FESA drought microinsurance for every African farmer
EARS website, September 2010
Food Early Solutions for Africa (FESA) is a millennium effort commissioned by the Netherlands Minister of Development Cooperation. The project aims to develop and implement a large scale, low cost drought insurance approach that reaches every farmer in Africa. It is carried out by EARS Earth Environment Monitoring in cooperation with RABO Development and Ecorys.
EARS receives hourly visual and thermal infrared Meteosat data and with support of Eumetsat and the Netherlands Meteorological Service, a 30 years historical database has been composed. All this data is continuingly being processed for the temperature, evapotranspiration and precipitation data fields. The data has continental coverage and 3 km spatial resolution. Alternative drought indices have been considered, data properties have been investigated and burn studies have been carried out for 29 locations in Tanzania. The first phase of the project is complete and results have been consolidated and published in the report "FESA microinsurance: Methodology, validation, contract design".
The study concludes Meteosat Relative Evapotranspiration (RE) to be the most suitable drought index with the lowest basis risk. RE represents water use by the crop and is closely related to crop growth. Though often used, precipitation (PREC) is considered less suitable, as it precedes crop growth by months and its fate is unknown. An advantage of the new RE index is its normal distribution, which allows triggers to be easily predicted.
The FESA approach offers high potential for insurance scaling up and corresponding economies. To this end a climatic zoning approach will be followed, where each zone is characterised by a specific sowing window and a specific RE-trigger derived from the historic database. In this way a single, fixed premium, parametric contract becomes feasible, where only the location/zone of the insured has to be determined and the contract parameters are then read from a table.
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IRDA to allow cross-selling of microinsurance in India
Tehelka, to be published 2 October 2010 (Vol. 7, Issue 39)
The Insurance Regulatory and Development Authority (IRDA) is considering a proposal to allow cross-selling of microinsurance products by insurance companies. Cross-selling means one firm can sell the policies of another — a relaxation the industry has sought for long. Microinsurance products are policies that are priced low enough for the poorer sections to avail of.
“We may allow crossselling of micro-insurance products, but we haven’t set a timeframe for effecting it,” IRDA Chairman J Hari Narayan told TEHELKA at a health insurance meet held by the Confederation of Indian Industry in Delhi.
The proposed move will open up rural areas to firms that do not have a presence there. Currently, insurers have tie-ups with banks that have large rural networks, mainly public sector ones, to sell microinsurance products. But the drawback is that the bank can sell products of only that particular company.
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2010 Food Security Essay Contest 2nd Winner about Microinsurance
Two essays were selected by a Panel of Judges for the 2010 Africa Rural Connect and World Policy Journal Essay Contest. Out of the many submissions received, these essays best responded to the prompt: describe a unique initiative that African governments, private organisations, or others in the international community can implement to improve food security in the rural regions of Africa.
The 2nd place essay is called Microinsurance: Brick by Brick and was written by Michael Norton, a Staff Associate at the International Research Institute of Climate and Society (IRI) at the Earth Institute, Columbia University.
Read essay here
Second European Research Conference on Microfinance calling for papers on microinsurance
This call for paper is for the Second European Research Conference on Microfinance, which will be held on 16-18 June 2011 in the Netherlands, and will address in particular researchers working on impact. Microinsurance is one of the key areas they are looking for input and microinsurance researchers are invited to submit their work.
Competitive papers, with a maximum of 35 pages, are being solicited for the conference in areas relevant to microfinance, including microinsurance and other topics:
- What is the role of microinsurance and microsavings vis-à-vis microcredit?
- What role does the private sector, i.e. commercial banks, play in providing microfinance?
- How important is product innovation and technology for microfinance?
Deadline for submission is 6 January 2011.
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Microinsurance faces growth challenges
National Underwriter Online News Service, 23 September 2010
In an interview with NU Online News Service, Michael Anthony, associate vice president responsible for microinsurance with the Munich-based insurer discussed some of the challenges Allianz is facing as it expands its microinsurance market.
Despite close to five years of experience in the field and more than four million participants, the growth of microinsurance programmes face some key hurdles for expansion and providing the world’s poor with the security of insurance. One of the barriers the programmes face is that, due to its low premiums, to be effective it must be sold in high volume because it is a low margin business.
