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Micro insurance coverage surges at tremendous pace

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Microfinance Focus, April 15, 2012:  Micro insurance schemes worldwide have catapulted over the past five years. It now reaches an estimated 500 million worldwide, according to the Micro insurance Innovation Facility of the International Labour Organization (ILO) and the Munich Re Foundation. Not only does micro insurance aim to protect the poor against risks, but is also tailored to their preferences and capacity to pay.

The number of people covered by micro insurance rose from 78 million in 2007 to 135 million in 2009, reaching nearly 500 million today, as published in the second volume of the “Micro insurance Compendium, Protecting the poor”.

Craig Churchill, Team Leader of the ILO’s Micro insurance Innovation Facility and Chair of the Micro insurance Network said, “Since 2008, we have seen numerous innovations emerging to overcome the challenges of providing viable insurance services to more low-income people.”

“Efforts now should focus on increasing effectiveness so that insurance products can successfully reduce their vulnerability. The Compendium comes at the right time to help insurers, delivery channels, donors and other stakeholders understand what it means to provide valuable risk-management services to the working poor,” Churchill adds.

China and India, which is referred as the micro insurance powerhouses is spearheading the trend, covering roughly 80 per cent of the market. It is estimated that 60 per cent of people around the world who are covered by micro insurance live in India. Latin America accounts for 15 per cent of the market and Africa 5 per cent.

Reasons for Asia being ahead is this game are  large and dense populations, interest from public and private insurers, proper distribution channels and active government support, are some examples, the report says.

Dirk Reinhard, Vice Chairman of the Munich Re Foundation noted, “Indeed, what the developed world took several hundred years to accomplish cannot be replicated within a decade in the developing world, even given all the new technology and knowledge that is now available. Providing micro insurance effectively requires the involvement of many stakeholders from both the public and private sector who are not used to working together and who often have very different objectives and operating systems. What matters now is the process of getting key stakeholders to work together effectively.”

New products covering a variety of risks have been piloted and distributed to poor households through an increasing diversity of channels (e.g., banks, retailers or cell phone companies). Commercial insurers have also entered the low-income market, creating significant capacity for scale. At least 33 of the 50 largest commercial insurance companies in the world now offer micro insurance, up from only seven in 2005.

With 26 chapters the Micro Insurance Compendium covers wide range of topics from  sector’s trends, contribution of micro insurance to social protection and resilience building, health, life and agriculture insurance and their distribution to the business case and client value of micro insurance.

Micro insurance is unlikely to break the cycle of poverty by itself, but it is a valuable tool in the poverty alleviation toolkit. When coupled with social protection, risk prevention and mitigation, and supplemented by other risk-managing financial services such as savings and emergency loans, micro insurance can play a critical role at multiple levels to efficiently manage risks, reduce vulnerability and contribute to poverty alleviation.

Microinsurance Reaches 3m in the Philippines, More Expansion Predicted in Microcredit as Commercial Banks Enter Microfinance

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Wednesday, April 4, 2012

MICROCAPITAL BRIEF

» Posted by  in Category: Asia,Microinsurance at 11:12 am

According to a report attributed to the Insurance Commission of the Philippines, a government body regulating the country’s insurance industry, the microinsurance program launched in 2010 has contributed to 3.1 million Filipinos having acquired insurance coverage. The basic unified microinsurance product for health, accident, house and livelihood doesn’t charge more than 5 percent of an individual’s earnings and can provide coverage between PHP 10,000 (USD 233) and PHP 200,000 (USD 4,460). The Asian Development Bank has provided USD 1 million in funding for the microinsurance program.

The Chairman of the Insurance Commission, Emmanual F Dooc, reportedly said the goal was to cover all households below the poverty level, which includes 27 percent of the population [1]. A recent addition to the program is the new product of property and livelihood coverage in case of disaster, a service that the government will be promoting through road shows within the country.

In a recent article in Positive, an online platform for investing in microfinance and small enterprises, several factors were cited as contributing to growth potential for the microfinance market in the Philippines. These include a strong regulatory framework and commercial establishments partaking in the microfinance arena, as opposed to only cooperatives and rural banks.

The Philippines was ranked as the second best market for microfinance business environment in a recent study based on 2010 data was conducted by the Economist Intelligence Unit of London that compared 55 countries. The Filipino National Credit Council Director, Joselito Almario, reportedly argued that the Philippines would have ranked first had it not been for a low ranking in the “investment climate” category.

By Amira Berrada, Research Associate

About the Insurance Commission of the Philippines: The Insurance Commission (IC) of the Philippines was created in 1949 and is mandated by law to regulate and supervise the country’s insurance industry. Its mission is to “protect the interest and welfare of the insuring public and to develop and strengthen the insurance industry.” Specifically, its objectives are to promote the growth and financial stability of insurance companies; to maintain a minimum standard of performance for insurance companies; to educate the public about insurance; to establish a sound insurance market; and to safeguard the rights and interests of the insured. IC’s vision is that by 2020, every Filipino will have the opportunity to be covered by insurance.

About the Asian Development Bank (ADB): Established in 1966 and headquartered in Manila, the Philippines, the Asian Development Bank (ADB) is a development finance institution that consists of sixty-seven members, of which forty-eight are located in the region. ADB has three strategic priorities: to foster inclusive growth, to facilitate regional integration and to ensure environmentally sustainable growth. To accomplish these objectives, ADB uses loans, technical assistance programs, grants, equity investments and guarantees to private companies in member countries. ADB reported a total capitalization of USD 64 billion as of December 31, 2010.

MicroEnsure Ghana to Launch Credit Health Insurance for Microfinance Clients

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» Posted by  in Category: Africa,Microinsurance at 12:08 am

The Ghanaian branch of MicroEnsure, a UK-based subsidiary of nonprofit Opportunity International that serves as a microinsurance intermediary, has announced plans to offer credit health insurance to microfinance clients in Ghana. The product will enable MicroEnsure to cover weekly microcredit repayments in the event that the borrower is admitted to the hospital during the loan term. Clients will need to present proof of admission and discharge from a recognized inpatient hospital in order to file a claim. The cost of the coverage will start at USD 0.25 per month and will cover loan payments for any health condition for any amount of time.

According to Eugene Adogla, director of operations in Ghana, MicroEnsure expects to pay hundreds of claims that range between USD 30 and USD 60 each month. Fiona Laryea, general manager of MicroEnsure in Ghana, stated that MicroEnsure Ghana also hopes to extend coverage to clients’ families.

Two unnamed microfinance institution (MFI) partners of MicroEnsure Ghana have signed up for the new product, and more organizations have reportedly expressed interest.

MicroEnsure serves approximately 3.5 million poor clients in Ghana, India, Bangladesh, Mozambique, Malawi, the Philippines, Tanzania and Kenya as of 2011.

By Charlotte Newman, Research Associate

About MicroEnsure
MicroEnsure was founded in 2005 in the UK as a wholly-owned subsidiary of Opportunity International, a US-based nonprofit microfinance network created in 1974. MicroEnsure was known as the Micro Insurance Agency until 2008. As an insurance intermediary, it provides a range of products including health, life, property and weather index-based insurance to approximately 3.5 million poor clients in Ghana, India, Bangladesh, Mozambique, Malawi, the Philippines, Tanzania and Kenya as of 2011.