Microfinance News » microinsurance

Microinsurance plan uses mobile phones, weather stations to shield Kenya farmers

Naagesh Naaraayana — Fri, 05 Mar 2010 17:39:07 +0000

Mobile payment

March 5, 2010: As East Africa recovers from the worst drought in decades, an innovative program launched on Friday will use a low-cost, mobile phone payment and data system, and automated, solar powered weather stations, to offer thousands of farmers in parts of Western and Central Kenya affordable, “pay as you plant” insurance to protect their investments in desperately needed high-yielding seeds, fertilizers, as well as other farm inputs.

The program, called “Kilimo Salama,” which in Kiswahili means “safe farming,” is a partnership between the Syngenta Foundation for Sustainable Agriculture, UAP Insurance, and telecoms operator Safaricom. The project will offer farmers who plant on as little as one acre insurance policies to shield them from significant financial losses when drought or excess rain are expected to wreak havoc on their harvests.

“Extreme weather, particularly drought, traps many African farmers in poverty because it robs them of the means to recover,” said Marco Ferroni, Executive Director of the Syngenta Foundation. “We have in Kilimo Salama a micro-insurance strategy that will work. By utilizing state-of-the-art risk management tools, revolutionary mobile phone technologies, and the knowledge and expertise of farmers and rural business men and women, we have developed for the first time a model for providing farmers with reliable, low-cost cover from the vagaries of extreme weather.”

The program will offer farmers the option of insuring purchases of seed, fertilizer, and other inputs from agricultural companies that are part of the Kilimo Salama partnership.

“We believe Kilimo Salama can revolutionize insurance and make it accessible to farmers,” said James Wambugu, Executive Director of UAP. “By using the weather stations to verify local weather conditions, we are avoiding claims procedures that have created mistrust and led people to avoid insurance. As such, this strategy has the potential to make agricultural micro-insurance affordable and attractive for smallholder farmers and economically viable for insurance companies in developing countries that had previously written off the agricultural sector.”

Weather station

Through Kilimo Salama, farmers can minimize risk by paying an extra 5% for a bag of seed, fertilizer or other inputs from participating local agro-dealers. That translates to about nine Kenyan shillings (Kshs) to insure a one-kilogram bag of improved, higher-yielding maize seed, and 25 Kshs to insure a 10-kilogram bag of fertilizer. The agro companies participating in the program, MEA Fertilizers and Syngenta East Africa Limited, match the farmers’ investment to cover the full 10 percent premium it takes to cover the cost of the program. The project partners hope to expand the program to include other agribusiness companies in the upcoming years.

Agro-dealers registered and trained by Kilimo Salama have been equipped with a camera phone that scans a special bar code at the time of purchase, which immediately registers the policy with UAP Insurance over the Safaricom’s mobile data network. This innovative mobile phone application, which was developed by the Syngenta Foundation, then sends a text (SMS) message confirming the insurance policy to the farmer’s mobile phone. Some 30 weather stations in the targeted regions have been renovated with automated, solar-powered systems capable of broadcasting regular updates on weather conditions and rainfall quantities. When data transmitted over Safaricom’s 3G data network from a particular station indicates that drought or other extreme conditions (including excessive rains) are destined to cripple crops, all farmers registered with that station automatically receive payouts directly via Safaricom’s M-PESA mobile money transfer service.

“This is the first project to use mobile phones to set up insurance contracts and issue payouts to poor, smallholder farmers in Africa, deploying both our vast data infrastructure and globally acclaimed M-PESA service,” said Betty Mwangi, Chief Officer, New Products Division at Safaricom. The project was pilot-tested in 2009 in the Laikipia district, where 200 farmers purchased insurance for seeds and herbicides, and, after the drought, received compensation for 80 percent of their investment.

While microfinance has taken off in many poor countries, micro-insurance, particularly for agriculture, has largely failed to take off because it offered no immediate benefit to farmers. As a result, farmers showed little interest.

Rain guage

The Kilimo Salama initiative seeks to overcome these obstacles by employing a variety of innovations.

First, payouts are triggered by a relatively inexpensive index system tied to local weather conditions. The weather stations, which are generally located at schools, private farms or other secure locations, allow experts to determine when the situation in a particular area has deteriorated to the point that crops are no longer viable. Costs are further reduced by using the Safaricom data network to record policies and transfer funds, both the premiums to UAP and the payouts to farmers. The cost of each transaction is minimal—far less than the price of a SMS message.

In addition, the system is designed to build trust by allowing farmers to purchase policies for relatively little cash out-of-pocket and on a “pay as you plant” basis. And by partnering with agricultural companies that sponsor premiums, organizers have been able to avoid dependence on government subsidies.

