Performance Indicators and Microinsurance
Regardless of where the emphasis is placed, all microinsurance programmes should aim to become viable since donor or government subsidies are only temporary or not available. Without subsidies, all programmes are subject to the same economic and market forces as mainstream businesses and this requires them to be managed professionally. Management goals, however, cannot be achieved without constant monitoring and transparent measurements of performance.
In October 2006, ADA and BRS in collaboration with the Microinsurance Network organised the first of two workshops in Luxembourg for microinsurance practitioners and experts from around the world with the aim of sharing experiences and to initiate discussions about measuring microinsurance performance. The workshop concluded with the group selecting eight key principles and ten key performance indicators which were then described and briefly discussed in a workshop report. The twenty participating organisations (practitioners from Asia, Africa and Latin America) also provided data from their operations which was used to illustrate the indicators.
In July 2007 a second workshop was held to confirm the selected principles and indicators and to test them further with a second round of data provided by the participating practitioners. A ninth principle was added. Three more regional trainings were held in collaboration with GTZ and INAFI to further test the indicators and the trainings themselves.
The key principles and indicators are applicable to all microinsurance providers, irrespective of legal structure, environment, delivery model and type of microinsurance product offered.
The Nine Key Principles
1. Separation of data
2. Collection of relevant and accurate data
3. Production of financial statements
4. Calculation and setting up premium and claim reserves
5. Efficient claims monitoring
6. Clear investment policy
7. Right technical insurance expertise
9. Client Satisfaction
The Ten Key Indicators
1. Net Income Ratio = Net Income / Earned Premium
2. Incurred Expense Ratio = Incurred Expenses / Earned Premiums
3. Incurred Claims Ratio = Incurred Claims / Earned Premiums
4. Renewal Rate Ratio = Number of Renewals / Number of Potential Renewals
5. Promptness of Claims Settlements = Select only the claims that have been processed and paid from the entire set of claims for a period, and apportion this set of paid claims in terms of the number of days that it took to pay each claim, according to a defined schedule
6. Claims Rejection Ratio = Number of Claims Rejected / All Claims Reported
7. Growth Ratio = (Number of insured n – Number of Insured n-1) / Number of Insured n-1
8. Coverage Ratio = Number of insured n / Target population n
9. Solvency Ratio = Admitted Assets / Liabilities
10. Liquidity Ratio = Available Cash or Cash Equivalents / Short-term Payables (3 months)
For more information on this initiative, visit the Performance Indicators Working Group.
- Performance Indicators for Microinsurance: A Handbook for Practitioners (pdf)
- Microinsurance Factsheet (request per email)