsurance is insurance that is accessed by low-income population,provided by a variety of different entities, but run in accordance with generallyaccepted insurance practices (which should include the Insurance CorePrinciples) “

Issues in Regulation & Supervision of Microinsurance, IAIS papers (2007)

“Microinsurance is the protection of low-income people against specificperils in exchange for regular premium payments proportionate to thelikelihood and cost of the risk involved”

Protecting the Poor: a microinsurance compendium (Volume II) 2012

“The term “microinsurance” typically refers to adapting insurance servicesmainly to clients with low income and no access to mainstream insuranceservices.”

Microinsurance Network “Microinsurance is insurance that is accessed by low-income population,provided by a variety of different entities, but run in accordance with generallyaccepted insurance practices (which should include the Insurance CorePrinciples) “

Issues in Regulation & Supervision of Microinsurance, IAIS papers (2007)

What is Microinsurance?What is Microinsurance?

Key Characteristics of Microinsurance

Key Characteristics of Microinsurance

• Low Income People• Specific Perils• Limited Access to Mainstream Insurance Services• All Business Lines• Affordable – premiums commensurate with income• Various providers• Variety of channels• Formal (Regulated) and Informal (Unregulated)

Markets

• Low Income People• Specific Perils• Limited Access to Mainstream Insurance Services• All Business Lines• Affordable – premiums commensurate with income• Various providers• Variety of channels• Formal (Regulated) and Informal (Unregulated)

Markets

Who is insured by whom?

Source: Craig Churchill

Lack of Insurance in Emerging Markets

Lack of Insurance in Emerging Markets

• The cooperative and mutual sector• Microinsurance through cooperatives• Issues for regulators• Case study: Mutual microinsurance in practice

• The cooperative and mutual sector• Microinsurance through cooperatives• Issues for regulators• Case study: Mutual microinsurance in practice

Microinsurance Potential MarketMicroinsurance Potential Market

• Assume – Income USD 1.25 to USD 8.0 per day• 2.5 Billion People• 3 to 4 Billion Policies• USD 30 to USD 50 Billion Premiums• Growth 10%pa

• Assume – Income USD 1.25 to USD 8.0 per day• 2.5 Billion People• 3 to 4 Billion Policies• USD 30 to USD 50 Billion Premiums• Growth 10%pa

Is Microinsurance Working?Is Microinsurance Working?

• 500 million currently covered• 78 Million in 100 Countries in 2007• 80% Asia• 15% Latin America• 5% Africa• India 300 million• China 40 million

• 500 million currently covered• 78 Million in 100 Countries in 2007• 80% Asia• 15% Latin America• 5% Africa• India 300 million• China 40 million

Is Microinsurance Working?Is Microinsurance Working?

• Growth driven by commercial insurance sector• Support from donors and governments• Focus on numbers• Recognition Microinsurance needs to be client

focused

• Growth driven by commercial insurance sector• Support from donors and governments• Focus on numbers• Recognition Microinsurance needs to be client

focused

Microinsurance ChallengesMicroinsurance Challenges• Coverage• Regulation• Moral hazard and Fraud• Adverse selection• Education and trust• Technical expertise• Affordability• Retention• Sustainability• Penetration

• Coverage• Regulation• Moral hazard and Fraud• Adverse selection• Education and trust• Technical expertise• Affordability• Retention• Sustainability• Penetration

‘The success of microinsurance should not be assessed by measuring uptake, but by measuring actual impact’

Stefan Dercon, DFID

‘To succeed in this market, it is essential that insurers change their attitude and adopt an open mind to the particular needs and characteristics of the market.’

Accenture ‘Microinsurance providers need to understand client needs and

preferences in order to improve their products and processes, and hence improve client value’

Microinsurance Innovation Facility

‘Mutual's and cooperatives should be better recognised as a distinct and important form of organisation for insurance provision.’

Arup Chatterjee,

ADB

‘The success of microinsurance should not be assessed by measuring uptake, but by measuring actual impact’

Stefan Dercon, DFID

‘To succeed in this market, it is essential that insurers change their attitude and adopt an open mind to the particular needs and characteristics of the market.’

