For the Central Bank of Nigeria by: Mosleh U Ahmed FCA GIZ Consultant mosleh.ahmed@btinternet

1. MICROINSURANCE a presentation at the 5th Annual Microfinance Conference and Entrepreneurship Award For theCentral Bank of Nigeria by:Mosleh U AhmedFCA GIZ Consultant mosleh.ahmed@btinternet.com MATS SCHOOL OF BUSINESS, BANGALORE

2. Outline Microinsurance basics The demand side of microinsurance The supply side of microinsurance Some innovative microinsurance programmes A few cautions World Bank/GIZ Microinsurance Survey in Lagos and Kano Regulatory issues MATS SCHOOL OF BUSINESS, BANGALORE

3. Microinsurance is not…….. Charity Prevents risk Provided by only small insurance companies Down-scaled existing product A “MAGIC BULLET” and a cure for all problems of the poor people MATS SCHOOL OF BUSINESS, BANGALORE

4. Microinsurance is………. Risk management tool Loss protection mechanism MATS SCHOOL OF BUSINESS, BANGALORE

5. Introduction to Microinsurance Microfinance Microsavings Microcredit MICROINSURANCE Emergence of microinsurance is an important development within the field of microfinance and challenges the widely held belief of the "non-insurability" of the poor.

6. Defining Microinsurance Microinsurance refers to the insurance products that are designed to be beneficial and affordable to low-income individuals or groups. Microinsurance can help to improve a person’s quality of life by allowing that person to better manage potential problems while empowering that person to be more proactive as to the future.

7. Defining Microinsurance • Insurance for low-income people. • Insurance involving low levels of premiums. • Insurance with small benefits. • Insurance with: • Simple, easily understood contracts; • Little underwriting; • Few if any exclusions; • Simple claim process while still controlling for fraud; • Innovative premium collection’ and policy delivery models; • Multi-task intermediaries; • Often community or group pricing;

8. Microinsurance Basics • The microinsurance business model is ‘social’ business where solving social problems is motivating the business instead of maximizing profits. • It is a contract to prevent low income people from facing severe financial problems when faced with unexpected risks events. • Microinsurance products typically have a low return on equity

9. Microinsurance Basics • In exchange for insurance protection, the low- income people pay a small premium. • The government or the donors would not subsidise any part of the premium.

10. Risk Pooling Risk Pooling is bringing together resources from a large number of people to share in the losses of a few In case of an MFI the cost to the insured is the average loss experienced by its “risk pool” In case of an insurance company the cost to the insured is the premium calculated actuarially for its “risk pool” MATS SCHOOL OF BUSINESS, BANGALORE

11. Why Microinsurance Microfinance helps people to move out of poverty: Credit Savings Leasing Microinsurance helps people to protect the gains they make through microfinance MATS SCHOOL OF BUSINESS, BANGALORE

12. Life Cycle Need of the Poor C = Credit; E = Education; H = Healthcare; I = Insurance; S = Savings; Sc = Social Marriage(C, S, Sc) Working Capital (C) Death(C,I, Sc) Fixed Asset Acquisition(C) Health (C,S,I) Old Age (H, I, S, Sc) Asset Protection (I) Investments (S) Birth (C, H, I, S) Religious Ceremony (C,S, Sc) Training & Education (E, Sc) MATS SCHOOL OF BUSINESS, BANGALORE

13. Impact of Microcredit and Losses Wealthy Non-poor Vulnerable non-poor Economic Levels Poverty Line Moderate poor Extreme poor Destitute Loan Cycles and Impact of Losses MATS SCHOOL OF BUSINESS, BANGALORE

15. Microinsurance Clients P O V E Extreme Moderate Vulnerable R Non - Poor Wealthy Destitute Poor Poor Non - Poor T Y L I Micro- Insurance Clients Traditional Not insured by anyone N E Insurance Clients MATS SCHOOL OF BUSINESS, BANGALORE

16. Delivery Channels MFIs NBFIs Banks Insurance Companies Cr. Unions Volunteers On-line, ATM Mobile Phones Field Workers Insurance Agents Health Workers Employees Existing and new channels of delivery for microinsurance products Adopted from a presentation made by Dr. B Helms, CGAP Self-help Groups Low-income Households MATS SCHOOL OF BUSINESS, BANGALORE

17. Different Microinsurance Models Community-Based Model (UPLIFT, India) Owned and Managed by Members Insurer/Limited Provider Model (GRET, Cambodia) GRET insures, and provides primary medical care Insurer/Full Provider Model (Grameen, Bangladesh) MFI is the insurer and owns healthcare clinics Bundled Insurance Package (SEWA, India) Partnership Model (AIG-FINCA, Uganda) Full Insurer Model (Delta Life, Bangladesh) PPP Model (GOP, Insurer and MFI, Pakistan) MATS SCHOOL OF BUSINESS, BANGALORE

18. Different Microinsurance Products Life/Endowment/Credit Life India, Bangladesh, Sri Lanka, Nepal, Vietnam, Pakistan, Indonesia, Laos, East Africa, South Africa, West Africa Colombia, Guatemala, Mexico, Nicaragua Health/Critical Illness India, Bangladesh, Philippines, Cambodia, China East Africa, South Africa, West Africa Colombia, Mexico Georgia, Russia Group Personal Accident West Africa Unemployment East Africa Crop/Weather India East Africa, North Africa Mexico, Nicaragua Property/Livestock/Assets India, Mongolia, Nepal East Africa Albania Funeral Insurance East Africa, South Africa, West Africa Colombia, Mexico Bundled Insurance Package India Colombia Rural Insurance Schemes India Flood Insurance China, Indonesia, Vietnam