Mr. Anthony explained that to do this, the company is working with groups such as farm cooperatives, dairy boards, NGOs and others to market the products to villages. This has been easier in India, where such organisations exist. Other places, Africa for example, are more fragmented and difficult to reach the scale needed for a successful programme, which he said is "central to success".
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New developments for microinsurance in Cambodia
The Phnom Penh Post, 22 September 2010
Regulations to cover large microinsurance initiatives in Cambodia have been drafted by the Ministry of Economy and Finance, providing a potential boost for the nascent insurance industry.
Secretary of State for the Finance Ministry, Hang Chuon Naron, confirmed yesterday that the ministry is set to submit a sub-decree regulating the sector to the Council of Ministers soon with approval “by the end of this year”.
Hang Chuon Naron believes developing microinsurance would open a market that is currently dominated by insurance sold to companies, not individuals.
Major insurance players are already preparing strategies for Cambodia’s large rural population. Some have partnered with microfinance organisations, which have established rural networks and access to numerous potential clients. The Kingdom’s largest MFI, Prasac signed a memorandum of understanding earlier this year with Forte Insurance to provide microinsurance.
Based on the MoU, Prasac would act as the sales agent for Forte – offering credit life, health and accident microinsurance to its 100,000 rural clients. Sim Senacheert, general manager of Prasac, said that Prasac would earn 8 percent commission for every US$100 premium.
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Innovations necessary accross the board in insurance, not only in microinsurance
The New York Times, 22 September 2010
State insurance regulators in the United States told the White House on Wednesday that health insurance markets in some states would be disrupted unless President Obama gave insurers a temporary dispensation from one major provision of the new health care law.
The provision requires insurance companies to spend at least 80 cents of every premium dollar on medical care, rather than administrative expenses, executive salaries and profits. If insurers do not meet the requirement in 2011, they will have to pay rebates to consumers in 2012.
Insurers are cutting administrative staff to lower overhead costs, investing in big technology upgrades and training employees to field the expected influx of customer inquiries. This mirrors the challenges faced by microinsurers, as they are constantly battling with their administrative costs. Many innovative ways in reducing administrative costs have been experimented with and there is a real opportunity for lessons to be learnt from microinsurers.
Jane L. Cline, the insurance commissioner of West Virginia and president of the National Association of Insurance Commissioners, said state officials had urged the Obama administration to consider phasing in the 80 percent requirement over several years, to avoid disruption of insurance markets for individuals and small businesses.
Read both articles: "States Ask for Phase-In on Insurance Change" and "Insurers Scramble to Comply With Health Rules"
Davao stakeholders keen on microinsurance in the Philippines
Philippine Information Agency, 22 September 2010
The government's financial literacy programme on microinsurance has gained interest from its target key stakeholders in the region in a recently held two-day consultation. Joselito S. Almario, director III of the Department of Finance, said stakeholders in Davao Region have showed interest in microinsurance which he said is one of the finance services that the government is currently pursuing to cater for the low-income sector.
On its third leg of regional consultation across the country, the DOF-National Credit Council (DOF-NCC) gathered last week where around 200 stakeholders from microfinance institutions, insurance companies, cooperatives, national government agencies and local government units attended.
Almario, also NCC executive director, told the Philippine Information Agency that the consultations which were first conducted in Cagayan de Oro and Cebu were part of the activities of the technical working group from the public and private sectors involved for the finalisation of the Roadmap to Financial Literacy on Microinsurance.
Almario also announced that the DOF-NCC launched the National Strategy for Microinsurance and the Regulatory Framework for Microinsurance, which will be the pillars of the microinsurance market development that ensures access to appropriate risk protection for the poor.
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Trustco teams up with African mobile operator to offer life insurance
Engineering News, 21 September 2010
Trustco, a Namibian based company that focuses on delivering microinsurance, microfinance, education and financial services with a strong social justice undertone, was aiming to provide mobile operators in Africa with a differentiated service offered through its transaction facilitation system Trustco Mobile.
The microfinance and microinsurance provider on Tuesday signed an agreement with Zimbabwe’s Econet Wireless for the roll out of the product, which would see the operator’s subscribers get free life insurance when they buy airtime for their cell phones.
