MR Microinsurance_2012_03_29.indd - International Labour ...

Is microinsurance a profi table business for insurance companies?
Gross insurance profi t ratios ratios1 Table 18.3 Gross insurance profi t ratios 1
Insurer Product 2009 (%) 2008 (%) 2007 (%)
CIC, Kenya Bima ya Jamii (accidental death and disability
bundled with National Hospital Insurance Fund)
ICICI Lombard,
India2 ICICI Lombard,
India India2 India India2 India
Old Mutual,
South Africa
27 51 60
Credit life 66 66 69
Manipal Arogya Suraksha (MAS)
(health insurance) insurance)
Weather insurance
(index-based weather insurance)
Burial Society Support Plan
(funeral insurance)
(32) (30) (30)
1 5 (35)
0 to 5 (25 to 35) (20 to 25)
ASR, Guatemala Life cover (accidental death and disability) 67 46 85
Malayan,
Philippines
Student cover (accidental death and disability) 56 67
Microinsurance business
(mainly accidental death and disability)
47 35 47
1 Gross insurance profi t ratio = (Gross premiums – Gross claims – Expenses)/Gross premiums.
2 All the fi gures for India in the fi nancial analysis section are for the fi nancial year 1 April to 31 March.
377
CIC
Th e allocated expenses for Bima ya Jamii were based on the direct expenses
determined by CIC with an addition of a proportion of the group life expenses
allocated to this product, based on assumptions made by the researchers. No
expenses were allocated individually to the credit life product.
Both of the CIC microinsurance products investigated in this study are
profi table. Th e credit life product is more profi table than the bundled health
insurance product and is the most profi table of all the products in the case studies.
CIC used its experience with credit life to learn about the market. Th e profi tability
of credit life supported the expansion into other microinsurance products such as
the bundled health product.
Th e bundled health insurance product was loss-making until it was relaunched as
Bima ya Jamii with the health insurance component underwritten by the NHIF. Th e
following keys to the profi tability of the CIC microinsurance products were identifi ed:
– partnerships with a large number of MFIs and SACCOs;
– exploiting the existing infrastructure of the distribution channel and paying low
fees for selling and servicing business;
– compulsory nature and high margins of the credit life product;
– bundling life benefi ts with the more popular health benefi ts;
– outsourcing the risk of the health cover to the NHIF;
– diffi culty in achieving adequate business volumes for Bima ya Jamii due to a lack
of incentives for individual sales staff ;