Accenture ‘Microinsurance providers need to understand client needs and

preferences in order to improve their products and processes, and hence improve client value’

Microinsurance Innovation Facility

‘Mutual's and cooperatives should be better recognised as a distinct and important form of organisation for insurance provision.’

Arup Chatterjee,

ADB

Key Attributes for SuccessKey Attributes for Success

• Understanding and responding to customers needs

• Value for money• Customer service and claims management• Policyholder = member• Instilling mutual values in staff• Prevention and risk management• Community concern• Financial inclusion

• Understanding and responding to customers needs

• Value for money• Customer service and claims management• Policyholder = member• Instilling mutual values in staff• Prevention and risk management• Community concern• Financial inclusion

Mutual/Cooperative Values Mutual/Cooperative Values

• Self-help, self-responsibility• Democracy, equality, equity• Solidarity• Honesty, openness• Social responsibility, caring for others

• Self-help, self-responsibility• Democracy, equality, equity• Solidarity• Honesty, openness• Social responsibility, caring for others

Source: International Cooperative Alliance (ICA)

Mutual/Cooperative Advantage in Microinsurance

Mutual/Cooperative Advantage in Microinsurance

• History of organising the poor• Members Interests - by the members • Trust • Ownership and loyalty• Peer pressure• Surplus reinvested or redistributed• Inclusive• Work together for the common good

• History of organising the poor• Members Interests - by the members • Trust • Ownership and loyalty• Peer pressure• Surplus reinvested or redistributed• Inclusive• Work together for the common good

Challenges for Mutual/Cooperative

Microinsurance

Challenges for Mutual/Cooperative

Microinsurance• Transitioning to formalisation – Regulatory

Compliance• Governance• Insurance expertise• Technical and financial capability• Working in isolation• Lack of awareness from stakeholders

• Transitioning to formalisation – Regulatory Compliance

• Governance• Insurance expertise• Technical and financial capability• Working in isolation• Lack of awareness from stakeholders

Does Mutual/Cooperative Ownership Work in Emerging

Markets?

Does Mutual/Cooperative Ownership Work in Emerging

Markets?• ICMIF Members in emerging markets:• Premiums 2011 up 15.5% on 2010• Asian members up 20.7%• Latin American members up 15.6%• Pre –tax profits USD 447m up 22%• Assets USD10bn -2011, USD 5.8bn - 2007

• ICMIF Members in emerging markets:• Premiums 2011 up 15.5% on 2010• Asian members up 20.7%• Latin American members up 15.6%• Pre –tax profits USD 447m up 22%• Assets USD10bn -2011, USD 5.8bn - 2007

ICMIF Mentoring MicroinsurersICMIF Mentoring Microinsurers

• Development function established in 1963• Annual Development Network Seminar• Web site www.microinsurance.coop• Microinsurance simulation• Participant in global forums• Development arm -Allnations -USD1.5m

invested in developing mutual's/coops.

• Development function established in 1963• Annual Development Network Seminar• Web site www.microinsurance.coop• Microinsurance simulation• Participant in global forums• Development arm -Allnations -USD1.5m

invested in developing mutual's/coops.

Uplift Mutuals, IndiaGrowing from the GrassrootsUplift Mutuals, India

Growing from the Grassroots

ICMIF MicroinsurersICMIF Microinsurers

• CARD MBA

• CIC Kenya

• Uplift Health Mutuals

• CARD MBA

• CIC Kenya

• Uplift Health Mutuals

Summary Summary

• Microinsurance• Risk Protection for the Poor• Integral tool in Poverty Alleviation• Potential Market over 2.5 billion people

• Client Centred Approach Provides Real Value and Impact

• Mutual/ Cooperative model highly successful• Regulation a Key Issue• Microinsurance Works

• Microinsurance• Risk Protection for the Poor• Integral tool in Poverty Alleviation• Potential Market over 2.5 billion people

• Client Centred Approach Provides Real Value and Impact

• Mutual/ Cooperative model highly successful• Regulation a Key Issue• Microinsurance Works

A Question?A Question?

Is microinsurance a solution to risk management for

Australasia’s poor?

Is microinsurance a solution to risk management for

Australasia’s poor?

ICMIFA global reach for local

strength

ICMIFA global reach for local

strengthThank you

www.icmif.org

Thank you

www.icmif.org