MICROINSURANCE
a presentation at the 5th Annual Microfinance
Conference and Entrepreneurship Award
For the
Central Bank
of Nigeria
by:
Mosleh U Ahmed
FCA
GIZ Consultant
mosleh.ahmed@btinternet.com
MATS SCHOOL OF BUSINESS,
BANGALORE
1
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
OF BUSINESS,
Regulatory issues MATS SCHOOL
BANGALORE
2
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
3
Microinsurance is……….
Risk management tool
 Loss protection mechanism

MATS SCHOOL OF BUSINESS,
BANGALORE
4
Introduction to Microinsurance
Microsavings
Microfinance
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.
5
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.
6
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;
7
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
8
Microinsurance Basics
In exchange for insurance protection, the lowincome people pay a small premium.
The government or the donors would not
subsidise any part of the premium.
9
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
10
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
11
Life Cycle Need of the Poor
C = Credit; E = Education; H = Healthcare; I = Insurance; S = Savings; Sc = Social
Marriage
(C, S, Sc)
Death
Working
Capital (C)
(C,I, Sc)
Fixed Asset
Acquisition (C)
Health
Old Age
Investments
Asset
Protection
(C,S,I)
(H, I, S, Sc)
Birth
(S)
Religious Ceremony
(C,S, Sc)
(C, H, I, S)
Training & Education
MATS SCHOOL OF BUSINESS,
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(I)
(E, Sc)
12
Impact of Microcredit and Losses
Economic Levels
Wealthy
Non-poor
Vulnerable non-poor
Poverty Line
Moderate poor
Extreme poor
Destitute
Loan Cycles and Impact of Losses
MATS SCHOOL OF BUSINESS,
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13
14
Microinsurance Clients
Destitute
Extreme
Poor
Not insured
by anyone
Moderate
Poor
MicroInsurance
Clients
P
O
V
E
R
T
Y
Vulnerable
Non- Poor
L
I
N
E
MATS SCHOOL OF BUSINESS,
BANGALORE
Non- Poor
Wealthy
Traditional
Insurance
Clients
15
Delivery Channels
Existing and new channels of delivery for microinsurance products
Adopted from a presentation made by Dr. B Helms, CGAP
Insurance
Companies
Cr. Unions
Insurance
Agents
On-line, ATM
Mobile Phones
MFIs
NBFIs
Banks
Self-help
Groups
Volunteers
Health Workers
Field Workers
Employees
Low-income
Households
MATS SCHOOL OF BUSINESS,
BANGALORE
16
Different Microinsurance Models

Community-Based Model (UPLIFT, India)


Insurer/Limited Provider Model (GRET, Cambodia)






Owned and Managed by Members
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
17
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

India
East Africa, North Africa
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
Property/Livestock/Assets
India, Mongolia, Nepal
East Africa
Albania


