Presentation made at the 2nd Annual Australasian General Insurance Exchange, which took place in Sidney on March 19-21, 2013.

1. Microinsurance
Providing Meaningful
Protection
John Balmforth
Chairman
International Cooperative and Mutual
Insurance Federation
2nd
Annual General Insurance Exchange
19-21 March 2013
Sydney

2. ICMIF Represents:
Direct members
• 219 members in 72 countries
• Represents 6.1% of world’s insurance market by premiums
• USD 241 billion in premiums
• USD 1.35 trillion in assets
• Over 300,000 staff employed by members
Indirect members
• Includes members of mutual trade associations
• 2,906 members
• With USD 620 billion in premiums
• Represents 14.5% of the world’s insurance market
• Almost one third of membership involved in microinsurance
and Takaful

3. Insurance and Poverty Alleviation
“The poorest citizens of the poorest countries are
typically exposed to the greatest risks.
Earthquakes, floods, drought, disease, crime all
tend to hit the poor hardest. Vulnerability and
poverty go hand in hand, but microinsurance holds
out the promise of breaking a part of the cycle that
ties them together.”
Jonathan Morduch 2006

4. “Microinsurance is the protection of low-income people against specific
perils in exchange for regular premium payments proportionate to the
likelihood and cost of the risk involved”
Protecting the Poor: a microinsurance compendium (Volume II) 2012
“The term “microinsurance” typically refers to adapting insurance services
mainly to clients with low income and no access to mainstream insurance
services.”
Microinsurance Network
“Microinsurance is insurance that is accessed by low-income population,
provided by a variety of different entities, but run in accordance with generally
accepted insurance practices (which should include the Insurance Core
Principles) “
Issues in Regulation & Supervision of Microinsurance, IAIS papers (2007)
What is Microinsurance?

5. Key Characteristics of
Microinsurance
• Low Income People
• Specific Perils
• Limited Access to Mainstream Insurance
Services
• All Business Lines
• Affordable – premiums commensurate with
income
• Various providers
• Variety of channels
• Formal (Regulated) and Informal (Unregulated)
Markets

6. Who is insured by whom?
Source: Craig Churchill

7. Lack of Insurance in Emerging
Markets
• The cooperative and mutual sector
• Microinsurance through cooperatives
• Issues for regulators
• Case study: Mutual microinsurance in practice

8. Microinsurance Potential
Market
• Assume – Income USD 1.25 to USD 8.0 per day
• 2.5 Billion People
• 3 to 4 Billion Policies
• USD 30 to USD 50 Billion Premiums
• Growth 10%pa

9. Is Microinsurance Working?
• 500 million currently covered
• 78 Million in 100 Countries in 2007
• 80% Asia
• 15% Latin America
• 5% Africa
• India 300 million
• China 40 million

10. Is Microinsurance Working?
• Growth driven by commercial insurance sector
• Support from donors and governments
• Focus on numbers
• Recognition Microinsurance needs to be client
focused

11. Microinsurance Challenges
• Coverage
• Regulation
• Moral hazard and Fraud
• Adverse selection
• Education and trust
• Technical expertise
• Affordability
• Retention
• Sustainability
• Penetration

12. ‘The success of microinsurance should not be assessed by measuring
uptake, but by measuring actual impact’
Stefan Dercon, DFID
‘To succeed in this market, it is essential that insurers change their
attitude and adopt an open mind to the particular needs and
characteristics of the market.’
Accenture
‘Microinsurance providers need to understand client needs and
preferences in order to improve their products and processes, and
hence improve client value’
Microinsurance Innovation Facility
‘Mutual's and cooperatives should be better recognised as a distinct
and important form of organisation for insurance provision.’
Arup Chatterjee, ADB

13. Key Attributes for Success
• Understanding and responding to customers
needs
• Value for money
• Customer service and claims management
• Policyholder = member
• Instilling mutual values in staff
• Prevention and risk management
• Community concern
• Financial inclusion

14. Mutual/Cooperative Values
• Self-help, self-responsibility
• Democracy, equality, equity
• Solidarity
• Honesty, openness
• Social responsibility, caring for others
Source: International Cooperative Alliance (ICA)

15. Mutual/Cooperative Advantage
in Microinsurance
• History of organising the poor
• Members Interests - by the members
• Trust
• Ownership and loyalty
• Peer pressure
• Surplus reinvested or redistributed
• Inclusive
• Work together for the common good

16. Challenges for
Mutual/Cooperative
Microinsurance
• Transitioning to formalisation – Regulatory
Compliance
• Governance
• Insurance expertise
• Technical and financial capability
• Working in isolation
• Lack of awareness from stakeholders

17. Does Mutual/Cooperative
Ownership Work in Emerging
Markets?
• ICMIF Members in emerging markets:
• Premiums 2011 up 15.5% on 2010
• Asian members up 20.7%
• Latin American members up 15.6%
• Pre –tax profits USD 447m up 22%
• Assets USD10bn -2011, USD 5.8bn - 2007

18. ICMIF Mentoring Microinsurers
• Development function established in 1963
• Annual Development Network Seminar
• Web site www.microinsurance.coop
• Microinsurance simulation
• Participant in global forums
• Development arm -Allnations -USD1.5m
invested in developing mutual's/coops.

19. Uplift Mutuals, India
Growing from the Grassroots

20. ICMIF Microinsurers
• CARD MBA
• CIC Kenya
• Uplift Health Mutuals

21. Summary
• Microinsurance
• Risk Protection for the Poor
• Integral tool in Poverty Alleviation
• Potential Market over 2.5 billion people
• Client Centred Approach Provides Real Value and
Impact
• Mutual/ Cooperative model highly successful
• Regulation a Key Issue
• Microinsurance Works

22. A Question?
Is microinsurance a solution to
risk management for
Australasia’s poor?

23. ICMIF
A global reach for
local strength
Thank you
www.icmif.org