“Also, payouts go directly to farmers, not to a middleman or a loan provider,” added Ferroni. Officials at UAP and Syngenta say evidence from the pilot program makes them optimistic that the program can be widely successful.Related Posts:

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BSP allows sale of microinsurance products in Philippines

Naagesh Naaraayana — Thu, 18 Feb 2010 09:35:46 +0000

Microfinance Focus, Feb 18, 2010: The Monetry Board of Bangko Sentral ng Pilipinas (BSP) early this month approved the marketing, sale and servicing of micro-insurance products by rural, cooperative and thrift banks.

This approval allows the network of nearly 3,500 rural, cooperative and thrift banking offices to serve as distribution points for authorized micro-insurance products offered by licensed insurance providers.

Recent events like the super typhoons have brought to fore the importance of adequate protection against death, injury, loss of property and other contingent events, BSP said.

“This move by is an important response to this urgent need for micro-insurance especially for the poor who are more vulnerable to various risks,” BSP said.

Microfinance and micro-insurance are highly complementary financial products that address the needs of the low-income sector. “Since many of these banks already have existing relationships with microfinance clients, they can more readily deliver a full range of financial services needed by their clients,” it said in a statement.

“This can only translate into better delivered products as well as lower transaction costs, ultimately benefiting the poor clients,” the central bank added.Related Posts:

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Microinsurance potential market between 1.5 and 3 billion policies: Lloyd’s report

Microfinance Focus — Sun, 22 Nov 2009 13:31:20 +0000

Microfinance Focus , Nov. 22, 2009 : Microinsurance, insurance for low income individuals, can play an important role in helping communities in developing countries mitigate and adapt to climate change, and to provide the security needed to develop long term sustainability projects, according to a report published by Lloyd’s, one of the world’s largest specialist insurance.

In a new report produced by Lloyd’s 360 Risk Insight and the Microinsurance Centre, Insurance in developing countries: exploring microinsurance and other commercial opportunities, the size of the potential market is estimated to be between 1.5 and 3 billion policies, with significant demand for a range of products, including health, life, agricultural and property insurance. Over 135 million people are currently covered with microinsurance which around 5 % of the potential market. Annual growth rates are currently over 10%.

Launching the report, Lloyd’s Finance Director, Luke Savage, said, “Bringing insurance to three billion low income individuals is a real opportunity to reduce poverty and give individuals the ability to invest in sustainable projects without the fear of loss from natural catastrophes or other destructive forces.”

Further he said, “But it is not a one way trade. There are benefits for commercial insurers too, which include larger and diversified risk pools, first mover advantage into new markets, market intelligence and innovations that can be applied to other business activities,” he said.

The demand for microinsurance is set to rise on the back of the global recession, with 50-90 million people predicted to be plunged back in to poverty over 2009. While recessionary pressures will influence the amount seeking microinsurance, the policies and business itself will be further shaped by numerous variables, including: economic growth; urbanisation; financial sector development; climate change; and information technology.

Download the Report . Click Related Posts:

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UNDP to host workshop on microinsurance in Delhi

Microfinance Focus — Wed, 18 Nov 2009 13:00:10 +0000

Microfinance Focus, Nov. 18, 2009: The UNDP is organizing a National Conference on the Status of Microinsurance in India, in collaboration with the Centre for Insurance and Risk Management (CIRM) and Centre for Micro Finance (CMF) at the Institute for Financial Management and Research (IFMR). The conference will be held in New Delhi on Dec. 10 and 11, 2009.

The conference will assess the status of microinsurance in India, especially in poorer states where the population is more vulnerable to natural disasters and other shocks, said the statement.

The Centre for Insurance and Risk Management and the Centre for Micro Finance are two of six autonomous research centres at the Institute for Financial Management and Research (IFMR). CIRM engages in designing
risk management solutions for poor households, while CMF primarily works with microfinance institutions to evaluate the impact of their products and services.Related Posts:

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Singapore’s Asia Insurance Review honours MIA chairman David Dror

Microfinance Focus — Mon, 16 Nov 2009 14:30:22 +0000

Microfinance Focus, Nov. 16, 2009: As part of the Asia Insurance Industry Awards 2009, Prof. David Dror, Chairman of the Micro Insurance Academy (MIA), New Delhi has been honoured as “Personality of the Year” at a ceremony organized recently by the Asia Insurance Review in Singapore, “for his groundbreaking research and study which has helped boost understanding of how the world’s poorest communities can benefit from microinsurance”.
Professor Dror was given the award for his “tremendous, groundbreaking and visionary” contribution in the field of microinsurance research in India and Asia, said a statement.
During the annual ceremony which brings together the most prominent personalities and innovative companies in the mainstream of insurance and reinsurance worldwide, Prof. Dror was praised for a decade of dedication “to studying and designing innovative ways of boosting the acceptance of insurance in some of the world’s poorest communities.”
Prof. Dror is a proponent of micro health insurance with his conceptual framework on ways to link grassroots poor communities with reinsurance, called “Social Re”, described in “Social Re Insurance: A New Approach to Sustainable Community Health Financing, published in 2002 by the International Labour Organization and the World Bank. Over the last few years, Prof. Dror has published some 60 articles and was associated with the Erasmus University Rotterdam (The Netherlands), The French Centre of Studies and Research on the International Development, (CERDI), Clermont-Ferrand, France.
Prof. Dror is currently the founding chairman of MIA, specialising on microinsurance units in resource-poor communities. Asia Insurance Review is a professional regional magazine for insurance and re-insurance practitioners in the Asia-Pacific region.Related Posts:

