managing risk.pdf

Managing Risk and Creating Value with Microfinance61Because the delivery supply chain requires close coordination of a number of actors, limitations often existat various points. The delivery channel must reach large numbers of interested clients, provide appropriateincentives, and respond to claims. Beneficiaries need to develop an appreciation of the benefits of insurance,a product that has odd characteristics compared to loans, grants, and other services. Given the unique needsand sheer number of this pool of uninsured households and microbusinesses, the products should be simpleto understand and determined by available delivery channels. As boxes 4.2 and 4.3 illustrate, those principles,along with strong leadership, can have impressive results.Box 4.2 Mapfre Seguros: Microinsurance in BrazilIn 2003, when Antonio Cássio dos Santos became the chief execuve officer of Mapfre Seguros, his first objecvewas to offer insurance to people in all income segments in Brazil by expanding the network of delivery channels andincreasing the product menu. The results have been outstanding. In a span of five years, Mapfre Seguros has covered3.5 million people through group life and funeral insurance policies, insured 50,000 rural houses, and providedunemployment insurance coverage to 3.7 million people.Mapfre Seguros achieved massive outreach as a result of three factors: (1) product prices are appropriately based onspecial mortality tables; (2) product design is based on the risk priories of the target segment (demand driven); and(3) new delivery channels (retail stores, ulity companies, consumer goods companies, and faith-based instuons)were developed. Its emphasis on using different distribuon channels to sell demand-driven products at a reasonableprice paid huge dividends in terms of outreach and sustainability.Source: Authors’ interview with Antonio Cássio dos Santos, Rio de Janerio, Brazil, March, 2008.Box 4.3 FINSOL: Life and Funeral Insurance in MexicoIn 2002, a group of financial sector investors created Financiera FINSOL, a regulated, limited objecvefinancial company in Mexico. FINSOL began operaons in August 2003, and by mid-2007, it was serving morethan 200,000 clients through 105 branches in 28 states. Microcredit methodologies include village banks,solidarity groups, and individual credit. FINSOL also serviced remiances. The next step is the formaon of aPopular Financial Society to enable FINSOL to provide a broader range of financial services, including savings.As the instuon evolved, FINSOL’s management noced another gap in the market—a lack of insurancecoverage for borrowers. The high costs of promoon and operaons and the potenal clients’ geographicisolaon made them unaracve to tradional providers. The MFIs did not have the specific insurance designand delivery skills. Yet, in combinaon, they could assemble a product that would be aracve to FINSOLclients and marginally profitable for the instuons. Within one year of start-up, FINSOL life insurance hadreached more than 180,000 borrowers. The insurance policy includes (1) no required medical examinaonfor coverage, (2) low policy costs, (3) US$3,000 coverage, (4) immediate payout of 30 percent for funeralexpenses, (5) remaining payout within three days, (6) coverage of people age 16 to 65, (7) use of a collecvepolicy format, and (8) double coverage for accidental death.Source: Adapted by authors from Rivas (2007).