for the central bank of nigeria by: mosleh u ahmed fca giz consultant mosleh.ahmed@btinternet
DESCRIPTION
MICROINSURANCE a presentation at the 5 th Annual Microfinance Conference and Entrepreneurship Award. For the Central Bank of Nigeria by: Mosleh U Ahmed FCA GIZ Consultant [email protected]. Outline. Microinsurance basics The demand side of microinsurance - PowerPoint PPT PresentationTRANSCRIPT
MATS SCHOOL OF BUSINESS, BANGALORE 1
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
MATS SCHOOL OF BUSINESS, BANGALORE 2
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 Regulatory issues
MATS SCHOOL OF BUSINESS, BANGALORE 3
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 4
Microinsurance is……….
Risk management tool Loss protection mechanism
5
MICROINSURANCE
Microsavings MicrocreditMicrofinance
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.
Introduction to Microinsurance
6
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.
Defining Microinsurance
7
Defining Microinsurance
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;
Insurance for low-income people.Insurance involving low levels of premiums.
8
Microinsurance Basics
The microinsurance business model is ‘social’ business where solving social problems is motivating the business instead of maximizing profits.
Microinsurance products typically have a low return on equity
It is a contract to prevent low income people from facing severe financial problems when faced with unexpected risks events.
9
Microinsurance Basics
The government or the donors would not
subsidise any part of the premium.
In exchange for insurance protection, the low-
income people pay a small premium.
MATS SCHOOL OF BUSINESS, BANGALORE 10
Risk Pooling
Risk Pooling is bringing together resourcesfrom 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 11
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 12
Life Cycle Need of the Poor
Birth (C, H, I, S)
Marriage (C, S,
Sc)Death (C,I, Sc)
Training & Education (E, Sc)
Health (C,S,I)
Fixed Asset Acquisition (C)
Old Age (H, I, S, Sc) Asset
Protection (I)
Religious Ceremony (C,S, Sc)
Working Capital (C)
Investments (S)
C = Credit; E = Education; H = Healthcare; I = Insurance; S = Savings; Sc = Social
MATS SCHOOL OF BUSINESS, BANGALORE 13
Destitute
Loan Cycles and Impact of Losses
Econ
om
ic L
evels
Wealthy
Non-poor
Moderate poor
Poverty Line
Impact of Microcredit and Losses
Extreme poor
Vulnerable non-poor
14
MATS SCHOOL OF BUSINESS, BANGALORE 15
DestituteExtremePoor
ModeratePoor
POVERTY
L INE
VulnerableNon-Poor
Non-Poor Wealthy
Not insuredby anyone
Micro-InsuranceClients
Microinsurance Clients
Traditional Insurance Clients
MATS SCHOOL OF BUSINESS, BANGALORE 16
Delivery Channels
Insurance Companies
MFIs NBFIsBanks
Insurance Agents
Self-help Groups
Low-income Households
Field Workers
Health WorkersVolunteers
Cr. Unions
On-line, ATM Mobile Phones
Employees
Existing and new channels of delivery for microinsurance productsAdopted from a presentation made by Dr. B Helms, CGAP
MATS SCHOOL OF BUSINESS, BANGALORE 17
Different Microinsurance Models
Community-Based Model (UPLIFT, India) Owned and Managed by Members
Insurer/Limited Provider Model (GRET, Cambodia) 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)
18
Different Microinsurance Products
Life/Endowment/Credit LifeIndia, Bangladesh, Sri Lanka, Nepal, Vietnam, Pakistan, Indonesia, Laos,East Africa, South Africa, West AfricaColombia, Guatemala, Mexico, Nicaragua
Health/Critical IllnessIndia, Bangladesh, Philippines, Cambodia, China East Africa, South Africa, West AfricaColombia, MexicoGeorgia, Russia
Group Personal Accident West Africa
UnemploymentEast Africa
Crop/WeatherIndiaEast Africa, North AfricaMexico, Nicaragua
Property/Livestock/AssetsIndia, Mongolia, NepalEast AfricaAlbania
Funeral Insurance East Africa, South Africa, West AfricaColombia, Mexico
Bundled Insurance PackageIndiaColombia
Rural Insurance SchemesIndia
Flood InsuranceChina, Indonesia, Vietnam
MATS SCHOOL OF BUSINESS, BANGALORE 19
Relative Complexity of Microinsurance Products
Crop/Weather Insurance
Integrated Insurance Packages
