«Protecting the poor A microinsurance compendium Edited by Craig Churchill Protecting the poor A microinsurance compendium Protecting the poor A ...»
2. Develop product prototype Based on the market research and institutional assessment, the TA provider can facilitate the development of a prototype product.
3. Price the product If management accepts the prototype, the product needs to be priced. In the case of a risk carrier working with a delivery channel, the assessment needs to
determine what rate the insurer will charge, as well as the delivery costs. The combination of the two is what the client is charged.
4. Develop process maps External advisors can help design the workflow and paper trail to maximize efficiency.
5. Design operations and marketing materials Before initiating the pilot test, it is useful to have operations manuals, staff training modules, and marketing materials. The marketing focus should be on the development of effective client education materials and techniques.
6. Configure MIS The management information system (MIS) needs to be adapted to accommodate the new product. For an MFI, to keep insurance separate from savings and credit activities it would be appropriate to install a separate accounting system as well as a suitable tracking system and claims management package.
7. Train staff Initial training is required for staff who will be involved in pilot testing (and in some cases client training as well). For existing organizations, strategies for overcoming employee resistance to change need to be carefully considered.
8. Evaluate the pilot Prior to the pilot test, it is important to establish targets that would be considered a success. The TA provider can conduct a review of the pilot test to assess what adjustments are required prior to rollout.
9. Establish a monitoring system A monitoring system needs to be put in place to track claims, service standards, efficiency and profitability. TA providers can ensure that the system meets management’s need for information while monitoring internationally accepted ratios.
10. Link with insurers and reinsurers If required, the TA provider could assist in negotiations with insurers or reinsurers. Providing a link with reinsurers is especially useful when the insurance market is reluctant to provide cover for the low-income market or for a particular product line (e.g. health or agricultural cover).
The provision of technical assistance 549 Technical assistance is also quite relevant for organizational development, to assist insurers as they evolve over time. Even for successful programmes, external support can be beneficial in preparing a business plan, reviewing management and administrative processes, strengthening governance practices, improving information systems and so on. Actuarial reviews are especially critical to regularly reassess pricing, reserves and product design features (see Box 104). By seeking to professionalize microinsurance providers, technical assistance can help organizations serve their clients better and become more competitive.
These interventions can be supplied by a TA provider on a one-off basis, through a series of short-term assignments, or during a long-term, on-site consultancy. The appropriate length of the involvement will depend on the type of activity and the budget available, but often better-quality assistance comes from those with a longer-term commitment, either on an intermittent or on-site basis. On-site technical experts might take on the role of manager of the insurance scheme, or manage particular operational aspects, such as underwriting, claims processing or insurance accounting. Another key role of on-site advisors is to train local staff, but this is an expensive approach.
The pros and cons of long-term, on-site support are summarized in Table 51.
Advantages and disadvantages of long-term, on-site TA support Table 51
3 Who provides microinsurance technical assistance?
To help overcome the tremendous gap between microinsurance supply and demand, and the challenging chasm between risk carriers and potential delivery channels, TA providers have to be experienced persons with technical and business expertise. Since microinsurance is a relatively new field, TA providers usually come from two different backgrounds: 1) microfinance or health experts who have learned about insurance or 2) insurance experts who have learned about the design and delivery of insurance to the poor.
Many different individuals and institutions are involved in delivering microinsurance technical assistance. The main categories include 1) insurance companies or professionals, 2) international technical cooperation agencies, which can be governmental or multilateral and 3) international development organizations, which are non-governmental. The review of TA providers The provision of technical assistance 551 below is not comprehensive or exhaustive. The details of representative providers are listed here to illustrate the types of organizations and persons involved in providing TA, and their diversity of backgrounds and motivations. Drawn primarily from the case studies, the descriptions of TA providers should not be considered to be endorsements of their services.
3.1 Insurance companies, associations and professionals If microinsurance technical assistance had a vanguard, two organizations would claim to be in it: CUNA Mutual and ICMIF.
In the 1970s and 1980s, CUNA Mutual, the United States-based insurance company for credit unions, has also pursued an international development agenda based on cooperative principles. Before anyone used the expression “microinsurance”, CUNA Mutual had propagated loan protection and life savings products in credit union associations and mutual insurance companies around the world, including MUSCCO, TUW SKOK (Poland) and ALMAO (Sri Lanka).3 Besides TA, CUNA Mutual has also made investments in local insurers and provided reinsurance.
By the time microinsurance became known more widely, however, CUNA Mutual had undergone a strategic rethink and largely withdrawn from the realm of microinsurance technical assistance. Yet its legacy remains, with several cooperative-owned insurance companies (and unregulated schemes managed by apex bodies) still operating in many countries. As described in Chapter 4.1, CUNA Mutual’s strategy was to keep it simple.