Trustco MD Quinton van Rooyen explained that when a subscriber buys airtime, they get an SMS notification to inform them that they qualify for a certain amount of life insurance cover for 30 days. The subscriber would then be required to register with the mobile operator for the life insurance, by providing details, such as their identity number of passport number and the details of the beneficiary in case of death.
As long as subscribers buy airtime, they will be covered by the life insurance. The amount of airtime bought would determine the amount of life cover, up to a maximum of $10 000. First Mutual Life Assurance Company will underwrite the life cover against payment of an underwriting fee.
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Rain shortfall triggers first M-PESA drought insurance payouts for Kenyan farmers
EurekAlert Press Release, 21 September 2010
Over 100 farmers in Embu received insurance payouts via M-PESA today, marking the first payouts issued through the mobile phone payment system M-PESA by Kilimo Salama, an innovative microinsurance programme that protects farmers' investments in improved seeds and farm inputs against drought and other extreme weather.
The payments under the Kilimo Salama programme were triggered when weather stations at Siakago Rural Technology School registered rainfall totals for the current season that were slightly below average.
"We keep our promises and pay out fast," said James Wambugu of UAP, adding that farmers received payments less than two weeks after the end of their insurance contracts for the growing season.
Kilimo Salama is a partnership involving the Syngenta Foundation for Sustainable Agriculture, UAP Insurance, and Safaricom. The insurance programme offers farmers who plant on as little as one acre an opportunity to pay a 5 percent insurance premium on their purchase of seeds or fertilizer. The insurance policy protects their investment by calculating losses incurred when insufficient or even excess rains have been detected by a nearby weather station.
In many locations this year, the weather during the long rain season has been good, hence the insurance payouts low or not triggered at all. "However, the weather in the short rain season is projected to be poor, so farmers should keep insuring in order to protect themselves against the risk," added Wambugu.
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The Anglican Church and microinsurance
AllAfrica.com , 16 September 2010
The Anglican Communion's Anglican Health Network (AHN) is piloting health microinsurance in Karakonam, India and will soon launch a further pilot in Dar Es Salaam, Tanzania. As the impact of the global financial crisis is starting to affect traditional aid funding, Revd Paul Holley, AHN coordinator is suggesting that now is the time to reconsider how churches fund healthcare around the world.
With the World Health Organisation's calculation that almost half of health services in sub-Saharan Africa are provided by churches, AHN believes that health microinsurance might well provide the most reliable basis for the church's health services.
AHN's partner in this project is MicroEnsure, one of the world's leading microinsurance agencies. Already active in India, the Philippines, and many parts of Africa, the partnership with the Anglican Church is designed to bring together the marketing potential of the parish structure with the technical skills of the insurer. Anglican health services will be participating along with others from both the public and private sector.
The pilot in India has attracted over 40,000 members since its launch in October 2009. These include local Christian, Muslim and Hindu communities. Members find that they can better budget their health expenditure and avoid financial crisis when family sickness spirals out of control. Moreover, it provides Anglican health facilities with a more stable revenue stream upon which to plan services.
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Make microinsurance transparent and easy to understand
Artemis, 16 September 2010
Recently, Guy Carpenter CEO of International Operations Henry Keeling said that the microinsurance market opportunity could amount to $5 trillion. That’s a huge market (an estimated 4 billion of the poorest people in the world) of untapped potential customers for insurers, and that many new insurance policies equals a massive market for reinsurers to back up those schemes.
However, stories like the one highlighted in India’s Business Standard entitled "When choice is a turnoff" where farmers in India aren’t being paid out to because they had two insurance policies, highlight the issues of bringing products as inherently complicated as insurance to developing countries.
Entering into the microinsurance market needs to be done carefully. Insurers need to ensure they work closely with local agents and representatives so that education about the products and their benefits are available to potential customers. As simple as an index-linked weather policy is to understand (eg. if it rains X amount you get X in payment) if the farmers you sell it to aren’t aware they could invalidate it by holding a second policy on the same plot of land then it is a pointless endeavour.