Health/Disability Insurance
Annuities/Endowment Property/Livestock Insurance Indemnity/Personal Accident
Life/Credit Life Insurance
More ComplexMore Complex
More SimpleMore Simple
MATS SCHOOL OF BUSINESS, BANGALORE 20
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, BANGALORE 21
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 22
Life Insurance with FlexibilityAmparar 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 deathChild education expenses for 2 yearsMedical expense for dependentsMonthly food vouchersUtility bills
MATS SCHOOL OF BUSINESS, BANGALORE 23
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 24
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
World Bank/GIZ Microinsurance Survey in Lagos and Kano
MATS SCHOOL OF BUSINESS, BANGALORE 25
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
Methodology
MATS SCHOOL OF BUSINESS, BANGALORE 26
Survey area
LAGOS604
Households
KANO405
Households
MATS SCHOOL OF BUSINESS, BANGALORE 27
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 68
TOTAL 604
MATS SCHOOL OF BUSINESS, BANGALORE 28
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 1
Sub-total 302
MATS SCHOOL OF BUSINESS, BANGALORE 29
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 30
Demography of households
Criteria Household Heads Lagos % Kano %
Gender Male 94.8 86.9
Female 5.2 13.1
Marital status Single 24.0 11.1
Married/with partner 68.9 85.4
Separated/divorced 3.3 1.5
Widowed 3.8 2.0
Education level 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 31
Demography of households (continued)
Criteria Household Heads
Lagos %
Kano %
Age 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
Disability Household heads 0.7 3.2
All members 0.6 1.6
Chronic illness Household heads 17.4 32.6
All members 25.4 30.9
Household size 4 or less 62.0 32.5
5 18.0 23.9
More than 5 20.0 43.6
MATS SCHOOL OF BUSINESS, BANGALORE 32
Source of incomeLagos % Kano %
EmployedPermanentTemporary
35.729.46.3
38.1 30.97.2
Self employedTrade Activities
Skilled LabourAgriculture
ServicesLivestock
Manufacturing
53.841.35.72.43.40.60.4
57.436.56.29.32.62.30.5
Pensioners 1.7 1.9
Social benefits/grants 0.6 1.2
RemittancesExternalInternal
8.44.44.0
140.7
0.7
MATS SCHOOL OF BUSINESS, BANGALORE 33
Poverty level – by poverty scoring
Lagos % Kano %
Extreme poor - 2.0
Poor 13.4 44.4
Vulnerable poor 66.6 52.4
Vulnerable non-poor
20.0 1.2
MATS SCHOOL OF BUSINESS, BANGALORE 34
Monthly earningMONTHLY 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
Did not answer/could not decide 81.0 -
MATS SCHOOL OF BUSINESS, BANGALORE 35
Monthly disposable incomeMONTHLY 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 4.8 26.2
MATS SCHOOL OF BUSINESS, BANGALORE 36
Risk events faced – in past 3 years
RISK EVENTS FACED IN PAST 3 YEARS
70.2
15.9
5.8 7.0 3.0 3.5
18.314.3
8.12.7
4.18.810.3 3.75.28.6
39.8
92.1
-10.020.030.040.050.060.070.080.090.0
100.0
Minor illness
Illness requiring hospitalisation and treatment
Death - natural
Illness requiring hospitalisation and surgery
Loss of job
Loss of source of income
Death of breadwinner
Death - unexpected
Theft/robbery of property
Lagos
Kano
MATS SCHOOL OF BUSINESS, BANGALORE 37
Risk events faced more than once – in past 3 years
RISK FACED MORE THAN ONCE IN PAST 3 YEARS
43.7
7.9
17.9
1.7 2.0
49.9
22.7
3.2 2.0
16.5
-
10.0
20.0
30.0
40.0
50.0
60.0
Minor illness
Illness requiring hospitalisation and treatment
Illness requiring out-patient visit
Illness requiring hospitalisation and surgery
Theft/robbery of property
Lagos
Kano
MATS SCHOOL OF BUSINESS, BANGALORE 38
Risks most difficult to cope with - in past 3 years
RISK EVENTS MOST DIFFICULT TO COPE WITH
29.8
22.5
7.84.3 3.3 5.1
1.66
26.4
16.319.8
8.95.9 4.4 4.20
-5.0
10.015.020.025.030.035.0
Min
or il
lnes
s
Illne
ss r
equi
ring
out-
patie
nttr
eatm
ent
Illne
ss r
equi
ring
hosp
italis
atio
nan
d tr
eatm
ent
Illne
ss r
equi
ring
hosp
italis
atio
nan
d su
rger
y
Dea
th -
nat
ural
Dam
age
topr
oper
ty/a
sset
s
Dea
th o
f the
brea
d-w
inne
r
Lagos
Kano
MATS SCHOOL OF BUSINESS, BANGALORE 39
Minor illness – number of times faced in past 3 years
