Presentation by

L. B. Abeysinghe - Consultant- SICL

At

AOA 30th Anniversary Seminar

26th August 2014

at Cinnamon Lakeside Hotel Colombo.

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Agenda……..Definition & explanations of concepts used in the presentation.

Strategies of developing Microinsurance to reach up to its objectives.

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Challenges encountered by Sanasa in conducting microinsurance schemes.

What are the Lessons Learnt.

Sanasa as a Microinsuranceprovider – Transition from status of mutual to formal insurance provider.

Types of Microinsuranceproducts offered by Sanasa.…...

…..……..

Definition of Microinsurance

• Microinsurance is defined as

“A Method of providing protection to the low incomepeople against specific perils in exchange for a regular payment ofpremium proportionate to likelihood and the cost of risk involved”

• Does this definition explain adequately the uniquecharacteristics and the scope of microinsurance?

- It fails to distinct microinsurance from traditional

insurance.

- It does not explain specific characteristics of microinsurance.

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Definitions and Explanations of other Concepts(a) Mutual

The concept of mutual can be understood clearly by comparing its features with those of Commercial Insurance Companies.

Mutual had been able to perform insurance business better than traditionalinsurance companies during the global economic crisis experienced in recentyears.

Mutual insurers tend to have a greater level of trust and customersatisfaction.

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Mutuals Commercial Insurance Company

Ownership Owned entirely by members/policy holders

Owned by investors who havepurchased companies stock.

Profits Distribution through rebates topolicyholders.

Profits are distributed to the shareholders.

Definitions and Explanations of other Concepts

Contd……..

(b) Living Standard

The Term living standard is closely related to quality of life that prevails in

a given socio economic class in a certain geographical area in terms of:

The Level of Wealth/Income

Comfort

Material goods

Necessities available

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Definitions and Explanations of other Concepts

Contd……..

(c) Marginalized groups

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The term “marginalized groups” can be defined asgroups of persons who have been deprived of being servedadequately against perils through insurance schemes operatedby commercial insurance companies or social securityinsurance schemes administered by the state.

The term “Underserved Sector” is also used to describe thegroup of persons ignored by traditional insurers and socialsecurity insurers.

Key factors that need to be considered in defining Microinsurance

• In defining micro insurance, in its correct perspective it is essential toconsider following factors:

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Concept of serving the poor & Marginalized /underserved groups.

Types of Product

Types of Insurance Provider

Distribution Channels

Other key factors that separate microinsurance from traditional insurance:

Simplicity

Accessibility

Efficiency of Process

The final goal of Microinsurance

• In the context of above definitions and explanations it is clearthat the final goal of developing microinsurance is to enhancethe quality of life related to a certain socio economic class ina certain geographical area.

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The need for developing Microinsurance.The need for developing microinsurance in an emerging economy ofa country like Sri Lanka is noteworthy.

• Insurance industry in Sri Lanka is still a growing industry.

• The overall insurance penetration is only 1.2%. This is one of the lowest in theAsian Region where the average level of penetration at 5.8%.

• Insurance penetration is low due to unawareness, of insurance, lack of attitudetowards the insurance by the masses and the majority of population being in lowincome groups.

• To enhance the insurance penetration and thereby to improve the quality of life,microinsurance is considered to be the best solution.

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Strategies of developing microinsurance

i. Product Development

- Meeting the real risk that target market requires

- Minimizing the price to enhance affordability and accessibility

- Simplicity in understanding terms and procedures.

ii. Production distribution through different models

- Full service model

- Partner agent model- Care provider model

- Community based organization model

iii. Consumer Education

To create better understanding of microinsurance as a tool of household riskmanagement.

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Sanasa Insurance as a microinsurer• “ Sanasa Insurance” signifies an insurance company registered namely as “Seema Sahitha

Sanasa Rakshana Samagama” of which English version is “Sanasa Insurance CompanyLimited” (SICL).

• Currently SICL operates both Life and General Insurance but a subsidiary company is dueto be established to operate general insurance business separately.

• Sanasa commenced microinsurance activities well before the incorporation of SICLthrough a subsidiary organization called ALMAO.

• ALMAO was a mutual organization owned by members and established to serve members of Sanasa & Funeral aid societies.

• Due to absence of any provisions in Insurance Law in the country. Sanasa had to establishSICL to continue its microinsurance services for the benefit of Sanasa Members.

• Although SICL is registered, as a traditional insurance company it is concerned mainlywith the development of microinsurance products.

