MR Microinsurance_2012_03_29.indd - International Labour ...

Improving credit life microinsurance
This chapter assumes the following five characteristics of a “valuable” credit
life microinsurance product:
a) Relevant: The product protects a borrower’s household from relevant risks
including having to deal with an outstanding loan following the borrower’s
death.
b) Timely: The insurer settles the claim in a timely manner before the outstanding
loan has an adverse effect on the household’s finances.
c) Understandable: The majority of borrowers understand the product even when
it is mandatory.
d) Facilitates access: The lender’s portfolio is protected, which makes it easier for
poor households to access credit.
e) Value for money: There is good value for money as defined by the three value
indicators in Table 9.1.
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To assess financial value, the authors analysed the financial information
provided by 17 institutions participating in the survey. These institutions were
selected on the basis of the authors’ identification of credit life programmes that
in aggregate offer a variety of covers, under a variety of different models, and
where management was willing to provide data (a significant challenge). Table
9.2 provides key financial data for these institutions’ credit life operations and
relevant characteristics of the institutions, but their specific identities are
obscured as a condition of providing the data. Even then, not all requested data
was available; for many it was difficult to provide the information because of the
accounting methods they used for these products.
The findings are particularly remarkable because of the enormous range of
the results. While credit life is commonly assumed to be profitable for insurers
and lenders, these results illustrate that this is not universally true. Of the 12
institutions that reported their profitability in Table 9.2, eight were indeed
significantly above the 10 per cent target, but two were loss making and thus have
significant issues.