Presentation by L. B. Abeysinghe - Consultant- SICL At AOA 30 th Anniversary Seminar 26 th August 2014 at Cinnamon Lakeside Hotel Colombo. 1
Agenda.. Definition & explanations of concepts used in the presentation. Strategies of developing Microinsurance to reach up to its objectives.... Sanasa as a Microinsurance provider Transition from status of mutual to formal insurance provider. Types of Microinsurance products offered by Sanasa..... Challenges encountered by Sanasa in conducting microinsurance schemes. What are the Lessons Learnt. 2
Definition of Microinsurance Microinsurance is defined as A Method of providing protection to the low income people against specific perils in exchange for a regular payment of premium proportionate to likelihood and the cost of risk involved Does this definition explain adequately the unique characteristics and the scope of microinsurance? - It fails to distinct microinsurance from traditional insurance. - It does not explain specific characteristics of microinsurance. 3
Definitions and Explanations of other Concepts (a) Mutual The concept of mutual can be understood clearly by comparing its features with those of Commercial Insurance Companies. Ownership Profits Mutuals Owned entirely by members/policy holders Distribution through rebates to policyholders. Commercial Insurance Company Owned by investors who have purchased companies stock. Profits are distributed to the shareholders. Mutual had been able to perform insurance business better than traditional insurance companies during the global economic crisis experienced in recent years. Mutual insurers tend to have a greater level of trust and customer satisfaction. 4
Definitions and Explanations of other Concepts Contd.. (b) Living Standard The Term living standard is closely related to quality of life that prevails in a given socio economic class in a certain geographical area in terms of: The Level of Wealth/Income Comfort Material goods Necessities available 5
Definitions and Explanations of other Concepts (c) Marginalized groups Contd.. The term marginalized groups can be defined as groups of persons who have been deprived of being served adequately against perils through insurance schemes operated by commercial insurance companies or social security insurance schemes administered by the state. The term Underserved Sector is also used to describe the group of persons ignored by traditional insurers and social security insurers. 6
Key factors that need to be considered in defining Microinsurance In defining micro insurance, in its correct perspective it is essential to consider following factors: Concept of serving the poor & Marginalized /underserved groups. Types of Product Types of Insurance Provider Distribution Channels Other key factors that separate microinsurance from traditional insurance: Simplicity Accessibility Efficiency of Process 7
The final goal of Microinsurance In the context of above definitions and explanations it is clear that the final goal of developing microinsurance is to enhance the quality of life related to a certain socio economic class in a certain geographical area. 8
The need for developing Microinsurance. The need for developing microinsurance in an emerging economy of a country like Sri Lanka is noteworthy. Insurance industry in Sri Lanka is still a growing industry. The overall insurance penetration is only 1.2%. This is one of the lowest in the Asian Region where the average level of penetration at 5.8%. Insurance penetration is low due to unawareness, of insurance, lack of attitude towards the insurance by the masses and the majority of population being in low income groups. To enhance the insurance penetration and thereby to improve the quality of life, microinsurance is considered to be the best solution. 9
Strategies of developing microinsurance i. Product Development - Meeting the real risk that target market requires - Minimizing the price to enhance affordability and accessibility - Simplicity in understanding terms and procedures. ii. iii. Production distribution through different models - Full service model - Partner agent model - Care provider model - Community based organization model Consumer Education To create better understanding of microinsurance as a tool of household risk management. 10
Sanasa Insurance as a microinsurer Sanasa Insurance signifies an insurance company registered namely as Seema Sahitha Sanasa Rakshana Samagama of which English version is Sanasa Insurance Company Limited (SICL). Currently SICL operates both Life and General Insurance but a subsidiary company is due to be established to operate general insurance business separately. Sanasa commenced microinsurance activities well before the incorporation of SICL through a subsidiary organization called ALMAO. ALMAO was a mutual organization owned by members and established to serve members of Sanasa & Funeral aid societies. Due to absence of any provisions in Insurance Law in the country. Sanasa had to establish SICL to continue its microinsurance services for the benefit of Sanasa Members. Although SICL is registered, as a traditional insurance company it is concerned mainly with the development of microinsurance products. 11
