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Indian insurers upset over Malegam report that calls to limit MFI services

Financial Chronicle, 26 January 2011

Insurance companies are not too happy with the recommendations of the Malegam Committee regarding microfinance institutions (MFIs) distributing insurance products. The committee, which was set up by the Reserve Bank of India (RBI) to study issues and concern in the microfinance sectors, recommended that MFIs should concentrate on their core nature of business, lending to the poorest of the poor.

"We have observed that some MFIs operate not merely as providers of credit, but also as providers of other services. These services include acting as insurance agents, acting as agents for the suppliers of mobile phones and telecom services. While these services can profitably be provided by MFIs along with the supply of credit, there is a risk that given the vulnerable nature of the borrower and his/her inadequate negotiating power, an element of compulsion may creep in unless the provision of these services is regulated. It is, therefore, necessary that the regulator limits the nature of services that can be provided, as also the income that can be generated from such services, the latter as a percentage of the total income of the MFIs," the Malegam Committee report said.

Insurers say that if there is a restriction on MFIs to distribute insurance products, they may find it difficult to be able to meet their mandatory microinsurance business target as MFIs form a major chunk of their distribution network to sell microinsurance products.

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Microinsurance grows in Colombia

The world radio programme (PRI), 17 January 2011

This four minute radio report introduces microinsurance and examines how the market in Colombia is growing. The report also touches on the challenges faced by the providers of microinsurance products by interviewing local policyholders in Barranquilla, Colombia.

Click here to listen to report

Bajaj Allianz wins SKOCH Financial Inclusion award

India Info Line, 14 January 2011

Bajaj Allianz Life Insurance has been awarded the SKOCH Financial Inclusion Award 2011 for their execution of the Financial Inclusion initiatives through life insurance across the country. The award recognises Bajaj Allianz’s microinsurance product, Sarve/Swayam Shakti Suraksha (SSS), which is an affordable insurance product with a systematic savings option catering to rural markets.

Sarve/Swayam Shakti Suraksha is a flexible and simple rural plan, which offers the customer insurance protection against unforeseen events and an opportunity to save systematically. The product was rolled out after conducting extensive consumer demand assessments with various MFI’s, RRB’s, co-operative and dairy boards with the aim of meeting the insurance needs of rural Indian masses. In the very first year of launch, a total of 1.8 million customers were enrolled.

The SSS project started in 2008 today and serves over 3 million customers spanning 19 Indian states. Under this project, Bajaj Allianz today offers this life insurance product to customers across 5000 consumer touch points spread across its countrywide network of rural distributors.

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Draft regulations for microinsurance unveiled in Pakistan

The Express Tribune, 14 January 2011

High instances of claims against existing microinsurance plans coupled with high administrative costs of selling these policies are the two biggest hurdles to expansion of microinsurance in the Pakistan.

There are currently about four million microinsurance policyholders in the country, majority of who reside in the northern areas. "Previously the size of this market was negligible but with a view of expanding insurance so that it may reach the masses, the regulator is formulating regulations for this segment," explained an official from the Securities and Exchange Commission of Pakistan (SECP).

The draft of SECP Microinsurance Rules 2011 was unveiled to stakeholders from insurance companies, financial institutions, non-governmental organisations and the media.

"A pilot project for microinsurance will be launched by June this year," Asia Care Insurance CEO Mehdi Kazmi informed the participants. The pilot project will be jointly executed by Asia Care, Allianz-EFU, Adamjee and State Life insurance companies with logistical support from Tameer Bank and First Micro Insurance Agency (FMIA).

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FESA Microinsurance: Excess rainfall products from Meteosat

EARS Earth Environment Monitoring, January 2011

The FESA-Microinsurance project, commissioned by the Netherlands Minister of Development Cooperation and operated by EARS, has so far focussed on agricultural drought and has developed the relative evapotranspiration agricultural drought index (RE). It is an excellent way of measuring the available water and crop production of plants. For more information on the project, see the report "FESA Microinsurance: Methodology, validation, contract design". In partnership with PlaNet Guarantee, a drought index pilot project was designed for maize and groundnuts and will be implemented this year in Western Burkina.

But farmers are not only hit by drought. Excess rainfall can also cause enormous damage to production and this may be because of mechanical nature (high precipitation intensity) or the result of water logging and flooding (high rainfall totals). For this reason EARS are also exploring the development of dedicated indices for this purpose, using their Meteosat 30 year climatic data base.

FESA Microinsurance
Cold Cloud Duration                                 Temperature Threshold Excess

CCD: Cold Cloud Duration is a measure of total rainfall during a dekad (a 10 day period), which is used as an indicator of excessive precipitation. It is possible to convert the cloud duration data into precipitation amounts, provided sufficient historic rain gauge data is available for calibration.
 
TTE: Maximum temperature threshold excess is a measure of the lowest cloud top temperatures that occur during a dekad. It is an indicator of rain storm vigour and may be used as an indicator of possible mechanical damage.
 
The CCD and TTE pictures are 1982-2006 averages for Africa. They give an impression where the risk of excessive rainfall is highest.

Click here for more information

Increase in microinsurance policy holders in Taiwan

Focus Taiwan, 8 January 2011

The Financial Supervisory Commission (FSC) announced the number of microinsurance policy holders in Taiwan was 21,180 as of the end of 2010. This increase is largely due to the government's approval in 2009 for insurance companies operating in Taiwan to sell microinsurance policies, with the aim of allowing low-income earners to obtain basic insurance, particularly for products that command low premiums and low coverage limits.

So far, a total of 16 insurers have obtained FSC approval to offer microinsurance policies, including life insurance and one-year personal injury insurance. The FSC said it is gearing up to campaign further for microinsurance policies, adding it held 37 seminars island wide last year to brief low-income people in the rural areas, welfare groups and local governments on the essentials of microinsurance.

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Draft microinsurance standards approved in the Philippines

Business World, 4 January 2011

Standards for the nascent microinsurance industry as well as the prototype of a non-life product will be released by the Insurance Commission (IC) at the end of the month, after these were approved by an interagency committee.

Joselito S. Almario, deputy executive director of the National Credit Council, oversaw the work of three technical working groups that worked on the standards, a prototype and roadmap for the financial literacy campaign.

The standards, known collectively as "SEGURO" - for solvency and stability, efficiency, governance, understanding of the product, risk-based capital, and outreach - will evaluate insurers based on their solvency, level of risk-based capital, among others.

The standards will be used essentially "to evaluate a microinsurance firm’s viability and capacity to support future claims," Mr. Almario explained.

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Panama's microinsurance landscape to change in 2011

Business News America, 22 December 2010

Panama's Nacional de Seguros will launch a wide range of microinsurance products during 2011, said the company's general manager, Jorge Bareirro. The products include personal accidents, temporary disability, funeral, unemployment insurance and mandatory auto insurance coverage. The executive added that the insurer's business strategy is to launch new products every four months for the country's low-income people.

In June this year, a Panamanian group acquired Nacional de Seguros from its Venezuelan owners for US$2 million. Bareirro said the insurer expects to finish this year with close to US$7 million in premiums and also turn a profit.

Panama's congress is expected to approve next year a bill that will reform the country's 15-year old insurance law, which will include a regulatory framework for microinsurance.

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