Funeral Insurance
East Africa, South Africa, West
Africa
Colombia, Mexico


Crop/Weather


Bundled Insurance Package
India
Colombia


Rural Insurance Schemes


India
Flood Insurance

China, Indonesia, Vietnam
18
Relative Complexity of Microinsurance Products
More Complex
More Simple
 Crop/Weather Insurance
 Integrated Insurance Packages
 Health/Disability Insurance
 Annuities/Endowment
 Property/Livestock Insurance
 Indemnity/Personal Accident
 Life/Credit Life Insurance
MATS SCHOOL OF BUSINESS,
BANGALORE
19
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,
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20
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
21
Life Insurance with Flexibility
Amparar 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,
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22
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
23
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
24
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,
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25
Survey area
KANO
405
Households
LAGOS
604
Households
MATS SCHOOL OF BUSINESS,
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26
Sample distribution - Lagos
№
Survey areas
No of household
1 Agege-Iyanpaja-Ogba
119
2 Badagry
20
3 Ikorodu
71
4 Ikeja
65
5 Ketu
43
6 Mushin
28
7 Orile Iganmu
44
8 Oshodi
93
9 Oworoshoki
54
10 Surulere
TOTAL
MATS SCHOOL OF BUSINESS,
BANGALORE
68
604
27
Sample distribution - Kano
№
Survey areas
No of household
1 Zango
45
2 Gwale
70
3 Kano Municipal
5
4 Nassarawa
17
5 Fagge
22
6 Dala
22
7 Kawo
76
8 Kabuga
28
9 Kofar Nassarawa
16
10 Ungogo
Sub-total
MATS SCHOOL OF BUSINESS,
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1
302
28
Sample distribution - Kano
№
Survey areas
No of household
11 Ungwar Uku
22
12 Mariri
27
13 Tarauni
25
14 Badawa
8
15 Kofar Mazugal
1
16 Tudu Wada
3
17 Wudil
6
18 Danbata
7
19 Jambulo
4
TOTAL
405
MATS SCHOOL OF BUSINESS,
BANGALORE
29
Demography of households
Criteria
Gender
Marital status
Education level
Household Heads
Lagos % Kano %
Male
94.8
86.9
Female
5.2
13.1
Single
24.0
11.1
Married/with partner
68.9
85.4
Separated/divorced
3.3
1.5
Widowed
3.8
2.0
No schooling
6.6
14.3
Primary
5.3
16.8
Incomplete Secondary
6.6
9.9
Completed Secondary
31.3
26.7
Vocational/Special Secondary
20.7
4.2
Higher
29.5
28.1
MATS SCHOOL OF BUSINESS,
BANGALORE
30
Demography of households
Criteria
Age
Disability
Chronic illness
Household size
(continued)
Household Heads Lagos % Kano %
18 to 34
34.4
35.3
35 to 44
36.4
30.1
45 to 65
25.8
31.9
Over 65
3.4
2.7
Household heads
0.7
3.2
All members
0.6
1.6
Household heads
17.4
32.6
All members
25.4
30.9
4 or less
62.0
32.5
5
18.0
23.9
More than
5 SCHOOL OF BUSINESS, 20.0
MATS
43.6
BANGALORE
31
Source of income
Lagos %
Kano %
38.1
Permanent
Temporary
35.7
29.4
6.3
Trade Activities
Skilled Labour
Agriculture
Services
Livestock
Manufacturing
53.8
41.3
5.7
2.4
3.4
0.6
0.4
57.4
36.5
6.2
9.3
2.6
2.3
0.5
Pensioners
1.7
1.9
Social benefits/grants
0.6
1.2
Employed
Self employed
Remittances
8.4
External
4.4
Internal
4.0
MATS SCHOOL OF BUSINESS,
BANGALORE
30.9
7.2
14
0.7
0.7
32
Poverty level
– by poverty scoring
Lagos %
Kano %
-
2.0
Poor
13.4
44.4
Vulnerable poor
66.6
52.4
Vulnerable non-poor
20.0
1.2
Extreme poor
MATS SCHOOL OF BUSINESS,
BANGALORE
33
Monthly earning
MONTHLY HOUSEHOLD INCOME
Lagos %
Kano %
Below N 20,000
6.5
8.4
N 20,000 to N 30,000
5.3
40.8