Since the insurers’ main distribution channel was the credit unions, which lacked insurance expertise, its TA recipients only offered basic products in conjunction with their core services.
What CUNA Mutual did globally for the credit union movement was what, generally speaking, another organization accomplished on a broader scale for the umbrella cooperative movement around the world: the International Cooperative and Mutual Insurance Federation (ICMIF), and its regional associations in the Americas, Asia and Europe. Having formally begun technical assistance in 1963, the federation has helped popularly based organizations set up some 25 new cooperative and mutual insurers, besides providing continuing problem-solving guidance to developing insurers within its ranks. Its technical assistance in some cases is coupled with financial 3 The insurance schemes supported by CUNA Mutual were not all “microinsurers”. Many credit unions affiliated with CUNA-supported insurers are employer-based and therefore serve as supplementary coverage for persons working in the formal economy. However, many credit unions do include low-income persons, including those in the informal economy, and therefore CUNA Mutual’s experiences are quite relevant for microinsurers and TA providers alike.
552 The role of other stakeholders support from its funding arm, Allnations Inc, to assist emerging insurers in raising capital and meeting regulatory requirements.
The federation’s regional association for the Americas has had a notable track record of insurance development work. The Americas Association of Cooperative/Mutual Insurance Societies (AAC/MIS) provides technical assistance and grants programmes – funded by USAID as well as the established insurer-members of AAC/MIS – to numerous insurance companies in the region. Many of AAC/MIS’ technical assistance recipients over the years, such as La Equidad Seguros in Colombia, have had an interest in reaching out and serving poorer populations. For its 35 popularly based members in Latin America and the Caribbean, AAC/MIS, like ICMIF globally, offers technical assistance, including member-to-member TA, and educational opportunities to new and emerging member societies based on the principles of mutual self-help, democracy in ownership and governance, and equitable sharing of gains and losses.
The TA provided by ICMIF and AAC/MIS is demand-driven, as the association responds to requests from organizations that ask for assistance in forming their own insurance agency, department or company. Both AAC/MIS and ICMIF also assist their members in obtaining reinsurance, often from other network members. For example, ALMAO is reinsured by NTUC Income in Singapore, an arrangement brokered by ICMIF since both are members of the federation.
An emerging player in international development work is the Rabobank Foundation, part of the Rabobank Group in the Netherlands. Its focus is to develop awareness of the benefits of cooperative banking and microinsurance. In line with the focus of the foundation, another subsidiary of the group, Interpolis Re, offers expertise to assist local organizations in developing countries in setting up microinsurance schemes – in addition to providing reinsurance. In 2000, for example, Interpolis started supporting Yasiru in Sri Lanka with a package of assistance including funding from the foundation along with TA, information systems and reinsurance.
Interpolis actively participates in the recently created Micro Insurance Association Netherlands (MIAN), which mobilizes Dutch insurance experts, including volunteers from Interpolis, to provide microinsurance technical assistance as part of the company’s corporate social responsibility.
Insurance expertise is also finding its way into microinsurance through actuaries and other insurance professionals from Europe and North America who have decided to apply their skills in developing-country contexts.
For example, CGAP funded an actuarial and management consultant to assist VimoSEWA in India from 2002 to 2004. International actuarial consultants have also worked with Spandana and Yeshasvini in India, Grameen The provision of technical assistance 553 Kalyan (Bangladesh), CARD MBA (Philippines), TYM (Viet Nam), MUSCCO and others. This development is particularly interesting because it begins to bridge the gap between those with insurance expertise and those who understand the low-income market. By rolling up their shirtsleeves and getting out into the field, these consultants are creating a new class of microinsurance experts.
3.2 International technical cooperation agencies GTZ implements development projects on behalf of the German Government mainly for the Federal Ministry for Economic Cooperation and Development (BMZ). After a first pilot project on microinsurance with SEWA in 1994, GTZ expanded its microinsurance technical assistance to other NGOs and MFIs. However, usually GTZ provides its services on microinsurance in the context of larger social protection, health insurance or financial system development programmes.
A vast range of capacity-building and advisory services is provided by GTZ. For example, MHOs in West Africa were supported in conducting feasibility studies, product design and insurance administration and monitoring systems. Government officials, healthcare providers, insurers and NGOs were trained to provide quality health microinsurance in Cambodia and the Philippines. In Tanzania, GTZ enabled community-based systems to create a strong national federation, which was officially recognized by the government as a provider of health microinsurance. In Chile and Paraguay, GTZ supports community-based systems to complement social protection efforts by the state.
The ILO approaches microinsurance technical assistance from two perspectives: 1) assisting financial sectors in becoming more inclusive and 2) extending social protection to workers in the informal economy. Much of the effort is dedicated to research activities (such as this book and the case studies that it draws upon), as well as developing training materials. In addition, the ILO has also provided technical assistance to microinsurance schemes, particularly those that extend health insurance to the poor.