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Max New York Life bags Asia Insurance Industry Award for serving the underserved

Microfinance Focus — Wed, 11 Nov 2009 11:50:32 +0000

Microfinance Focus, Nov. 11, 2009: Max New York Life Insurance Company Limited, one of India’s leading life insurance companies, won the coveted Asia Insurance Industry ‘Innovation of the Year ‘ Award 2009 instituted by Asia Insurance Review. Max New York Life has been recognized for an innovative new insurance product that untaps the potential offered by the millions of uninsureds in the country, said the report published by Asia.

“There are over 115 million people in India with limited access to insurance and savings products. Max New York Life has recognized the need for protection and savings and the untapped potential of the underserved millions in the country. Breaking free of the existing paradigms in insurance, Max Vijay has proven to be innovative in product and distribution”, the judging panel said.

Max Vijay was launched in October 2008 and it has been able to provide financial inclusion to over 75,000 underserved households touching over 3.5 lakhs lives.

Mr. Rajesh Sud, CEO & Managing Director, Max New York Life, received the award at a ceremony in Singapore attended by representatives of insurance and re-insurance communities, from around Asia.
Receiving the award, Mr. Rajesh Sud, CEO & Managing Director, Max New York Life Insurance Co. Ltd, said: “We feel proud and are honored to accept this prestigious award as it acknowledges Max New York Life’s honest endeavor to reach out to the underserved segment in India. All efforts are also being made to serve the underserved, by making Max Vijay easily accessible to the customers at their doorstep. We are delighted to be acclaimed as a discerning life insurance company”.

“Such recognition is an immense source of delight and clearly establishes Max Vijay as a novel and innovative initiative, which combines global standards in life insurance with social objectives through innovation in product, distribution, marketing, and service delivery.” he further added.Related Posts:

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Free Clinics in Pakistan Promote Microinsurance for Healthcare

Microfinance Focus — Wed, 11 Nov 2009 08:55:01 +0000

Microfinance Focus, Nov. 11, 2009: ‘First Microinsurance Agency (FMiA)’ in Karachi has offered several hundred clients basic outpatient care, along with information on health insurance. This is the part of a new programme designed to make poor people aware of microinsurance services and their benefits.

The health clinics programme, which is expected to continue, is meant to help fulfill FMiA’s goal of providing affordable insurance products carefully tailored to the needs of poor families.
“FMiA hopes to keep playing an important role in making health care easily available to its clients and others that need it,” said Al Malik Khoja, the acting CEO of FMiA.

Microinsurance services offered by FMiA include: hospitalization insurance, savings completion and credit life. Counselors at the clinics offer advice on microinsurance products, including how:
•   Health insurance provides cashless coverage for medical expenses incurred in private and medical hospitals due to serious illnesses, obstetric care and accidents,
•   Savings completion ensures that a family’s savings objectives are met even in the event of the death or injury of the breadwinner,
•   Credit life helps to protect the family of the loan borrower from debt in case of death or serious disability.

FMiA Pakistan is the first of two microinsurance institutions operated by the Aga Khan Agency for Microfinance (AKAM). FMiA focuses on the needs of poor families, in both the formal and informal economies, by providing them with a range of financial products that will help protect their assets and well-being.

AKAM is a not-for-profit; non-denominational, international development agency created under Swiss law and it has 13 microcredit operations and two microinsurance operations in 13 countries. Its headquarters are in Geneva, Switzerland. It is governed by a Board of Directors and the Chairman of the Board is His Highness the Aga Khan.Related Posts:

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Microinsurance – The first option for the vulnerable to manage risks