MINOR ILLNESS - NO OF TIMES FACED BY HOUSEHOLDS IN PAST 3 YEARS
39.9
3.0 0.8
26.5
7.9
45.7
4.00.2
42.2
29.8
-
10.0
20.0
30.0
40.0
50.0
None Upto 10 times 11 to 20times
Above 20times
Hard to say
Lagos
Kano
MATS SCHOOL OF BUSINESS, BANGALORE 40
Source of funds - in past 3 years
WHERE DID YOU FIND THE MONEY
80.5
1.3 1.8 0.8 1.710.96.9 4.2 3.7 2.2 2.2
78.8
-10.020.030.040.050.060.070.080.090.0
Usi
ng o
wn
fund
,dep
letin
gsa
ving
s
Sel
ling
Ani
mal
s,fr
uits
and
othe
rs
Don
atio
n fr
omre
lativ
es a
ndfr
iend
s
Insu
ranc
e
Get
ting
Add
ition
al J
ob
No
copi
ngac
tion
take
n
Lagos
Kano
MATS SCHOOL OF BUSINESS, BANGALORE 41
Knowledge about insurance products
KNOWLEDGE OF INSURANCE PRODUCTS
33.4 34.9
22.8
4.0 3.6
49.4
7.4 5.70.5
36.5
-10.020.030.040.050.060.0
Do
not k
now
any
of in
sura
nce
prod
uct Hea
lth
Pro
pert
y -
vehi
cle
Acc
iden
t/Dis
abilit
y
Life
Lagos
Kano
MATS SCHOOL OF BUSINESS, BANGALORE 42
Name of Insurers
KANO
1 Capital
2 Law and Rock
3 Finin
4 Nicon
5 Union
6 Trustway
7 Leadway
8 Access
9 Royal Exchange
10 AIICO
LAGOS
1 AIICO
2 Niger Insurance
3 IGI
4 Leadway
5 Nicon
6 Standard Alliance
7 Royal Exchange
8 Oasis
9 Cornerstone
10 Great Nigeria
MATS SCHOOL OF BUSINESS, BANGALORE 43
Did you have any insurance – in past 5 years
INSURANCE USAGE IN PAST 5 YEARS
81.1
10.9 7.10.9
8.42.5 0.5
88.6
-
20.0
40.0
60.0
80.0
100.0
No Used to have Have now Hard to say
Lagos
Kano
MATS SCHOOL OF BUSINESS, BANGALORE 44
What type of insurance you had – in past 5 years
WHAT TYPE OF INSURANCE YOU USED TO HAVE/HAVE NOW
6.8
8.9
2.3
0.5
6.9
3.2
0.5-
-
2.0
4.0
6.0
8.0
10.0
Health Property -vehicle
Life Livestock
Lagos
Kano
MATS SCHOOL OF BUSINESS, BANGALORE 45
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, BANGALORE 46
Priority
PRIORITY IN SELECTING INSURANCE PRODUCT
40.6
12.5
61.7
10.64.6
22.0
24.9
23.1
-
10.0
20.0
30.0
40.0
50.0
60.0
70.0
Health Property Life Funeral/Burial
Lagos
Kano
MATS SCHOOL OF BUSINESS, BANGALORE 47
Preferred frequency of payment
FREQUENCY OF PREMIUM PAYMENT
7.95.0 6.1
10.47.7
3.5
27.8
53.1
27.4
51.1
-
10.0
20.0
30.0
40.0
50.0
60.0
Monthly Quarterly Half-yearly Yearly Hard to say
Lagos
Kano
MATS SCHOOL OF BUSINESS, BANGALORE 48
Health insurance – how many
people
HEALTH INSURANCE - HOW MANY PERSONS TO BE INCLUDED
11.513.3
19.922.2
16.7
7.26.4
27.7
18.1
2.1
9.0
18.413.813.5
-5.0
10.015.020.025.030.0
1 Person 2Persons
3Persons
4Persons
5Persons
6 andabove
Persons
Hard tosay
Lagos
Kano
MATS SCHOOL OF BUSINESS, BANGALORE 49
Attitude towards insurance
WHY DIDN'T YOU BUY INSURANCE
31.1
13.18.3 5.1
31.623.5
14.18.6
-5.0
10.015.020.025.030.035.0
I never thoughof insurance
I don't knowhow insuranceworks; I need
moreinformation
I never heardabout
insurance
No bodyapproached
me to buyinsurance
Lagos
Kano
MATS SCHOOL OF BUSINESS, BANGALORE 50
Attitude towards insurance - Kano
2.7
4.2
93.1
Unaware
Misinformed
Uneducated
Never thought about insurance, would like to know more about insurance, does not know where to buy insurance
Insurance too expensive, no trust in insurers, long and difficult to collect claims from insurance companyBelieves in the benefits of insurance
Insurance is a waste of money
MATS SCHOOL OF BUSINESS, BANGALORE 51
Attitude towards insurance - Lagos
0.3
11.4
11.1
77.2
UnawareMisinformedUneducatedOther reasons
Insurance is a waste of money
Insurance too expensive, no trust in insurers, long and difficult to collect claims from insurance companyBelieves in the benefits of insurance
Never thought about insurance, would like to know more about insurance, does not know where to buy insurance
Other reasons for not buying insurance
MATS SCHOOL OF BUSINESS, BANGALORE 52
Market development projection
MARKET DEVELOPMENT PROJECTIONS
15.1
44.2
32.6
8.1
23.2
55.1
20.5
1.2
-10.020.030.040.050.060.0
Marketavailable now
Market readyfor expansion
in future
Market that canbe created
throughawareness
building
Market notavailable
Lagos
Kano
MATS SCHOOL OF BUSINESS, BANGALORE 53
Regulatory issues
Insurance regulations in Nigeria How regulations can help growth of
microinsurance
MATS SCHOOL OF BUSINESS, BANGALORE 54
Thank you…
for the
Central Bankof Nigeria
Mosleh U Ahmed FCA