Vision and Mission of the Sanasa Insurance Company Vision : To establish a new society based on Co-operative principles. Mission: To strengthen the society through adequate risk coverage and developing the community through comprehensive risk cover. 12
Microinsurance products offered by Sanasa insurance. Sanasa Microinsurance Products could be categorized As follows: (1) Products related to financial products of MFIs. Eg: Loan Protection and life savings (2) Products offered for welfare of families of low income groups. Eg: Funeral Aid Insurance & Suwadayaka (Health Insurance) (3) Products to protect properties of individuals, societies and SMEs. Eg: Property Insurance (Fire and burglary, etc.) & Utthamavi (4) Products for developing Agri Business. Eg: Weather Index Based Crop Insurance for Paddy and Tea growers & Sanasa Cattle Insurance. (5) Life policies adapted to meet the insurance needs of low income earners. Eg: Whole life, Endowment, Education and Life pension policies 13
Business Progress of Microinsurance Products (non life) - in details. Premium Income (in Rs. Million) Products related to microfinance 2011 2013 - Loan Protection 6.81 14.08 - Life Savings 0.02 0.16 Products offered for members family welfare - Funeral Aid Insurance 16.46 14.58 - Suwadayaka (Health Insurance) 3.63 7.13 Products offered to cover properties of individuals society members and SMEs 39.7 54.2 Products for developing Agri Business - WII for Paddy 0.9 5.9 - WII for Tea - 5.5 - Cattle Insurance 1.1 10.1 Total 68.62 111.65 14
Details of benefits Provided to Sanasa Microinsurance Policy Holders (Non life) Products related to financial products of MFIs 2011 2013 - Loan Protection& Life savings - claims paid (Rs. Mn.)6.02 3.5 No of beneficiaries 66 43 Products offered for members family welfare - Funeral Aid Insurance - claims paid (Rs. Mn.) 14.3 11.6 No of beneficiaries 1413 1173 - Suwadayaka (Health Insurance) - claims paid (Rs. Mn.) 2.52 4.7 No of beneficiaries 1092 1383 Property Insurance - claims paid (Rs. Mn.) 3.1 3.4 No of beneficiaries 34 38 Agriculture Insurance -claims paid (Rs. Mn.) 3.0 8.3 Crop(WII) & Livestock No of beneficiaries 4868 22946 15
Business Progress of Life Microinsurance Products. Life 2011 2012 2013 Premium income (Rs. Million) 128.1 202.9 285.3 No. of policies in force 77462 110,637 124,435 Claims paid (Rs. Million) 4.5 9.9 13.4 No. of Claims paid 148 191 248 16
Challenges faced by Sanasa Insurance in Promoting Microinsurance Products There is no provisions in insurance law in this country for microinsurance and operation of insurance activities by mutuals and other CBOs. In some countries registered microinsurance organizations are enjoying relaxed provisions under the insurance law pertaining to microinsurance. Such facilities not available in Sri Lanka yet. Absence of national policy for development of microinsurance as a tool of risk management has resulted an unhealthy situation between the policy makers and microinsurance practitioners in the insurance industry. 17
Challenges faced by Sanasa Insurance in Promoting Microinsurance Products. Contd.. Development of innovative products have been hindered due to the fact that such exercise needs significant recourses and technical expertise to conduct initial research and product configuration. Training field staff and potential clients will also incur heavy investments. Negative attitude towards microinsurance not only from the potential clients but also from front line staff, field staff and officers of the government departments who are in charge of community development programs has been a great hindrance for the development of microinsurance. 18
Lessons Learnt in implementing microinsurance schemes by Sanasa Insurance. There is a great necessity to accommodate microinsurance legislatively in Sri Lanka to enable insurance companies operate microinsurance business with collaboration of MFIs welfare societies and other community based organizations. Designing a microinsurance product requires services of experts for conducting market assessment product configuration and product pricing and also for training of trainers to educate potential clients and also to members of frontline staff and field staff. Availability of such services from experts could be made available through a Microinsurance Development Center setup legislatively. Microinsurance products such as loan protection Health Insurance, Funeral Aid Insurance, Agri Insurance Business have had greater impact on lives of low income group in Sri Lanka. 19
Thank You Sanasa Insurance Company Limited. No: 340 2/1, R. A. De Mel Mawatha. Colombo 03. SANASA Insurance Company Limited 20