N 30,001 to N 40,000
1.2
19.5
N 40,001 and N 50,000
2.0
13.8
Above N 50,000
4.0
17.5
81.0
-
Did not answer/could not decide
MATS SCHOOL OF BUSINESS,
BANGALORE
34
Monthly disposable income
MONTHLY DISPOSABLE INCOME
Lagos %
Kano %
Below N 1,000
0.7
9.0
N 1,001 to N 2,000
1.3
10.9
N 2,001 to N 3,000
4.0
19.3
N 3,001 to N 4,000
2.5
11.1
N 4,001 to N 5,000
1.8
6.4
N 5,001 to N 6,000
1.2
2.2
N 6,001 to N 7,000
1.2
3.7
N 7,001 to N 8,000
0.5
4.0
N 8,001 to N 9,000
0.5
4.2
N 9,001 to N 10,000
0.5
3.0
Above N 10,000
MATS SCHOOL OF BUSINESS,
4.8
BANGALORE
26.2
35
Risk events faced
– in past 3 years
RISK EVENTS FACED IN PAST 3 YEARS
100.0
90.0
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
-
92.1
70.2
39.8
15.9
Lagos
18.3
5.8
Kano
14.3 10.3
8.8
8.1
7.0
8.6
5.2
3.0
3.7
3.5
4.1
2.7
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MATS SCHOOL OF BUSINESS,
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36
Risk events faced more than once – in past 3 years
RISK FACED MORE THAN ONCE IN PAST 3 YEARS
60.0
49.9
50.0
43.7
40.0
Lagos
30.0
Kano
22.7
17.9 16.5
20.0
7.9
10.0
1.7
3.2
2.0 2.0
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Th
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SCHOOL aOF
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BANGALORE
ob
be
ry
an
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of
pr
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ty
su
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37
-
Risks most difficult to cope with
in past 3 years
RISK EVENTS MOST DIFFICULT TO COPE WITH
19.8
4.3
3.3
5.9
5.1 4.4
4.20
1.66
Death of the
bread-winner
8.9
Damage to
property/assets
Illness requiring
hospitalisation
and treatment
Illness requiring
out-patient
treatment
7.8
Lagos
Death - natural
22.5
16.3
Illness requiring
hospitalisation
and surgery
29.8
26.4
Minor illness
35.0
30.0
25.0
20.0
15.0
10.0
5.0
-
MATS SCHOOL OF BUSINESS,
BANGALORE
Kano
38
Minor illness
– number of times faced in past 3 years
MINOR ILLNESS - NO OF TIMES FACED BY HOUSEHOLDS IN
PAST 3 YEARS
45.7
39.9
50.0
40.0
42.2
29.8
26.5
30.0
Kano
20.0
10.0
Lagos
7.9
3.0 4.0
0.8 0.2
None
Upto 10 times
11 to 20
times
Above 20
times
MATS SCHOOL OF BUSINESS,
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Hard to say
39
Source of funds
- in past 3 years
WHERE DID YOU FIND THE MONEY
80.5
78.8
Lagos
1.8 4.2
0.8 3.7
1.7 2.2
10.9
2.2
Insurance
Getting
Additional Job
No coping
action taken
Selling
Animals,fruits
and others
1.3
6.9
Donation from
relatives and
friends
Kano
Using own
fund,depleting
savings
90.0
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
-
MATS SCHOOL OF BUSINESS,
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40
Knowledge about insurance products
KNOWLEDGE OF INSURANCE PRODUCTS
36.5
33.4
49.4
34.9
Lagos
22.8
3.6 0.5
Life
Kano
4.0 5.7
Accident/Disability
Property - vehicle
Health
7.4
Do not know any
of insurance
product
60.0
50.0
40.0
30.0
20.0
10.0
-
MATS SCHOOL OF BUSINESS,
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41
Name of Insurers
LAGOS
KANO
1
AIICO
1
Capital
2
Niger Insurance
2
Law and Rock
3
IGI
3
Finin
4
Leadway
4
Nicon
5
Nicon
5
Union
6
Standard Alliance
6
Trustway
7
Royal Exchange
7
Leadway
8
Oasis
8
Access
9
Cornerstone
9
Royal Exchange
10
Great Nigeria
10
AIICO
MATS SCHOOL OF BUSINESS,
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42
Did you have any insurance – in past 5 years
INSURANCE USAGE IN PAST 5 YEARS
100.0
