МОНГОЛЫН АКТУАРЧДЫН НИЙГЭМЛЭГ
The role of the Actuary in
Microfinance
Ulan Bator, Mongolia
14-15 November 2011
Kirsten Armstrong
THE SOCIETY OF ACTUARIES OF MONGOLIA
Agenda
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•
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What is micro-finance?
What is micro-insurance?
What should actuaries do in the sector?
A case study
Specific challenges
THE SOCIETY OF ACTUARIES OF MONGOLIA
What is Microfinance?
• Basic financial services to poor & excluded
• Innovating to meet needs:
Eg: Mobile phone banking for remote communities
• Savings, credit, money–transfer, insurance
• Target groups:
– Micro Entrepreneurs
– Small and medium-sized enterprises
THE SOCIETY OF ACTUARIES OF MONGOLIA
Social Goals more important than profit
Mission: To contribute to the socio-economic
development of the country while creating a fair value
for its shareholders. This will be achieved by providing
inclusive, value adding, and reliable financial services
to all people and entities of Mongolia through
establishing a leading financial institution that is
equally concerned about Planet, People, and Profit.
XAC Bank
THE SOCIETY OF ACTUARIES OF MONGOLIA
Microfinance in Mongolia
Loans
Borrowers
Deposits
Depositors
MFIs
US$914.7 million
390,000
US$1.2 billion
1.8 million
6
Hugjil badrakh, VFM, TFS, Khan Bank, Credit Mongol, XacBank
Regulator
Bank of Mongolia
Source: Mixmarket 2010
THE SOCIETY OF ACTUARIES OF MONGOLIA
What is Micro-insurance?
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•
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Targetted protection for low-income people
Simple
Affordable
Work best when supported with advice &
innovation
* Microinsurance is still in development.*
THE SOCIETY OF ACTUARIES OF MONGOLIA
Product Groups
Crop Insurance
Health / disability insurance
Annuities / endowment
Property
Term life
Credit life
THE SOCIETY OF ACTUARIES OF MONGOLIA
Micro-insurance in Mongolia
• To be updated!
THE SOCIETY OF ACTUARIES OF MONGOLIA
Case Study:
Health insurance in India’s slums
62 million people live in India’s slums.
300 million people in India live in poverty.
Slide 9
THE SOCIETY OF ACTUARIES
HealthOF
careMONGOLIA
is limited & basic.
Micro health insurance
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•
•
•
Covers insured people in Pune’s slums
Annual premium: 60 rupees ($2)
Reimburses max 5,000 rupees hospital costs
Other benefits
• health camps, discounts, 24 hour hotline
• More than 60,000 members
• Scheme expanded to other slums
Slide 10
THE SOCIETY OF ACTUARIES OF MONGOLIA
Community-based decisionmaking helps manage risk.
Some benefits remain discretionary
→ minimises solvency requirements.
Slide 11
THE SOCIETY OF ACTUARIES OF MONGOLIA
Local systems can be basic –
simplicity essential
Performance monitoring at
the community level
Slide 12
THE SOCIETY OF ACTUARIES OF MONGOLIA
What did I do?
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•
•
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Supported product redesign
Pricing model
Performance monitoring tool
Minimum Solvency requirements
Reviewed accounting procedures
Advised on data requirements
…All in a three week visit….
Slide 13
THE SOCIETY OF ACTUARIES OF MONGOLIA
Other roles for actuaries
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Identifying needs, gaps and opportunities
Risk Management
Reserving / outstanding claims valuation
Forecasting
Slide 14
THE SOCIETY OF ACTUARIES OF MONGOLIA
Original Benefit Structure
2007
Premium
HMF
Option 1
Option 2
Option 3
40,000 claim
Option 4Contributed
Basis
60
100
Family 2+2
240
400
600
Child
60
100
150
Individual
100
150
200
Max
Benefit
5,000
Payable
Sub Limits
Benefits
2008
15,000
80% of
80% of
Health
Health
Event Bills Event Bills
up to
up to:
35,000
50,000
80% of Health
Event Bills up to:
L1: 50% of L2: 80% of
Health
Health
Event Bills Event Bills
up to:
up to:
80% of
Health
Event Bills
up to:
5000 claim
4000 reimbursed
5,000
15,000 50,000
General
2,500
5,000
One Day
1,000
1,000
Discounts
150
45,000
Special
Slide
OPD15
5000 reimbursed
20,000
-5000RS
deductible
3,000
5,000
30,000
50,000
5,000
15,000
20,000
3,000
5,000
THE
OFcoupon
ACTUARIES
OF with
MONGOLIA
noneSOCIETY
50% discount
on Consultations
local OPD provider
Option 2
2008
Option 2
100
Premium
Basis
Option 4Contributed
150
400
600
Child
100
150
Individual
150
200
Payable
Sub Limits
45,000
35,000
50,000
80% of Health
Event Bills up to:
L1: 50% of L2: 80% of
Health
Health
5000 claim
Event Billsnil reimbursed
Event Bills
up to:
up to:
80% of
Health
Event Bills
up to:
Special
50,000
General
20,000
One Day
Slide 16
OPD
Discounts
40,000 claim
28,000 reimbursed
Family 2+2
Max
Benefit
Benefits
Option 3
-5000RS
deductible
5,000
30,000
50,000
5,000
15,000
20,000
3,000
5,000
3,000
50% discount coupon on Consultations with local OPD
THE
SOCIETY OF ACTUARIES OF MONGOLIA
provider
Option 3
Premium
2008
Option 3
Option 4Contributed
Basis
100
150
Family 2+2
400
600
Child
100
150
Individual
150
200
Max
Benefit
35,000
50,000
Sub Limits
Benefits
Payable
5,000
30,000
50,000
General
5,000
15,000
20,000
3,000
5,000
Slide 17
OPD
Discounts
29,000 reimbursed
L1: 50% of L2: 80% of
80% of
Health
Health
Health Event
5000 claim
Event Bills Event Bills
Bills up
2500to:
reimbursed
up to:
up to:
Special
One Day
40,000 claim
50% discount coupon on
THE
SOCIETY OF ACTUARIES OF MONGOLIA
Consultations with local OPD
Unique aspects for Actuaries
• Poor data: how to price? How to manage uncertainty?
• Keep costs down : offer simple tools
• Short tail products; focus on
– Pricing
– Good monitoring systems
– Outstanding claims valuations are less important
• Design products with risk management levers
– Don’t want to end up needing big solvency reserves
THE SOCIETY OF ACTUARIES OF MONGOLIA
Unique aspects for Actuaries
• Always ask: Is this meeting social needs?
• Measure social outcomes as well as financial
outcomes
• Do you understand the customer?
• Data collection: What do they need for pricing and
evaluation?
• Offer ideas from the industry – innovate!
THE SOCIETY OF ACTUARIES OF MONGOLIA
Further Information…
Consultative Group Assisting the Poor
www.cgap.org
Microfinance Information Exchange
www.themix.org
www.microinsuranceacademy.org/
www.ilo.org/public/english/employment/mifacility/
THE SOCIETY OF ACTUARIES OF MONGOLIA
МОНГОЛЫН АКТУАРЧДЫН НИЙГЭМЛЭГ
The role of the Actuary in
Microfinance
Ulan Bator, Mongolia
14-15 November 2011
Kirsten Armstrong
THE SOCIETY OF ACTUARIES OF MONGOLIA