Microinsurance Supply Analysis

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Microinsurance Supply Analysis
Presented at the ESAF Conference Microinsurance
Opportunities in Palestine
Palestine Red Crescent Society Ramallah, West
Bank 20 May 2009 Roland Steinmann rsteinmann_at_mic
roinsurancecentre.org www.MicroInsuranceCentre.org

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Purpose and Activities

• Goals
• analyze the state of microinsurance in the West
  Bank
• identify potential partners for new
  microinsurance services
• assess the most important areas of technical
  assistance in the insurance sector in general and
  specifically for the development of microinsurance

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Purpose and Activities

• Activity
• conducting interviews with
• 7 insurance companies(Ahleia, Al Arabya, Al
  Mashreq, Arab Life Accident Insurance, National
  Insurance Company, Palestinian Insurance Company,
  TRUST)
• 5 microcredit organizations / banks(Alrafah
  Microfinance Bank, Cairo Amman Bank, Faten,
  Palestine Islamic Bank, UNRWA)
• 4 Government bodies(MoH, MoL, MoSA, PCMA)
• 2 federations(Associations of Banks in
  Palestine, Palestinian Insurance Federation)
• 6 related organizations(Centre for Private
  Sector Development, Democracy Workers Rights
  Centre, Economic Social Development Centre,
  Medical Relief Prevention and Diagnostic Centre,
  Merlin, ILO)
• Summary workshop

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Insurance Sector Facts

• 7 Palestinian and 2 foreign insurance companies
  operating in the West Bank
• 68 branches (incl. headquarters)
• Gross written premium (USD)

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Insurance Sector Facts II

• No specialized university-level training on
  insurance available
• No actuary resident Jordan or Egyptian actuaries
  contracted
• Distribution/sale through 3 models
• insurance company sales staff
• licensed insurance agents
• senior management staff
• not yet used brokers
• Microinsurance some limited credit-life (no
  explicit pricing), downscaling efforts

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Insurance Sector Regulation

• Started effectively in 2005. Goals
• stabilize the sector
• increase professionalism (training, license for
  agents)
• consumer protection
• Gets increasingly serious
• solvency
• reporting of financial statements
• enforcement of mandatory covers

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Insurance Sector Impressions

• Huge disparities in the sector
• Financial situation
• Strategy for growth compulsory vs voluntary
• Strong competition in the compulsory motor
  business
• All products, except Agriculture insurance, are
  available in the market

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Ideal Partner-Agent Model

• Prerequisites for success
• Actively interested in microinsurance
• Senior management product champion
• Flexible and aggressive
• Good reputation
• Board support
• Secure balance sheet and reserves
• Regulatory compliance

• Insurance Companies
• Compliance with regulation

• Delivery Channel
• Good market penetration
• Operationally stable
• Staff capacity
• Sales skills

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Who is a suitable Agent in the West Bank?

• MFIs ? perhaps some
• Postal Service? ? no
• Retailers? ? inexistent
• Water/electricity/telephone providers? ? no
• Transportation companies? ? no
• Trade Unions? ? perhaps some
• Cooperatives? ? too small

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Potential Agent MFI

• Sharakeh network 13 MFIs
• active clients (Dec 2008) 32000potential
  market estimated at 200000
• gross portfolio USD 47.8 mn
• outreach 64 branches
• front office staff 210
• financial sustainability not yet achieved in the
  sector
• source The Palestinian Network for Small and
  Microfinance (2008) Financial Performance
  Indicators

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Potential Agent Cooperatives

• 878 cooperatives registered (April 2008)at least
  1/3 classified as dormant
• main sectors farming, livestock, housing,
  handicrafts, services
• the typical cooperative operates in agriculture
  and is rather small (60 members)
• at least 1 meta-coop, regrouping 19 coops and
  700-800 members
• sources
• ILO (2008) Assessment of the Palestinian
  Cooperative Sector
• Personal communication Mr D. Istanbuli, Mr A.
  Al-Taher, both ESDC

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Some impressions

• Motor is a dirty business. Everybody is
  competing for the same piece of cake, but its
  poisoned.

We do not trust our customers. They always try
to cheat us.
For individuals its impossible to get health
insurance, even if they are rather wealthy and in
good health.
We have to strengthen the private sector,
because we need it - but they should first do
their home work.
I want to work in a good business environment.
We had enough studies. What we need now is
ACTION.
We have to pay the claims promptly.
Our clients need only credit-life insurance.
We have to start a learning process. People
should move from a level of need to a level of
demand for insurance.
Most MFIs are spoiled by donor money. They still
have to transform into viable, commercially
minded entities.
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What to do? Suggestion I

• Explore mutual benefits for larger MFIs and
  insurer. Most enthusiastic

• MFIs / Banks
• UNRWA
• Al Rafah Microfinance
• Faten
• Cairo Amman Bank

• Insurer
• NIC
• TRUST
• Al Mashreq
• Arab Life Insurance

• Start with credit-life plus and property

important note this is based on my very
personal impression gained in a first meeting -
there might be substantial changes once the
concept is discussed more profoundly.
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What to do? Suggestion II

• Explore potential for tailored group cover for
  cooperatives and trade unions
• Personal Accident
• Group health insurance
• Property (productive assets, infrastructure,
  household)
• Advantage reduced costs
• Disadvantage no choice for members
• Approach free to join, but at least 75

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Suggestions for Sector Devt

• Financial Education Campaign
• Agents they have to explain the benefits, but
  also the very basic mechanisms of insurance
• potential clients what is insurance, how does it
  work, what does it not solve
• Industry Code of Conduct (sales techniques,
  claims payment, etc)
• Actuarial training, data collection and sharing
  (mortality tables !)

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Potential Areas of Action

• Working groups on Agriculture
• products assisting the Agricultural sector?-gt
  property (incl. equipment), transport...
• Could some pilot schemes be realized?-gt loans
  for greenhouses, coupled with Ag insurance for
  3-5 years only
• Working group on Health insurance
• How to improve business practice?
• Regulation
• Industry standard on data capturing, reporting,
  smart cards