88.6
81.1
80.0
60.0
Lagos
40.0
Kano
20.0
10.9 8.4
7.1
2.5
0.9
0.5
-
No
Used to have
Have now
Hard to say
MATS SCHOOL OF BUSINESS,
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43
What type of insurance you had – in past 5 years
WHAT TYPE OF INSURANCE YOU USED TO HAVE/HAVE NOW
10.0
8.0
8.9
6.8 6.9
6.0
Lagos
3.2
4.0
Kano
2.3
2.0
0.5
0.5
-
Health
Property vehicle
Life
Livestock
MATS SCHOOL OF BUSINESS,
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44
Which concept product will you buy - %
LAGOS %
KANO %
Health
73.2
69.6
Property
25.8
31.4
Life
29.1
14.6
Funeral
22.5
7.2
MATS SCHOOL OF BUSINESS,
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45
Priority
PRIORITY IN SELECTING INSURANCE PRODUCT
70.0
61.7
60.0
50.0
40.6
40.0
Lagos
24.9
30.0
23.1
20.0
Kano
22.0
10.6
12.5
4.6
10.0
Health
Property
Life
Funeral/Burial
MATS SCHOOL OF BUSINESS,
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46
Preferred frequency of payment
FREQUENCY OF PREMIUM PAYMENT
60.0
53.1 51.1
50.0
40.0
Lagos
27.8 27.4
30.0
Kano
20.0
7.9
10.0
10.4
5.0
7.7
6.1
3.5
Monthly
Quarterly
Half-yearly
Yearly
Hard to say
MATS SCHOOL OF BUSINESS,
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47
Health insurance
– how many people
HEALTH INSURANCE - HOW MANY PERSONS TO BE
INCLUDED
30.0
25.0
20.0
15.0
10.0
5.0
-
27.7
9.0
6.4
13.5
11.5
13.8
19.9
22.2
18.1
18.4
16.7
Lagos
13.3
7.2
Kano
2.1
1 Person
2
Persons
3
4
5
Persons Persons Persons
6 and
above
Persons
MATS SCHOOL OF BUSINESS,
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Hard to
say
48
Attitude towards insurance
WHY DIDN'T YOU BUY INSURANCE
35.0
30.0
25.0
20.0
15.0
10.0
5.0
-
31.1 31.6
23.5
13.1
8.3
I never though
I don't know
of insurance how insurance
works; I need
more
information
14.1
I never heard
about
insurance
Lagos
5.1 8.6
Kano
No body
approached
me to buy
insurance
MATS SCHOOL OF BUSINESS,
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49
Attitude towards insurance -
Kano
2.7
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
4.2
Unaware
Misinformed
Uneducated
Never thought about insurance,
would like to know more about
insurance, does not know where
to buy insurance
93.1
MATS SCHOOL OF BUSINESS,
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50
Attitude towards insurance
Insurance is a waste of money
Insurance too expensive, no trust in
insurers, long and difficult to collect
claims from insurance company
Believes in the benefits of insurance
11.4
- Lagos
Other reasons for not buying insurance
0.3
11.1
Never thought about insurance, would
like to know more about insurance,
does not know where to buy insurance
Unaware
Misinformed
Uneducated
Other reasons
77.2
MATS SCHOOL OF BUSINESS,
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51
Market development projection
MARKET DEVELOPMENT PROJECTIONS
60.0
50.0
40.0
30.0
20.0
10.0
-
55.1
44.2
32.6
23.2
15.1
Market
available now
Lagos
20.5
8.1
Market ready Market that can
for expansion
be created
in future
through
awareness
building
Kano
1.2
Market not
available
MATS SCHOOL OF BUSINESS,
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52
Regulatory issues


Insurance regulations in Nigeria
How regulations can help growth of
microinsurance
MATS SCHOOL OF BUSINESS,
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53
Thank you…
for the
Central Bank
of Nigeria
Mosleh U Ahmed
FCA
GIZ Consultant
Mosleh.ahmed@btinternet.com
MATS SCHOOL OF BUSINESS,
BANGALORE
54