Microinsurance Conference in Munich 18-20 October 2005 Coverage - - PDF document

Microinsurance Conference in Munich 18-20 October 2005

• Coverage

– Death due to accident or natural causes – Permanent or total disability – Hospitalization

• Compensation

– Lump sums in case of death or disability – Monthly awards during hostpitalization (max 15 days)

• Premiums payable

– Varying from 10 LKR to 100 LKR per month for:

• Household with no children
• One parent with children

– Household with children from LKR 15 to 150 – Other adult > 18 years from LKR 5 to 50

• Compensation varying to selected premium

– Accidental death LKR 6000 to 60000 – Death due to natural causes LKR 3000 to 30000 – Permanent disability LKR 12000 to 120000 – Sudden death of child LKR 3000 – Sudden death between 65 and 75 LKR 3000 to 6000 – Hospitalization LKR 30 to 300 per month

• The product is well adapted to suit the

needs of the traget group

– Simple to explain and administer – Affordable – Influence on product development by the members – Most of the members are women

• Question marks

– Sustainability

• Actuarial analysis of product and price
• Viability of product

– Inflation

• Decreases the value of compensation
• Administration costs will consume a larger part of

the premium

• Control of administration costs vital

• Question marks, cont.

– Monetary subsidies will cease during 2005 – To compensate, increase in premium income of 60 % necessary – Reinsurance cover may have to be renegotiated – Increase in claims may cause a reduction of amounts put into members’ accounts – Retention rates must be increased in order not to cause bad will among the members – Still an ”illegal” insurance service according to IBSL

• Recommendations

– Actuarial expertise to evaluate premiums and funds – Extend number of partners – Find ways of covering up for loss of subsidies – Reinsurance arrangements for ”hospitalization” – New methods of premium collection to increase retention rates – Adjustment for inflation

ALMAO

• Simple and affordable product

that can easily be understood

• Start as an agent; no capital

required, access to profession

• Build equity if you want to

develop to an insurance comp

• Provide death cover, avoid

maturity

Yasiru

• Identify established partners

carefully, dialogue

• Make a thorough situation

analysis

• Need analysis in dialogue with

target group

• Mutual system with democratic

control

• Take care to involve people
• Government funding scarce
• Microinsurance a private sector operation
• Demand driven complement to Government

social security

• Builds long term capital

• Low penetration by insurance industry
• Why limit to the poorest segments?
• Middle and low income groups need service

and may become good clients

• Their involvement may be necessary to

make service viable

• Depletes benefits and premiums
• Costs increase
• Creates disappointments
• In Sri Lanka: lower returns on safe

investments

• Schemes need tools to reduce effects

• Will create negative

attitudes

• May destroy the future

market

• Compare poor

agricultural credit schemes

COUNTER MEASURES

• Do not reduce

commission

• Build members’

accounts

• Allow withdrawals

every fifth year

• Mindsetting exercises
• Governments do not facilitate

microinsurance because they are unaware

• Develop education and promotion material
• Organise meetings, seminars and

conferences

• Develop models for both systems and legal

framework