CIC AFRICA LIFE ASSURANCE Ltd We keep our Word Cooperative Insurance and Risk Mitigation James Sserumaga SACCO ASSURANCE OFFICER
Understanding Cooperative Insurance Cooperatives like other entities, qualify for a special category of insurance, offering its members unique advantages in services and risk mitigation. Cooperative insurance is designed to extend cover to uninsured, under-insured, and inefficiently-insured risks. Cooperative Insurance is premised on the foundation of providing of insurance and other financial services through the co-operative spirit.
Understanding Cooperative Insurance cont The focus is to provide financial security for the Cooperatives and people through the co-operative spirit. Cooperative Insurance builds financial strength and stability of cooperatives that give them a significant competitive advantage. We offer support as well as expert advice to help them find the best insurance solutions for their business and personal needs.
Co-operative Insurance in Africa The following are examples across Africa showing co-operative micro insurance activities. These are; CIC Insurance CNMA (Algeria), Unique (Ghana), CIF (Burkina Faso), GMC (Cameron), NCIS & MBA (Nigeria), SAFOBs (S. Africa) and PAMECAS (Senegal).
It has been established that the co-operative model is more successful in delivering insurance services to the low income population. This is so because of the co-operative structure and philosophy that is an effective and flexible model idea for channeling insurance products to the disadvantaged. In this respect, the strengths of co-operative insurers include: identifying the needs of the poor; trust; reduction of moral hazard, adverse selection and fraud; member education; and empowerment.
Experience of CIC Insurance as a Cooperative Insurer CIC is the leading co-operative insurer in Africa. It underwrites all classes of both life and non-life business and is the pioneer and largest provider of micro insurance in Kenya. CIC is 70% owned by the co-operative movement with share capital of USD14.5 million.
How CIC supports financial services risk mitigation in Cooperatives. The data reveals that the role of Cooperatives in providing financial access cannot be overestimated. Over 72% of all financial points of service in Uganda are provided by Cooperatives. The Government of Uganda is aware of the strategic importance of this sector and has invested in the development of Cooperatives as evidenced in several initiatives. Cooperative Insurance is therefore critical, to ensure that the movement is able to stand tall above the apparent risks.
Risk mitigation in Cooperatives cont.. We develop risk management culture in the Cooperatives. We Facilitate identification and categorization of potential risks in Cooperatives in line with the regulatory requirements and Global Cooperative Standards. We evaluate and prioritize the risks based on probability matrix guidelines on potential frequencies and severities of the listed risks and maintain a risk register to be reviewed and updated frequently.
Risk mitigation in Cooperatives cont.. Establish risk mitigation plans according to the risk characteristics and support implementation. Quantify the financial impact of the net risks of identified critical risks each period to be advised to the Risk Committee/ Audit Committee/ Board. Conduct an annual review of risk management strategy and update as necessary and obtain board approval. Document risk management procedures and policies of cooperatives and to review and update periodically.
Major Risks covered Group Products: Loan Guard Micro insurance Employee Group Life policy Group Funeral Expense Individual Products: Smart Saver policy Academia Policy Invest Plan policy Family Protector
Risks covered Money Insurance Fidelity Guarantee Fire Industrial Consequential Loss Burglary Goods In Transit Risk Motor Crop Insurance Livestock Fidelity guarantee Public Liability Group Personal Accident Machine Breakdown Professional Indemnity All Risks
Managing risks is a specific challenge faced by the sector at the individual and collective levels. Insurance contributes significantly in this respect as our Ugandan experience reveals. The history of CIC proves this risk management role of a co-operative insurer especially in relation to the development of SACCOs (Savings and Credit Co-operatives) and Coop Unions.
Contributions of Insurance to Business Growth and Sustainability of Cooperatives Insurance contributes materially to economic growth of Cooperatives by improving the investment climate and promoting a more efficient mix of activities than would be undertaken in the absence of risk management instruments. The indemnification and risk pooling properties of insurance facilitate commercial transactions and the provision of credit by mitigating losses as well as the measurement and management of non diversifiable risk more generally. Most fundamentally, the availability of insurance enables risk averse individuals and societies to undertake higher risk, higher return activities than they would do in the absence of insurance, promoting higher productivity and growth.
Contributions Cont Insurance places dual emphasis on financial sustainability and operational efficiency by using ICT to enhance productivity and cost reduction, and also by employing innovative risk mitigation techniques i.e., loan ku simu yo By applying the co-operative principle of education and training, we run various seminars, workshops and we give presentations during co-operative activities to sensitize cooperators on good practices and enhance good corporate governance in the sector. Other issues that are covered during these educational activities include: effective leadership, importance of strategic planning, proper management of scarce resources, enlightening on quality services, and better risk management.
Contributions Cont In Kenya, and very soon in Uganda, CIC played a role in making recommendations towards legislation that favors the SACCO subsector. Further, it has set the example of becoming more competitive through better focus, products and service provision, understanding customer needs, and becoming creative. Similarly, there is injection of business culture that facilitates specialization, diversification and networking while fostering interaction with "common bond. While CIC has been competitive in providing quality insurance products for higher income groups, it has actively pursued the provision of low ticket insurance packages and services to the low income households through micro insurance packages such as Invest plan policy, Smart saver and Alfa&Omega.
Contributions Cont CIC provides investment income to Cooperatives (shareholders only) in terms of dividends. Dividends provide a steady flow of passive income, which Cooperatives can choose to capitalize their operations or reinvest, thereby directly contributing to their business Growth and Sustainability. For each share owned, a declared amount of money is distributed. Thus, if a society owns 100 shares and the dividend is 50,000UGX per share, the shareholder will be paid 5,000,000 UGX
Complementary Roles of Insurance and COOP Societies in the Growth Process Co-operative and Co-op insurance bring about the solidarity principle that enables aggregation ensuring insurance access to people that could otherwise be excluded. Co-operative insurers are able to measure and manage risks thereby increasing entrepreneurial activities as a result of greater efficiency in capital allocation. At the grassroots, insurance can be provided to the underserved population on a sustainable basis using the cooperative model. The benefits of the cooperative structure are at its greatest at the local level, the strong community relationship, good user networks, member involvement and democratic process encourages greater trusts and taps into policyholder's know-how, loyalty and ideas.
Complementary Roles Cont As members are owners of the scheme they have greater incentive in making the scheme work and preventing fraudulent behavior.. The cooperative knows its customers better than anyone else, their interests, issues and consumption processes; it can adapt to reflect their changing needs and circumstances. Not only does the cooperative provide insurance products but also additional services such as education, risk management, health advice, community support all with the focus on improving members' livelihoods.
Complementary Roles Cont With their common overriding objective, co-operative entities have a history of working together not only locally but also globally, sharing experiences and finding innovative ways to better serve their members
Conclusion The cooperative structure and the cooperative philosophy are the effective and flexible ways in mitigating risks, satisfying the needs of an ordinary person. This makes the cooperatives model very ideal for channeling insurance products to the masses. Promotion of Cooperative insurance should be seen as one way of promoting social and economic justice. In Africa, Cooperative insurance is certainly the next frontier of insurance development and has enormous potential for growth.
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