Microinsurance Reaching the masses
at grass root level –
The Pakistani
perspective
Tahir Ahmed
Managing Director & Chief Executive
Jubilee General Insurance Company Limited
Introduction
About 80% of the world’s population live on less than $10 a day
and nearly 50% live on less than $2 a day (World Bank
Development Indicators, 2008).
The Munich Re Foundation estimates that “of the four billion
people living on less than $2 a day, fewer than 10 million have
access to insurance”.
These low-income households are particularly vulnerable to risks
of Illness, death, natural disasters, damage to property, and
accidents all can have devastating effects on livelihoods without
a buffer to mitigate the financial impact.
2
Pakistani Context
•
Pakistan is a country of over 180 million people. Per capita
income is US$ 1,280/-. However, approximately 20% of
population lives below the poverty line, and another 35% of
population lives in vulnerable conditions.
•
Approximately 60% live in the rural areas
•
Overall literacy rate is approximately at 57% (Rural literacy
49% - Urban 73%)
3
Micro-segment Landscape
• There are currently 48 insurance providers and 1
reinsurer operating in Pakistan
• Presently there are no specific micro-insurance
programs operating on a national scale; though there
are few with an insurance component and have the
potential to reach national scale, namely National
Rural Support Pakistan (NRSP), the crop loan
insurance scheme and the Benazir Income Support
Program (BISP’s) life and health insurance program.
4
Micro-segment Landscape
• BISP’s life insurance program started in early year
2011 and provides life insurance cover of PKR100,000
to the head of the household. Currently there are over
2 million persons covered in this life insurance
program.
• In addition to NGOs and Government Funded BISP,
other distributors for micro-insurance in Pakistan are
micro-finance providers (MFPs). Out of 28 active MFPs
in the country, only 17 offer micro-insurance and
currently have 2.4 million policyholders with a sum
insured of Rs.28.2 million (USD 0.3m).
5
Micro-segment Landscape
Operational Projects
Credit Life & Health by MFPs
Insurers like Adamjee and UIC working with RSPs. Several
initiatives by microfinance banks
BISP Health & Life Insurance
is the largest social protection scheme currently in operation in
the country, initiated with General Life cover with SLIC and has also rolled out pilot Health project on funded NGO
model
SBP Crop Loan Insurance Scheme
This is a mandatory crop insurance scheme in
collaboration with insurance companies, launched by the State Bank of Pakistan for agricultural loans, provides
coverage against multiple perils, such as excessive rain, hail, frost, flood and diseases like viral and bacterial
attacks or damage by locusts, for the five major crops – wheat, rice, cotton, sugarcane, and maize
Postal Life Insurance
life insurance policies voluntarily distributed using the established network
of Pakistan Post service
NDMA Disaster Management Insurance Pool
is in conceptual stage to extend
coverage against natural catastrophes to all citizens of Pakistan.
6
Micro-segment Landscape
1.
Pilot projects underway for Crop (Weather index based) &
Livestock (Live Weight) by SECP & PPAF
2.
Nayajeewan – Microinsurance for Urban-Poor (Health
Coverage for Children & Domestic staff)
3.
Telenor-Easy Paisa (Life insurance coverage for mobile
accountholders)
4.
Tameer Bank – Health solutions offered in remote areas
through banking channels
7
Micro-segment Landscape
MFI’s Most
Recent Data
Mobile
Banking
(2012)
483.3m
2.7m
Loans (USD) Borrowers
60,000 Agents
(Non Banking
Retailers)
Mobile
Phone Users
125m
Over 90m
Transactions
(Avg USD42)
70% Tele
Density
302.3m
5.3m
Deposits (USD) Depositors
Worth over
3.7bn (USD)
35% Female
users
1.6m
mobilewallets
(accounts)
65% Male
users
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Micro-segment Landscape
• Microinsurance needs have been recognized by the
regulators (SECP) who have issued “Micro-insurance Rules
2013” addressing:
–
–
–
–
–
–
–
–
Business operational infrastructure
Awareness Creation & knowledge sharing
Coverage of Risks, events & coverage limits
Comprehensive engagement of key stakeholders &
Capacity building
Proper
documentation
and
premium
payment
mechanism
After sales services & Claims Management procedures
Customer Protection
Grievance Handling & complaints Management
9
Micro-insurance Demand
Drivers
Accidents
Robberies/
theft
Death
Natural
disasters
Crop failure
Business
losses
Health/
illness
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Micro-insurance Demand
Drivers
Event
Predictable
Non-Predictable
Top 5 ranked
Health/Illness
Marriage of Children
Y
Y
Death
Y
Childbirth
Y
Business setup/losses
Y
Y
Bottom 5 ranked
Children Education
Y
Natural disasters
Y
Accidents
Y
Rent/House purchase
Y
Pilgrimage
Y
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Informal Coping Mechanism
The informal coping mechanisms developed by the poor
– rotating savings and credit associations, depleting
savings,
informal
borrowing,
selling
assets,
taking
children out of school - offer short-term protection at
long-term costs, preventing escape from poverty.