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IRDA in India proposes amendments to micro-life insurance policies and cuts to agent commissions
Microcapital.org, 15 September 2010
The Insurance Regulatory and Development Authority (IRDA), India’s insurance regulatory organisation, recently announced a draft set of regulations for insurers providing micro life insurance policies.
One proposed change would require the provision of minimum life insurance coverage of INR 100,000 (USD 2,100) for a set policy premium of INR 2,224 (USD 47), which is an increase from the previous minimum coverage of INR 10,000 (USD 210).
Additionally, insurance agents’ commissions will be capped at 10 percent of first-year premiums and 2 percent for renewal premiums earned for individual life insurance policies. For group insurance policies, commissions will be capped at 2 percent of first-year premiums and 0.5 percent for renewal premiums. The current agent commissions for microinsurance products are 20 percent on the first-year premium and 10 percent for renewals.
Latin American microinsurance industry moving towards broader product offering
Business News America, 13 September 2010
The Latin American microinsurance industry is moving towards a broader product offering that will include new products and also more complex products that better fit the needs of the low-income population, said Michael McCord, president of The MicroInsurance Center and member of the Microinsurance Network, in an interview with BNamericas.
The product offering of the region's microinsurance industry is today dominated by credit life, said McCord, adding that burial insurance also has a very strong presence in some countries, like Colombia, due to cultural factors.
McCord said he sees microinsurance providers in Latin America beginning to develop and offer a wider range of life policies as well as more property and health insurance products to the low-income population. Today there is very little property and health insurance penetration in the regional microinsurance market, he noted.
In terms of growth potential, McCord said Brazil, Mexico, Peru and Colombia are the markets in Latin America that will see the strongest growth in microinsurance during the coming years due to the sheer size of their populations. "A lot of the innovation will be guided by these countries."
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High costing healthcare pushes insurers to launch cheaper products in Kenya
Business Daily Africa, 13 September 2010
The high cost of accessing medical services is setting the stage for the launch of new innovative products targeting the low-end market, offering a new income stream for insurers and health care providers.
Insurers say medical costs have been rising by at least of 20 per cent annually over the past year, fuelled by rising prices in drugs and hospital equipment. This has pushed up insurance premiums, locking out a sizeable number of households from basic healthcare, forcing insurers to develop more affordable products.
The newest product, Changamka, a micro-health cover launched by Changamka Micro-Health in Kenya. The product allows members to receive treatment at designated hospitals for as low as Sh450 ($5.50) per visit, joins the growing list of micro-health insurance covers.
Changamka Micro-Health uses pre-paid smart card technology to allow its members to access treatment at the designated medical outlets while another product from Eagle Africa, which covers maternity costs, doctors fees, daily hospital charges and drug prescriptions, allows the members to make payment through the use of mobile money transfer services hence easing the process.
In addition, the Changamka cards can be used by any member of the family breaking down the individual cover barrier common with the normal insurance covers. This provision opens up access to all family members and the card can be bought for third parties beneficiaries such as parents.
Read full article, which includes details on other products launched in the area
Health insurance in Cambodia
HealthNet TPO newsletter, September 2010
Despite the political and economic improvements over the last ten years, the health status of the Cambodian population is still among the poorest in the world, partly due to an underutilisation of existing health services and a misconception of what ‘health’ means and how this should be handled.
HealthNet TPO, a Dutch knowledge-driven NGO that works on the structural rehabilitation of health care systems in fragile states, set up a project in Pearang (Cambodia) in 2005. The idea was born to convert the established user fees to a health insurance system as is common in most Western countries. This idea was further developed by a Dutch and Cambodian taskforce in 2006 and 2007.
The feasibility of the project was researched using an extensive assessment, implemented by staff of HealthNet TPO, and Achmea. A survey among 179 Cambodian households in Pearang in 2008, made clear that the population is in favour of a health insurance system. Furthermore a premium of eight to sixteen Euros (depending on the size of the household) was found affordable.
In 2009 various donors were approached for financing the implementation of this project. Initial funding was received from PSO (a Dutch based organisation working on capacity building in developing countries). Using this funding, the implementation of the project in cooperation with the local partner organisation RACHA started in 2010.
The project staff was trained in the various aspects of microinsurance systems in the first few months of 2010. In May 2010 the project was first carried out and by August the promising result of having 147 households insured for one year was achieved. The aim of the project is to be sustainable and have 250.000 households insured by 2015.