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Vision and Mission of the Sanasa Insurance Company

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Mission:

To strengthen the society through adequate risk coverage and

developing the community through comprehensive risk cover.

Vision :

To establish a new society based on Co-operative principles.

• Sanasa Microinsurance Products could be categorized As follows:

(1) Products related to financial products of MFIs.

Eg: Loan Protection and life savings

(2) Products offered for welfare of families of low income groups.

Eg: Funeral Aid Insurance & Suwadayaka (Health Insurance)

(3) Products to protect properties of individuals, societies and SMEs.

Eg: Property Insurance (Fire and burglary, etc.) & Utthamavi

(4) Products for developing Agri Business.

Eg: Weather Index Based Crop Insurance for Paddy and Tea growers & Sanasa

Cattle Insurance.

(5) Life policies adapted to meet the insurance needs of low income

earners.

Eg: Whole life, Endowment, Education and Life pension policies

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Microinsurance products offered by Sanasa insurance.

Premium Income (in Rs. Million)

• Products related to microfinance 2011 2013

- Loan Protection 6.81 14.08

- Life Savings 0.02 0.16

• Products offered for members family welfare

- Funeral Aid Insurance 16.46 14.58

- Suwadayaka (Health Insurance) 3.63 7.13

• Products offered to cover properties of

individuals society members and SMEs 39.7 54.2

• Products for developing Agri Business

- WII for Paddy 0.9 5.9

- WII for Tea - 5.5

- Cattle Insurance 1.1 10.1

Total 68.62 111.65

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Business Progress of Microinsurance Products (non life) - in details.

• Products related to financial products of MFIs 2011 2013

- Loan Protection& Life savings - claims paid (Rs. Mn.)6.02 3.5

No of beneficiaries 66 43

• Products offered for members family welfare

- Funeral Aid Insurance - claims paid (Rs. Mn.) 14.3 11.6

No of beneficiaries 1413 1173

- Suwadayaka (Health Insurance) - claims paid (Rs. Mn.) 2.52 4.7

No of beneficiaries 1092 1383

• Property Insurance - claims paid (Rs. Mn.) 3.1 3.4

No of beneficiaries 34 38

• Agriculture Insurance -claims paid (Rs. Mn.) 3.0 8.3

Crop(WII) & Livestock

No of beneficiaries 4868 22946

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Details of benefits Provided to Sanasa Microinsurance Policy Holders (Non life)

Business Progress of Life Microinsurance Products.

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Life 2011 2012 2013

Premium income (Rs. Million) 128.1 202.9 285.3

No. of policies in force 77462 110,637 124,435

Claims paid (Rs. Million) 4.5 9.9 13.4

No. of Claims paid 148 191 248

Challenges faced by Sanasa Insurance in Promoting Microinsurance Products

• There is no provisions in insurance law in this country formicroinsurance and operation of insurance activities by mutualsand other CBOs.

• In some countries registered microinsurance organizations areenjoying relaxed provisions under the insurance law pertaining tomicroinsurance. Such facilities not available in Sri Lanka yet.

• Absence of national policy for development of microinsurance as atool of risk management has resulted an unhealthy situationbetween the policy makers and microinsurance practitioners in theinsurance industry.

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Challenges faced by Sanasa Insurance in Promoting Microinsurance Products.

Contd………..

• Development of innovative products have been hindered due to the fact that

such exercise needs significant recourses and technical expertise to conduct

initial research and product configuration. Training field staff and potential

clients will also incur heavy investments.

• Negative attitude towards microinsurance not only from the potential clients

but also from front line staff, field staff and officers of the government

departments who are in charge of community development programs has

been a great hindrance for the development of microinsurance.

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• There is a great necessity to accommodate microinsurance legislatively in SriLanka to enable insurance companies operate microinsurance business withcollaboration of MFIs welfare societies and other community basedorganizations.

• Designing a microinsurance product requires services of experts for conductingmarket assessment product configuration and product pricing and also fortraining of trainers to educate potential clients and also to members of frontlinestaff and field staff. Availability of such services from experts could be madeavailable through a Microinsurance Development Center setup legislatively.

• Microinsurance products such as loan protection Health Insurance, Funeral AidInsurance, Agri Insurance Business have had greater impact on lives of lowincome group in Sri Lanka.

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Lessons Learnt in implementing

microinsurance schemes by Sanasa Insurance.

SANASA Insurance Company Limited

Thank You…

Sanasa Insurance Company Limited.

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No: 340 2/1, R. A. De Mel Mawatha. Colombo 03.