12
Customer needs & wants
CUSTOMER “NEEDS”
CUSTOMER “WANTS”
•Savings, health covers
•Life protection
•Asset protection
•Income for retirement
•Trust
•Fairness
•Ethical System
•Meeting expectations
NEEDS - change
WANTS – are static
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Core questions
Client value
Business case
1. How micro-insurance provides 1. Business Viability
value to low-income households? 2. Market & Product Development
(to induce them to switch from 3. Capacity Building
existing coping mechanisms)
4. Systematic Data Collection &
2. Affordable and easy to
Transparency
understand and use insurances 5. Cost effective market access
3. Consumer protection
6. Service optimisation
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Challenges
• Customer Identification
• Market Reach
• Insurance Products
• Low literacy rate & Cultural Barriers
• Lack of Awareness
15
Meeting Challenges
• Customer Identification
– Use of NADRA’s Database (National Database and
Registration Authority)
– Community based schemes
– Use of MFPs’ databases
– Creation of Centralized information sharing system by
Insurers
16
Meeting Challenges
• Market Reach
– Use of MFPs’ & NGO’s Networks
– Use of Mobile Phone Networks
– Branchless Banking platforms of Commercial Banks (UBL
Omni, HBL Express etc.)
– Telecommunication sector initiatives (Telenor Easy Paisa,
Zong Time pey, Mobilink Mobi Cash)
17
Meeting Challenges
• Insurance Products
– Simple & Structured Products
– Underwriting & Claims Processes to be aligned with
– Micro-segment’s needs
– Going paperless wherever possible
18
Meeting Challenges
• Low Literacy rate & Cultural Barriers
– Simple to Understand Products
– Community/MFPs based schemes
– Use of regional languages
– Culturally Aligned Products
19
Meeting Challenges
• Very Little (or Lack of) Awareness
– Extensive Media Campaigns
– Public Private Partnerships
– Community schools
– Capacity building with skilled, trained field staff
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Basics to scale up
Micro Insurance
MICRO LEVEL
•
Mutual knowledge sharing & initiatives by conventional insurers
•
Innovative products’ catering the unmet needs with lower the
premiums
•
Technology deployment for enhanced
overheads.
•
Development & training of key human resource
•
Network of distribution including intermediaries, point of sales and
retailer shop
servicing
and
lower the
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Basics to scale up
Micro Insurance
MACRO LEVEL
•
Government support in the form of subsidies, public-private
partnerships, facilitating private and public sector insurers.
•
Development of specific regulatory frameworks for micro-insurance.
•
Establishment of effective payment systems such as mobile money,
bill payments, points of sale
•
Enhancement in the capacity of multinational insurers as well as
brokers to expand their successful models across jurisdictions
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The Resulting Potential
Non-Poor
(10%)
Life
Credit Life
(Bread winner)
5 million lives
28 million
lives
Over
USD1bn
Transitory Non-Poor
(12%)
Transitory Vulnerable (36%)
Health
80 million lives
Transitory Poor (20%)
Chronic Poor (16%)
Property
5 million
policies
Agriculture
5 million
policies
Extremely Poor (6%)
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Microinsurance Key
Success Factors
Value
Addition
Product
Design
Claims
Management
Awareness
campaign
After Sales
servicing
Distribution
mechanism
Marketing
collateral
Technology
base
Human
Resource
development
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Way Forward
•
Government support in the form of subsidies, public-private
partnerships, facilitating private and public sector insurers;
•
Technology products; Automatic enrolment or mandatory cover;
•
Establishment of effective payment systems such as mobile
money, bill payments, points of sale etc.;
•
Enhancement in the capacity of multinational and local insurers as
well as brokers to expand their successful models across
jurisdictions;
•
Development
insurance.
of
specific
regulatory
frameworks
for
micro-
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Microinsurance promises to
improve billions of lives at
the bottom of the pyramid
Thank You
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