November 22, 2010
What I Learned at the 6th Microinsurance ConferenceBy Aparna Dalal
This is a guest post from Aparna Dalal, independent consultant and former FAI Director of Special Projects.
If you are studying or working in the field of microinsurance, the annual International Microinsurance Conference, jointly hosted by the Munich Re Foundation and the Microinsurance Network, is the place to be. The 6th installment of the conference was held in Manila last week. This was the third conference I’ve attended, and in many ways, the most interesting one. While challenges remain, various organizations are successfully implementing innovative products and processes. Below are four areas of development that I found particularly interesting -
Client value and business case: Practitioners face the dual challenge of making a business case for microinsurance, while providing value to customers. Unlike microcredit, where many institutions have created a sustainable business model, albeit with occasional start-up subsidies, it is yet unclear whether microinsurance practitioners will be able to provide relevant insurance products, at an affordable price, on a sustainable basis. If subsidies in microinsurance (for example, ongoing government-subsidized premiums) are to be required beyond the initial development phase, then there is a greater impetus on practitioners and researchers to prove that microinsurance products provide client value. Craig Churchill, the head of ILO’s Microinsurance Innovation Facility highlighted the lack of compelling evidence on whether microinsurance reduces vulnerability and poverty. Research on the impact of it is clearly needed.
Distribution: Microinfinance institutions continue to be the most sought after distribution partner for microinsurers. This is understandable given the ready pool of clients and the channel’s experience in conducting financial transactions. However, limiting microinsurance to microcredit clients is insufficient, and the search is on for alternate distribution channels to reach the 97% of world’s poor that are still uninsured. Practitioners are experimenting with distribution channels ranging from religious organizations and cooperative societies to retail stores and utility companies. CENFRI, a research organization, will soon release a paper on alternative (“passive”) distribution models being tested in Brazil, Colombia, South Africa and India. A summary can be found here (p. 6).
Bundling insurance with other services: During a session on agriculture insurance the International Fund for Agriculture and Development and the World Food Program presented a paper on how to scale index insurance (available here) based on 36 case studies of index insurance programs worldwide. Apart from the interesting fact that there are at least 36 ongoing index insurance schemes, a useful lesson for providers is that for insurance to create a value proposition for clients, practitioners should consider offering it as a part of a wider package of services. This theme was also repeated in the context of health insurance. To make health insurance programs sustainable and valuable, the risk protection (for example, in-patient hospitalization coverage) should be supplemented with risk prevention and other benefits (outpatient consultation, discounts on drugs etc.). Bundling insurance with other services is one way that practitioners are trying to address low take-up and the lack of an insurance culture amongst the target population.
Data: FAI has often voiced the need for more data. Thus, the ongoing efforts by the World Bank and the Centre for Insurance and Risk Management (CIRM) are heartening. Over the last two years, the Insurance for the Poor Unit at the World Bank has created the Global Microinsurance Benchmark Database. The first phase of the database contains data from 161 providers in six countries on outreach, premiums, claims, and distribution channels. In a similar effort, CIRM has created a Microinsurance Map on India that lists data on insurers and products that can be used by community agencies to compare products, negotiate services, etc. The database also lists risk data such as agriculture productivity, cattle valuation, and hospitalization rates on a local basis to aid development of customized insurance products. A beta version of the map is available here.
If you wish to learn more about the conference, a complete list of papers and presentations from the conference is available here. Stay tuned for a follow-up post on insurance education.