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Brokers and Agents in Microinsurance: Opportunities and Challenges. World Federation of Insurance Intermediaries Washington, DC 10 March 2009 Michael J. McCord President, MicroInsurance Centre mjmccord@microinsurancecentre.org www.microinsurancecentre.org.

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brokers and agents in microinsurance opportunities and challenges

Brokers and Agents in Microinsurance: Opportunities and Challenges

World Federation of Insurance Intermediaries

Washington, DC

10 March 2009

Michael J. McCord

President, MicroInsurance Centre

mjmccord@microinsurancecentre.org

www.microinsurancecentre.org

slide2

A comprehensive landscape study of low-income people in the world’s 100 poorest countries found that only 3% (78m) of the low-income population are covered by formal microinsurance.

(data from mid-2006). Estimate 125 million today. Potential market might be 3 Billion.

Microinsurance Availability

microinsurance
“Microinsurance”
  • Risk-pooling products that are designed to be appropriate for the low-income market in relation to cost,terms,coverage,anddelivery mechanisms

WHAT

IS

MICROINSURANCE?

microinsurance types

“Transition funds”

Funeral

Pensions

Credit Life

Education Life

Endowments

Health

Disability

Surgical

Out-patient

Credit Disability

Total

Hospitalisation

Permanent

Optical

Partial

Temporary

Dread Disease

Dismemberment

Livestock

Floods

Fire

Rainfall

Theft

Dental

Agriculture

Prices

Microinsurance types

QUALITY?????

Life Insurance

Comprehensive

Property

factors in microinsurance purchases
Factors in Microinsurance Purchases

Perceptions of Insurance

Requires

Education Knowledge  Appreciation

Understanding Insurance

Concepts

Product / Demand Match

Purchase

Decision

Making

Easy Payment Mechanism

Cost of Coverage

Requires

Appropriate product design

Available Income

Cost and Frequency

relationships in brief
Relationships, in brief

Insurers

?

Misunderstanding

Delivery channels

  • Sometimes good products, but often
  • Products poorly designed for the market
  • Inappropriate procedures
  • Weak servicing
  • Inefficient systems
  • Poorly trained staff and clients
  • Ineffective marketing

?

Brokers might improve this situation

sources
Sources
  • Michael J. McCord. AIG Uganda - CGAP Working Group on Microinsurance, Good and Bad Practices Case Study No. 9. April 2005.
  • James Roth and Vijay Athreye. Tata – AIG Life Insurance Company Ltd. - CGAP Working Group on Microinsurance, Good and Bad Practices Case Study No. 14. September 2005
  • Lemmy Manje. Madison Insurance Zambia- CGAP Working Group on Microinsurance, Good and Bad Practices Case Study No. 10. May 2005
  • Sven Enarsson and Kjell Wiren. MUSCCO: Malawi Union of Savings and Credit Cooperatives: Good and Bad Practices Case Study No. 8 . March 2005
  • Craig Churchill and Terry Pepler. Tuw Skok, Poland: Good and Bad Practices Case Study No. 2. May 2004
microinsurance brokers examples 1
Microinsurance Brokers – examples1
  • Micro Insurance Agency (MicroEnsure)
    • Traditional brokerage activity focused on low income
    • Primarily work through MFIs
    • Uganda, Tanzania, Ghana, India, and the Philippines
    • “Break even in <1 year”
    • http://www.microinsuranceagency.com/index.html
  • Planet Guarantee
    • Numerous francophone countries
    • Technical assistance provision and brokerage
    • http://www.planetfinancegroup.org/EN/pop_planet_garantee.php
brokers in microinsurance examples
Brokers in microinsurance - examples
  • SANTAM (South Africa) broker with runners
    • Recent variation on broker model
    • Sell new low income household structure and content insurance
    • Brokers employ “runners” who sell the product but not registered to provide advice
    • Advice provided by broker or supervisor. Supervisor for every 5 runners.
    • Premiums collected by debit order. No option to pay premium in cash.
    • Free “Call me” for SMS used for call centre access
  • Mexico
    • Insurers generally use brokers for all business

SABTAM source: Jeremy Leach, Hollard Insurance

reinsurance brokers
Reinsurance Brokers
  • Guy Carpenter –
    • Reinsurance intermediary for microinsurance
    • ILO Microinsurance Innovation Facility
agents in microinsurance
Agents in microinsurance
  • Traditional agents
    • Gemini Life Insurance (Ghana)
    • AIG Uganda (as intermediary)
  • Micro-agents
    • Delta Life (Bangladesh)
    • Tata-AIG (India)
  • Unlicensed agents
    • SurAmericana (Colombia)
    • Allianz (Indonesia)
regulations examples
Regulations - examples
  • India (2005)
    • In addition to an insurance agent or corporate agent or broker licensed under the Act, … as the case may be, micro-insurance products may be distributed to the micro-insurance agents
  • Peru (2007)
    • “The commercialization of microinsurance can be undertaken by direct sale to the insured, through the intermediation of insurance brokers or through the signing of commercialization contracts
  • Bolivia (2009?)
    • “Bans” brokers in microinsurance (draft regulations)
issues in regulation and supervision of microinsurance iais
Issues in Regulation and Supervision of Microinsurance (IAIS)
  • Alternative delivery channels: Traditional brokers/ agents typically do not want to sell microinsurancewith its relatively small premiums (and thus small commissions). Thus, many microinsurance delivery channels are unlicensed and unregulated agents. Often the regulator allows the insurer to take on the risk of agents so may not need to be directly regulated.
  • Intermediaries such as agents and brokers are also importantactors at the micro level. These entities need to be strong, capable and responsive to the particular needs of low-income households and their service providers in order to contribute effectively to building an inclusive financial system.
strategies for brokers in microinsurance
Strategies for Brokers in Microinsurance
  • Assess potential role and profitability
    • Is this really a priority for brokers
  • Develop (buy) low-income market expertise
    • Someone from MFIs or other type distributor
  • Identify demand
    • Risk managements gaps
  • Identify potential market conduits
    • MFIs ( easier to start)
    • Others – retailers, utilities, cell phone operators, churches
opportunities
Opportunities
  • Microinsurance Innovation Facility
    • Innovation grants
    • Technical assistance
    • Research
  • Micro Insurance Network
    • Leaders forum
    • Sub groups
    • Newsletter
  • 5TH International Microinsurance Conference
    • Dakar, Senegal – 3-5 November 2009
slide21

The MicroInsurance Centre“Developing partnerships to insure the world’s poor”

www.MicroInsuranceCentre.org

mjmccord@MicroInsuranceCentre.org

insurance
“Insurance”

“Covers an individual / company / household for some or all of a financial loss that is linked to an unpredictable event or risk, via risk pooling and the payment of a premium”

models of microinsurance delivery
Models of Microinsurance Delivery
  • Community-Based Model(ILO STEP)
    • Owned and Managed by Members
  • Mutual Model(TYM and their planned MBA)
    • Owned by members, professional management
  • Partnership Model(ABIC and VBARD)
    • Very limited risk to MFI, administrative burden limited
  • Also: full service insurer, provider, social security models, new microinsurance brokerage model

KEY ISSUE = PLACINGRISKWHERE IT IS BEST MANAGED

knowledge gap
Knowledge Gap

Insurers

Brokers

Haze of misunderstanding

Financial institutions (especially MFIs)

Other delivery channels