Shahzad Iqbal of Pakistan's Kashf Foundation. "Microinsurance is a safety net for the poor."
Photo: Sebastien Goossens for ADA
“Microinsurance is insurance in its most basic form,” said Matthew Genazzini, head of technical support for microfinance institutions at Ada Luxembourg, speaking at a lunch dedicated to the topic last week. “Because microinsurance is for the very poor, it has to be set up differently.”
The comments came during a session which discussed the ways microinsurance differs from traditional insurance.
According to Ada, Luxembourg’s not-for-profit inclusive finance agency, the microfinance and inclusive finance lunches are a series of conferences dedicated to issues relating to all forms of microfinance. The “44th Midi de la microfinance” held on Thursday 7 June, was dedicated to the topic of microinsurance, which was described as, “Insurance in its most basic form,” by Genazzini, who chaired the panel discussion.
Jonathan Batangan, first vice president of the PJLI Group of Companies in the Philippines, said that microinsurance is, “insurance for the poor.” Shahzad Iqbal, financial director of the Kashf Foundation in Pakistan added, “It is a safety net for the poor.”
Batangan began by saying that that the Philippines was one of the first countries to have a dedicated microinsurance strategy. “We started in microinsurance in 1999 and now more than 32 million people have cover.” A large part of the Philippines success has been the fact that they have made a point of keeping the insurance documents simple and the cover affordable.
“Our policies are easy to purchase via our network of 2,500 branches nationwide. In our paperwork we ask simply the name, age and address, and that’s it. As soon as a person steps out of the branch office, he or she is covered. It is that simple.” The PJLI Group also prides itself on settling claims with 24 hours, something that is essential to a country situated in the volcanic Ring of Fire. “We make it a priority to settle within 24 hours to promote trust,” said Batangan.
The Kashf Foundation in Pakistan originally started with microcredit, introducing micro-health insurance in 2014, explained Iqbal. “It was initially set up to help very underprivileged women. The woman takes out the insurance policy in her name, which then covers the health of the entire family, with no limit on the number of family members.”
The microinsurance lunch was hosted by Arendt & Medernach, which has an entire team dedicated to microfinance structuring. Pierre-Michaël de Waersegger, partner in the insurance & reinsurance Law and banking & financial services practices said that, “…microinsurance is a fast-growing sector and over the last month, we have been approached by people looking to set up microinsurance in Luxembourg as a result of Brexit.” But how does it work?
According to the Microinsurance Network, the term refers to insurance services offered to low income clients who have no or limited access to mainstream insurance products and have no other effective way of coping with risk.
“The principal distinction from traditional insurance is in the targeting of low income people, which leads to distinct characteristics and objectives, including addressing the particular risks of low income people, affordability and inclusiveness, simplicity and clarity in documentation, accessible processes, and building trust among target clients.”
The network explains that microinsurance is a highly diversified sector, in terms of:
Stakeholders: Microinsurance is developed and offered by commercial insurers, mutual funds, microfinance institutions, NGOs, governments or semi-public bodies. Microinsurance ventures are often joint efforts among several of these stakeholders, who can play roles ranging from market research and product design to selling, delivering and servicing claims;
Products: Microinsurance products can cover any insurable risk, including death, illness, accident, property damage, unemployment, crop failure or loss of livestock;
Portfolio size: Microinsurance can operate at any scale; a microinsurer may cover dozens of policyholders, or millions.