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The Indian Corporation Bank and United India Insurance Company join forces
MicroCapital.org, 6 September 2010
Corporation Bank of India, a Karnataka-based, government-owned bank, and United India Insurance Company Limited (UIIC), a Chennai-based general insurance company, recently signed a memorandum of understanding to "create awareness and to market and distribute microinsurance products through business correspondents engaged by the bank."
Corporation Bank intends to market and distribute these microinsurance products through its approximately 1,300 branchless banking terminals, designed especially for the poor in both rural and urban areas. The companies will also use "smart card" technology to offer UIIC’s non-life microinsurance products and health insurance products.
The agreement corresponds to a trend among Indian microloan, microsavings and microinsurance service providers adapting their offers to reflect customer needs. Indian microfinance institutions (MFIs) such as Spandana Sphoorthy Financial Limited are now offering monthly, instead of weekly, repayment schedules
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Selecting the Right Micro Health Insurance Model: Potential for Creating Public-Private Linkages
Online discusion, 14 September 2010, 13h30 GMT
The Abt Associates-led Strengthening Health Outcomes through the Private Sector (SHOPS) Project\'s Network for Africa (N4A) invites you to join a second discussion on the lessons learned to date on implementing micro-insurance: Selecting the Right Micro Health Insurance Model: Potential for Creating Public-Private Linkages.
This discussion will focus on the characteristics of the various models of microinsurance, and potential opportunities or challenges to creating public-private partnerships.
If you would like to have more information or submit questions to panelists ahead of time, please email: Ashleigh_Hodge@abtassoc.com
Click here to access the chat website
Strengthening a nascent insurance sector in Palestine
The Expanded and Sustained Access to Financial Services programme (ESAF) supports USAID in its efforts to build a more inclusive financial sector that increases the sustainable access to financial services for Palestinian households and micro, small and medium enterprises (MSMEs).
Increased donor investment in the West Bank more recently has led to a slight recovery, but an estimated 70% of the Palestinian population is still living at or below the national poverty line of US $2.3 per day. The Palestinian private sector has shown an impressive ability to adapt to the situation however, and continues to operate, though at a greatly reduced capacity.
“Together towards safety” was the slogan of the First Palestinian Insurance Conference, held last June. USAID has published an ESAF Field note on insurance development in Palestine.
More information on the programme and to download the note, go to Microlinks
ADB provides USD750,000 for microinsurance in China and Mongolia
Microfinance Focus, 1 September 2010
The Asian Development Bank (ADB) is providing a two-year USD750,000 grant from the ADB-administered Regional Cooperation and Integration Fund to examine market supply and demand for microinsurance in People’s Republic of China and Mongolia. The grant will address policy, regulatory and institutional barriers in the region’s Microinsurance sector.
ADB will work with the Access to Insurance Initiative (A2II), a global programme launched in 2009 with the International Association of Insurance Supervisors (IAIS) and the Microinsurance Network (Regulation, Supervision and Policy Working Group).
This Initiative seeks to link development agencies and industry supervisors to promote expanded insurance services to the poor worldwide.
A Memorandum of Agreement has been signed under which the German development agency and secretariat of the initiative, GTZ, will provide co-financing of about USD178,000 and will engage in and support work agreed with ADB and A2II. The ADB, A2II, and GTZ teams will work with the Chinese Insurance Regulatory Commission and Mongolia Financial Regulatory Commission.
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IDB and REDCAMIF sign microinsurance development deal for Central America
El Nuevo Diario, 27 August 2010
The Inter-American Development Bank (IDB) and REDCAMIF, a microfinance network for Central America are to implement a business model for the development of microinsurance in the region. The agreement signed is backed by a $2.4 million investment to develop the business model. The investment is secured by the IDB (70%) and the Luxembourg Government (30%).
El Nuevo Diario, Nicaragua, reports comments from IDB's Nicaraguan representative, Mirna Lievano de Márquez: "In Central America there are few insurance services aimed at micro-enterprises, hence the need to promote this area in view of the great work done by families working hard to support our economy".
English text source: CentralAmericaData
Read full article in Spanish