MR Microinsurance_2012_03_29.indd - International Labour ...

388 Insurers and microinsurance
18.3.3 Managing claims costs
Th e risk of higher-than-expected claims can be signifi cant for microinsurance,
especially if companies are expanding into markets where there is little previous
experience on which to base assumptions on expected claims (see Chapter 21).
Th e ratio of the claims to the premiums can give an indication as to whether
claims are higher than assumed by the insurer when the product was priced.
Table 18.6 Gross claims ratios
Insurer Product 2009 (%) 2008 (%) 2007 (%)
CIC, Kenya Bima ya Jamii 15 7 41 CIC, Kenya Bima ya Jamii 15 7 41 Credit life 5 8 5
ICICI Lombard, India Manipal Arogya Suraksha 110 109 110
Weather insurance 77 75 115
Old Mutual, South Africa Group funeral 65 to 75 80 to 90 90 to 100
ASR, Guatemala Life cover 32 38 2
Student cover 31 11
Malayan, Philippines Microinsurance business 18 27 13
1 Th e Bima ya Jamii product and the ASR microinsurance products are relatively new initiatives
begun in 2006 and 2007. Th e small claims ratios in the fi rst year are very probably due to unfamiliarity
with insurance and delays in claiming. As business volumes grow over time, it is expected that
the claims ratio will stabilize to refl ect the risk profi le of the lives covered.
Th e analysis in Table 18.6 shows that claims experience is closely linked to
the type of product and the profi le of the target market:
– Th e low claims ratios for the compulsory credit life product in Kenya is consistent
with compulsory credit life business.
– Th e claims ratios are also relatively low for the life products with limited benefi ts
found in the Bima ya Jamii product, the life cover and student cover from Guatemala,
and the microinsurance initiatives of Malayan.
– Managing claims ratios for health products is a common challenge in microinsurance.
High claims costs do not appear to be related to a specifi c region,
insurer or initiative. Th e diffi culties in managing the cost of claims are demonstrated
by the loss-making experience with the health insurance product in
India. ICICI Lombard has taken action to improve claims ratios by increasing
premiums, negotiating lower treatment fees with the healthcare providers,
encouraging enrolment and managing anti-selection. However, to date these
eff orts have had only a small perceptible eff ect. Similar experience was seen in
the previous bundled life and health insurance product provided by CIC, which