MICRO INSURANCE The Next Revolution in Financial Services for the Poor Our Journey • Opportunity International entered micro insurance market in 2002 • Micro Insurance Agency established in 2005 • Currently serving 3,500,000 lives globally • 5 year plan: • Expand into 11 new countries • Serve 25m people by 2012 – life, health, crop Micro Insurance Agency footprint ASIA AFRICA AMERICA’S Mexico Columbia Honduras Zambia Malawi Uganda Ghana Tanzania Zimbabwe Mozambique India Philippines Indonesia Our Model Risk Carrier BPO Insurers - local and multinational Reinsurers - especially on crop Front Office MFIs, SACCOs, Susu, VSLA - from most major networks TPA - claims management Aid Agencies Retail - white label, mobile phone, kiosks Back Office Systems Brokerage Product Design Training Education Insurance products • • • • • • • Credit Life Term life / funeral insurance Livestock Property insurance Index based crop insurance Package policy Health insurance Our Products - Malawi Crop Insurance • Enables lending to smallholder farmers • Uses historical rainfall index and weather stations to establish weather derivative • Too little / much rain triggers a payment • Premiums included in loan value The Three Farmers of Mchinji, Malawi: The True Impact of Crop Insurance Malawi farmer Henry Kangwelema puts meat on the table and sends his children to school now that he has a crop insurance policy from the Micro Insurance Agency to protect his farm from the devastating effects of drought. Thanks to crop insurance from the MIA, Malawi farmer Gelesom Chimpopi was able to get a loan to purchase high-quality seed and fertilizer to greatly increase his crop yield Our Products Uganda “care” policy • • • • • Death of borrower: Death of spouse: Death of child: Disability / Critical : Property: Loan plus $830 $333 $166 Loan covered Loan covered • Cost: between 0.3% and 0.7% of loan Our Products Housing Insurance: Partnership with Habitat Yudaya Nakazibwe now has food to feed her family, a steady income and is paying her loan back at 2 bags of cement a month. Product Development Challenges Approach Understanding the market Market Research Availability of data Experts in the field (crop, health) Finding the right distribution channels Network with MFIs, NGOs, humanitarian organisations, retailers Lack of actuarial experience Secure it Challenges – Weather Crop Insurance Availability of data & weather infrastructure in post conflict countries Mozambique: working with Universities that are likely to have the data given that the government resources were destroyed. Rwanda: 100+ weather stations will need to have the data gaps filled in through estimates derived from satellite data. The weather infrastructure will need to be rebuilt. Solutions are expensive and will need external finance Challenges with Pilots • • • Regulatory issues Adverse selection Insurance capacity So what do we do? Ongoing analysis & development client education programmes going the ‘extra mile’ innovate Lessons Learned • Data is not always reliable • Insurance companies are interested if scale can be reached • Importance of efficient Back Office IT system to minimise coverage, transaction and claims costs • Importance of right distribution partners • Process can take time in our markets • Persevere and you will succeed Common traps and mistakes ¨if only I’d known...¨ • The poor have very different priorities • Price is not the only priority – service is equally important • Simple products work best for the poor Conclusions • There is both supply and demand for micro insurance globally • A gap in technical expertise exists, separating these parties • Those highest in demand, weather index and health insurance, are the most difficult to administer