1. Microinsurance 101
What it is, Why it’s Relevant, and Opportunities for Actuaries
Nanabayin Coleman, ASA, Principal Life
Mitchell Momanyi, FSA, MAAA, Milliman
July 2018
Section topics:
What microinsurance is, who it serves, similarities and departures to traditional coverages
What risks MI products cover
Current global landscape
Distribution in the global MI sector
Roles for actuaries in MI and how to learn more

2. What Microinsurance is
Often hear the word “microinsurance” to describe different things
Size of coverage
The type of coverage (acute or very specific events)
Period of coverage
Cost of coverage
Specifically in this presentation going to talk about insurance products specifically designed to meet the needs of low-income consumers with respect to cost, structure and method of delivery

3. The Microinsurance Market – 3 Billion People
Wealthy
Traditional Insurance Market
Non-poor
Vulnerable non-poor
Potential Insurance Market
Poverty line
Moderate poor
Can access higher level financial services – Traditional insurance clients
Microfinance & Microinsurance target segment
Too poor to access Microfinance or insurance
Very poor
Destitute

4. Users of Microinsurance
Low- to Moderately-low Income, but financially vulnerable
Often informally or self-employed
Likely to be using informal or combination of formal and informal RM and financial tools
Proactive: Savings groups, burial societies refraining from risky economic/investment activity
Reactive: Sale of productive assets to deal with shock events, removal of children from schooling
May have negative perceptions of insurance, distrust that companies will pay claim

5. Microinsurance compared to traditional products
Product Structures
Simple, not a lot of bells and whistles (think the opposite of riders, complex charge structures, AV/CV, shadow accounts, etc.)
Fewer exclusions, minimal to no individual underwriting
Shorter coverage periods
Sometimes designed to adapt to irregular income streams
Delivery
Try to meet consumers at points of transaction/interaction, combined with another transaction
Use of cultural institutions, commercial institutions, individuals that target market trust
Consumer education sometimes a significant component
Claims Validation
Sometimes rely on alternative forms of validation where use of formal records may be limited

6. Types of Products Health (Hospital Cash, Reimbursement)
Property/Livestock
Agricultural/Weather Index
Life (Funeral, Final Expense) and AD&D

7. Global Landscape of Microinsurance
worldmapofmicroinsurance.org

8. Microinsurance Distribution
Variety of alternative distribution methods emerge over past 15 years
Similarity across methods: Design to reach consumer at point of transaction
Some Types
Cash-based retailers (supermarkets, clothing retailers offering simple AD&D, burial products)
Credit-based (furniture, electronic goods stores offering credit life, extended warranty, sometimes AD&D, burial products)
Utilities and Telecoms (disability, unemployment, AD&D, burial covers, health/hospital cash)
From the Microinsurance Compendium, Volume 2 – Chapter 22

9. Characteristics of alternative distribution for MI
Scale through aggregation – reach non-insurance populations by partnering with telecoms, utilities, etc. to get access to their client base
Rely on infrastructure of distribution partner, relationships they have with client base
Multi-purpose transaction platform (utility bill includes insurance premium, airtime payment includes insurance premium, etc.)
Opt-in rather than opt-in – coverage not compulsory with purchase of distribution partner’s product/service
Distribution partner usually a well-trusted brand among client base
From the Microinsurance Compendium, Volume 2 – Chapter 22

