Social Impact Assessment of Compulsory Credit-Life Insurance

• What are the social impacts of the "Payung Keluarga" credit-life product?
• What role has the socio-cultural context played in producing impacts?
• Has Payung Keluarga improved the risk management capacities of the insured and beneficiaries?
• How have beneficiaries used the additional payouts?
• Has the asset base of the insured been increased (financial literacy, feeling of protection, and access to insurance)?
• Has Payung Keluarga crowded out traditional risk management strategies?
• Have customers become more likely to take business risks?

Partner organizations

Founded in 1890 in Germany, Allianz now serves around 75 million clients around the world. Allianz started its operations in Indonesia with a representative office in 1981. In 1989, Allianz established PT Asuransi Allianz Utama Indonesia, a general insurance company. In 1996, Allianz entered the Indonesian life insurance market by opening PT Asuransi Allianz Life Indonesia.

Product

Payung Keluarga ("Family Umbrella") is a compulsory enhanced credit-life insurance scheme. Between Sep 1, 2006 and Sep 30, 2008, 71,899 policies have been issued. The average one-time premium payments amounts to USD $0.92. Benefits include (1) the waiver of outstanding loan balance (not including interest) according to regular installment schedule, and (2) an additional payout of twice the original loan amount to beneficiary, appointed from close family.

The rationale behind covering the outstanding loan balance, but not the interest, is that covering the interest would allow the microfinance institution to draw financial benefits from the death of its members, which seems unethical. By waiving the outstanding loan balance, this loan cover allows the microfinance institution to lend out the funds again immediately, earning new interest on the loan. Covering the foregone interest thus give the microfinance institution double interest on the same funds.

Evaluation design

Non-experimental. Largely qualitative study, triangulating clients. Using single difference method (baseline/endline) for insured customers (non-randomized selection). No control groups.

Data Sources

• Administrative data: Allianz Indonesia Payung Keluarga customer database
• Survey: Baseline/endline survey of customers using oral group questioning (251 individual respondents)
• Interviews: interviews with 26 beneficiaries and 6 MFI managers; background interviews with 24 cultural, political, religious, insurance and microfinance experts
• Group questioning: oral/written groups with 66 MFI loan officers and group questioning/focus groups with 31 credit group leaders