19. Relative Complexity of Microinsurance Products Crop/Weather Insurance Integrated Insurance Packages Health/Disability Insurance Annuities/Endowment Property/Livestock Insurance Indemnity/Personal Accident Life/Credit Life Insurance More Complex More Simple MATS SCHOOL OF BUSINESS, BANGALORE

20. Vimo SEWA – INDIA a Bundled Insurance Package SEWA offers three different bundled insurance packages Covers life, healthcare and loss of assets Premiums are paid annually or through fixed deposit account MATS SCHOOL OF BUSINESS, BANGALORE

21. Vimo SEWA – an Integrated Insurance Package SPECIAL BENEFITS FOR FIXED DEPOSIT PREMIUM MEMBERS (Eligible after 1 year of membership) Maternity: $ 20.0  Dentures: $ 20.0  Hearing Aid: $ 20.0 Eye glasses: $ 10.0 MATS SCHOOL OF BUSINESS, BANGALORE

22. Life Insurance with FlexibilityAmparar Policy by La Equidad, Colombia Monthly premium US$ 1.00; basic coverage US$ 1,250.00 50% payout for treatment in case policy- holder contracts incurable disease while insured After policyholder’s death Child education expenses for 2 years Medical expense for dependents Monthly food vouchers Utility bills MATS SCHOOL OF BUSINESS, BANGALORE

23. Pre-paid Health Card – JAMII BORA In-patient Health Insurance with Photo ID in Kenya Mandatory for all borrowers Costs US$ 10 per year Covers borrower and up to 6 family members Named hospitals/clinics Up to secondary level treatment and surgeries Medicines and lab tests covered MATS SCHOOL OF BUSINESS, BANGALORE

24. World Bank/GIZ Microinsurance Survey in Lagos and Kano Objectives: To identify the potential microinsurance clients’: • Socioeconomic status • Perception and understanding of insurance risks • Risk mitigation measures • Income and expenditure patterns • Affordability of insurance premiums • Constraints on access to microinsurance services • Supply side • Delivery channels MATS SCHOOL OF BUSINESS, BANGALORE

25. Methodology • Quantitative and qualitative survey carried out by Centre for Microenterprise Development (CMD) • 604 urban households in Lagos state • 405 rural households in Kano state • 4 FGDs in Lagos state • 5 FGDs in Kano state MATS SCHOOL OF BUSINESS, BANGALORE

26. Survey area KANO 405 Households LAGOS 604 Households MATS SCHOOL OF BUSINESS, BANGALORE

27. Sample distribution - Lagos MATS SCHOOL OF BUSINESS, BANGALORE

28. Sample distribution - Kano MATS SCHOOL OF BUSINESS, BANGALORE

29. Sample distribution - Kano MATS SCHOOL OF BUSINESS, BANGALORE

30. Demography of households MATS SCHOOL OF BUSINESS, BANGALORE

31. Demography of households(continued) MATS SCHOOL OF BUSINESS, BANGALORE

32. Source of income MATS SCHOOL OF BUSINESS, BANGALORE

33. Poverty level – by poverty scoring MATS SCHOOL OF BUSINESS, BANGALORE

34. Monthly earning MATS SCHOOL OF BUSINESS, BANGALORE

35. Monthly disposable income MATS SCHOOL OF BUSINESS, BANGALORE

36. Risk events faced– in past 3 years MATS SCHOOL OF BUSINESS, BANGALORE

37. Risk events faced more than once– in past 3 years MATS SCHOOL OF BUSINESS, BANGALORE

38. Risks most difficult to cope with - in past 3 years MATS SCHOOL OF BUSINESS, BANGALORE

39. Minor illness–number of times faced in past 3 years MATS SCHOOL OF BUSINESS, BANGALORE

40. Source of funds- in past 3 years MATS SCHOOL OF BUSINESS, BANGALORE

41. Knowledge about insurance products MATS SCHOOL OF BUSINESS, BANGALORE

42. Name of Insurers MATS SCHOOL OF BUSINESS, BANGALORE

43. INSURANCE USAGE IN PAST 5 YEARS 100.0 88.6 81.1 80.0 60.0 Lagos Kano 40.0 20.0 10.9 8.4 7.1 2.5 0.9 0.5 - No Used to have Have now Hard to say Did you have any insurance – in past 5 years MATS SCHOOL OF BUSINESS, BANGALORE

44. What type of insurance you had – in past 5 years MATS SCHOOL OF BUSINESS, BANGALORE

45. Which concept product will you buy - % MATS SCHOOL OF BUSINESS, BANGALORE

46. Priority MATS SCHOOL OF BUSINESS, BANGALORE

47. Preferred frequency of payment MATS SCHOOL OF BUSINESS, BANGALORE

48. Health insurance – how many people MATS SCHOOL OF BUSINESS, BANGALORE

49. Attitude towards insurance MATS SCHOOL OF BUSINESS, BANGALORE

50. Attitude towards insurance - Kano Insurance too expensive, no trust in insurers, long and difficult to collect claims from insurance company Believes in the benefits of insurance Insurance is a waste of money Never thought about insurance, would like to know more about insurance, does not know where to buy insurance MATS SCHOOL OF BUSINESS, BANGALORE