10. How Distribution Models Function - Examples
Underwriter
Distribution Partner
Channel Classification
Product
Distribution
Policy-Servicing
Hollard Insurance (South Africa)
*Pep Stores (Clothing and Small Appliances)
Cash-based Retailer
Individual and Family Funeral
Product sold off the shelf, no active staff push. Premiums paid in-store in cash
TPA services policies and manages claims, Pep stores collects cash premiums
Take it Eezi (Informal rural shop vendors using GPRS technology to facilitate airtime, electricity, insurance sales)
Third-Party Bill Payment Provider
Monthly premiums paid to vendor in cash
TPA services policies and manages claims, Take-it-Eezi does registrations and premium collections
Metropolitan Cover2Go (South Africa)
Shoprite (Supermarket, large low-income customer base)
Family Funeral—offers Return of Premium if no claim after 5 years
Product sold off the shelf, no active staff push. Monthly premiums paid in-store in cash
Shoprite does registrations, collects premiums, Cover2Go services policies and manages claims
All South African Mobile Providers
Personal Accident – coverage activated by sending SMS of product code that deducts premium from available airtime
Airtime converted to cash by mobile provider
Mobile provider collects premium and does registrations, Cover2Go services policies and manages claims
MAPFRE (Colombia)
*CONDENSA (Colombian Utility provider)
Utilities and Telecom
Each of Life, personal accident, vehicle, funeral and home covers
Out-bound call center, face-to-face, mass mailings, premium collected via existing bill-payment system
Admin handled by both parties—claims directed to CONDENSA’s call center, operational aspects of claims handled by MAPFRE
ColSeguros (Colombia)
*Carrefour (International Retailer)
Personal Accident – Premium equal to change from retail transaction
Cover offered after transaction completed, proportional to premium paid
Registration and premiums by Carrefour, claims and policy servicing by ColSeguros
QBE (Brazil)
*Brasil Telecom (Brazilian Telecommunications Company)
Individual or Family Hospital Indemnity
Marketed/sold via outbound call-center, premiums collected via existing bill-payment system
Policy servicing, administration, claims handled predominantly by broker, Aon Affinity
Modified from Table 22.2 in Microinsurance Compendium, Volume 2

11. Actuarial Capacity in MI
Significantly limited actuarial capacity in many emerging markets
If actuarial capacity exists, may not be available to MI market
Opportunity to produce/adapt technical training materials and guidance specifically relevant to MI to help build local capacity
Continue to develop understanding of what functions need actuaries, what actuarial work can be done by non-actuaries trained in actuarial techniques/methods
Could include development of practice notes, standards of practice
Addressing the Gap in Actuarial Services in Inclusive Insurance Markets (May 2014, International Actuarial Association)

12. Learn More, Get Involved!
Microinsurance Centre at Milliman Critical in producing regional/global landscape reports since Very good for getting holistic picture of the global or regional microinsurance microinsurancecentre.org
International Labour Organization, Impact Insurance Facility impactinsurance.org
Actuaries in Microinsurance (2015, Blacker and Yang) – multiple actuaries who’ve worked in MI write about their experience, various aspects of actuarial work in MI
Microinsurance Network microinsurancenetwork.org
International Actuarial Association, Actuaries Without Borders (AWB) Capacity building, not direct provision of services actuaries.org
International Microinsurance Conference - sponsored by Munich RE Foundation (November 6 – 8, Lusaka, Zambia) microinsuranceconference.org

13. Public-Private Partnerships & Health Microinsurance in Kenya
Section topics:
Why has access to healthcare become a key concern in Kenya?
How does health insurance help in addressing access to healthcare?
What are the main sources of health financing in Kenya?
How can microinsurance help?

14. Access to Healthcare Universal Health Coverage
Sustainable Development Goals
Constitutional Right

15. Why Health Insurance Access to network of providers Opportunity cost
Limited out of pocket expenses

16. Healthcare Financing Low-income demographic High – interest
Sale of productive assets
Family, friends and community
May work for rare events
Puts strain on the community for more frequent events
Only 30% of expenses can be financed this way
81% of population remains uninsured
Large regional disparities
Large gender disparities
National Hospital Insurance Fund (NHIF) is the largest insurer

17. Government Healthcare Financing - NHIF
Predominant form of health insurance in Kenya
Comprehensive inpatient and outpatient coverage
Compulsory for formal sector workers
Voluntary for informal sector workers (83% of workforce)

18. Health microinsurance coverage in Kenya
Kenyan population
42 million (2010)
Microinsurance target market
10 million
3.1 million (2013)
NHIF informal sector program
0.8 million (2015)
Private HMIs

19. Role of HMI Partnership Foundation Universal Health Coverage
Private or community-based health insurer (CBHI)
Primary
Foundation
Substitute
Universal
Health
Coverage
Organic demonstration
Planned demonstration
Provider of coverage
Reform designs underway
Supplement
Secondary
Government
No reform in place
Maturity (e.g. time, political commitment, management capacity, infrastructure, resources

20. Role of HMI Value - added services Innovation in financing
Supplementing public schemes - hospital cash

21. Thank you
Mitchell Momanyi