products that meet client needs Designing microinsurance Expanding Access to Insurance for the Poor Kampala, Uganda March 2009

Transcription

1 Designing microinsurance products that meet client needs Expanding Access to Insurance for the Poor Kampala, Uganda March 2009 Craig Churchill International Labour Organization

2 Overview of Presentation 1. Characteristics of the insurable poor 2. Ten microinsurance product design issues

3 1. Characteristics of the insurable poor Often work in the informal economy Irregular cash flows Manage risks through myriad of informal means, including social networks Limited familiarity with formal insurance May not trust insurance companies Vulnerable to risks

4 Understanding risks Economic stresses Wedding Ceremonies Child birth Education Paying rent, utilities Risks Death Illness Accidents Loss of assets Business risks/unemployment Vulnerability Poverty

5 What risks are they concerned about? Country Priority risk Uganda Illness, death, disability, property loss, risk of loan Malawi Death, food insecurity, illness, education Philippines Death, old age, illness Viet Nam Illness, natural disaster, accidents, livestock disease Indonesia Illness, children s education, poor harvest Lao P.D.R. Illness, livestock disease, death Georgia Illness, business losses, theft, death, retirement income Ukraine Illness, disability, theft Bolivia Illness, death, property loss (including crop loss in rural areas) Adapted from Cohen and Sebstad (2006)

6 What risks are they concerned about? Country Priority risk Uganda Illness, death, disability, property loss, risk of loan Malawi Death, food insecurity, illness, education Philippines Death, old age, illness Viet Nam Illness, natural disaster, accidents, livestock disease Indonesia Illness, children s education, poor harvest Lao P.D.R. Illness, livestock disease, death Georgia Illness, business losses, theft, death, retirement income Ukraine Illness, disability, theft Bolivia Illness, death, property loss (including crop loss in rural areas) Adapted from Cohen and Sebstad (2006)

7 Most common types of microinsurance products Degree of Success Credit life Term life/personal accident Savings life Property insurance Endowment life Health insurance Agriculture Degree of Difficulty

8 2) Ten product design issues 1. Eligibility 2. Piggyback or standalone 3. Mandatory or voluntary 4. Long or short term 5. Premium collection timing and mechanism 6. Benefit design 7. Claims payments 8. Consumer education 9. Risk management and controls 10. KISS

9 Overarching goal: Create and maintain trust

10 Group or individual? Family coverage? How low do you go? Screening? 2.1 Eligibility

11 2.2 Piggyback or stand alone? Much more efficient if insurance can be layered on top of another financial transaction A link with savings provides more permanent coverage than a link with credit

12 2.3 Mandatory vs. voluntary Advantages of mandatory insurance: controls adverse selection minimises sales costs simplifies administrative procedures easier to reach large numbers = much less expensive Advantages of voluntary insurance: customer-oriented ensures that staff and clients understand the product signals real demand

13 2.4 Long v. short term Short term Advantage: actuarial ease for insurer and regulator Disadvantage: limited premiums for insurer Long term Advantage: could be a savings vehicle for the poor Disadvantage: usually poor value, low persistency

14 2.5 Premium collection Timing: collect premiums when people have them Transaction costs: minimize costs by linking with another transaction

15 2.6 Benefit design Covers the risks that people are concerned about: do market research! Pre-underwritten Basket coverage? In cash or in-kind? Now or later?

16 2.7 Managing claims Sales without service will quickly undermine the scheme Must respond immediately to claims requests Make it easy to claim Best opportunity to show your concern Leverage claims payment to produce a demonstration effect.encourage CLAIMS!

17 2.7 Managing claims (cont.) Prevent claims rejections Try to prevent claims rejections due to: exclusions insured event occurring outside the term of cover policy lapses Only justification for rejection is policyholder fraud, and even that should be unequivocal

18 2.8 Consumer education Helping the poor to make informed risk management choices Incorporated into marketing and product delivery Innovative approaches Adaptations for illiterate, semi-literate target market Involvement of community organization to bolster trust?

19 2.9 Risk management and controls Waiting periods or graduated benefits? Health declarations? Deductibles, co-payments? Community verification, claims assessors Role of technology?

20 2.10 Keep it simple, stupid! (KISS) Make it easy to explain, and easy to claim No gray areas, no misunderstandings Minimize or eliminate exclusions No whistles and bells No fine print

21 2) Ten product design issues 1. Eligibility 2. Piggyback or standalone 3. Mandatory or voluntary 4. Long or short term 5. Premium collection timing and mechanism 6. Benefit design 7. Claims payments 8. Consumer education 9. Risk management and controls 10. KISS

22 Conclusion Microinsurance is not just regular insurance products with smaller premiums and sums assured It requires a significantly different approach that includes Strategies to overcome the wariness of customers Adaptations to accommodate their socio-economic situation A different attitude: help people to manage risks

23 Thank you! Craig Churchill Tel