Microfinance Focus — Thu, 05 Nov 2009 16:15:53 +0000

5th International Microinsurance Conference 2009

Microfinance Focus, Nov. 05, 2009: The 5th International Microinsurance Conference in Dakar, Senegal, has been taking place this week with the aim of unlocking the full potential of microinsurance by addressing the most challenging topics such as health, access and product design. Microinsurance has been growing and expanding rapidly in recent years throughout the world but especially in Africa, said Craig Churchill from the International Labour Organization (ILO) and Chairman of the Microinsurance Network. “Over 14 million low-income people were covered by microinsurance at the end of 2008. Compared to a global landscape study conducted in 2005, this reflects more than an 80% increase for most African countries. This is substantial growth by any standard.”
The conference, organised by the Munich Re Foundation and the Microinsurance Network, involved nearly 400 microinsurance experts and practitioners who met to discuss trends and recent developments in cost-effective insurance for the poor. “With over 60 countries represented this year, the conference, held in Africa for the second time, is now truly the annual international meeting of microinsurance experts,” said Dirk Reinhard, Vice Chairman of the Munich Re Foundation and Chair of the conference organizing committee. “Experts usually think that Africa is the forgotten continent when it comes to economic development. But in the case of microinsurance, we are convinced that the conference participants will learn a lot from the experience in Africa, especially in the field of mutual health insurance.”
Microinsurance is facing many issues and one of them is the lack of reliable data. With this in mind the ILO’s Microinsurance Innovation Facility presented a new Landscape Study of Microinsurance in Africa. This study found that 14.7 million people living under $2 a day are covered by microinsurance in 32 African countries. This represents only about 2.6% of the population and differences among some African countries are quite significant. Senegal, for example, has just over 346,000 people covered (2% of the 14.7 million people covered on the African continent), while South Africa has 8.2 million (which represents 56%).
The study also found that Africa is dominated in terms of product by life insurance, while health insurance products cover only 1.9 million people. More positively, most of those covered enjoy comprehensive health packages with both in-patient and out-patient treatments. These packages, especially in Senegal, are predominantly delivered by health mutuals.
“Health is a key issue regarding human rights and development, and this is the reason it has been selected as a key topic for this conference. Senegal has interesting and promising approaches, especially in the area of mutuals,” said Thomas Loster, Chairman of the Munich Re Foundation. “With many new initiatives at this conference I hope to see the conference and microinsurance grow. I also hope that microinsurance will soon no longer be known as micro, but macro.”
Microinsurance is not without its challenges, as Charles Dan, Regional Director Africa, ILO, correctly pointed out: “Indeed, there are still a number of important conditions that need to be put in place to enable civil society, cooperatives, microfinance institutions, and insurance companies to live up to their potential to extend sustainable protection to the working poor.”
Prisca Soares, Secretary General of the African Insurance Organization (AIO) concluded: “We need to go beyond talking and take concrete action. I see two major challenges. The first is education, but not only for the population; the providers too need to have a deeper understanding of the target market. The second is innovation. We need to think outside of the box and look at the needs of each individual population group, know their culture and customs, and it’s only by doing this that we will be able to offer good−value microinsurance products.”Related Posts:

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Strengthening Access to Insurance Initiative: GB announced

Microfinance Focus — Thu, 05 Nov 2009 05:54:28 +0000

Microfinance Focus , Nov. o5, 2009 : The Access to Insurance Initiative announced that Jonathon Dixon, Deputy Chief Executive Officer of Financial Services Board, South Africa and Ramesh Rai Bhattrai, Executive Director of Beema Samiti (Insurance Board), Nepal have been elected as the Chair and Vice-Chair of the Governing Board. The board members include insurance supervisors from Brazil, Ghana and the sponsors of the Initiative CGAP, ILO, BMZ, Fin Mark Trust, IAIS Secretariat and GTZ.

The Access to Insurance Initiative is a new collaborative approach between the International Association of Insurance Supervisors (IAIS), Consultative Group for Assisting the Poor (CGAP) and World Bank, International Labor Organization (ILO), German Federal Ministry for Economic Cooperation and Development (BMZ) and the Fin Mark Trust. With the participation of international development agencies and insurance supervisors through the IAIS, this global programme is designed to strengthen the capacity and understanding of insurance supervisors, and to facilitate their role in expanding access to insurance markets. The expected outcome is to contribute towards an improved policy, regulatory and supervisory environment consistent with international insurance sector, and develop sustainable microinsurance operations in emerging markets.
Dirk Reinhard, Vice Chairmen of Munich Re Foundation commended, “The Initiative builds on the ever-growing ecosystem of access to insurance and will improve our understanding to tackle the challenges and take advantage of opportunities that arise across the insurance value chain.” “The challenges of access to insurance are not just about elaborating standards that allow low-cost delivery of insurance services without exposing customers to unnecessary risks, but rather a combination of regulation, supervision and policy requirements, balanced against proportionality,” says Dixon.
G. Prabhakara, Member of Insurance Regulatory and Development Authority, India added that, “Supervisors from emerging markets can expect varied forms of technical assistance for building their capacity, not only to promote access to insurance but also allow implementation of international insurance standards.”
“Those who live in constant uncertainty of losing their jobs, home or good health are less able to be as economically productive and are often stymied in reaching their full potential,. said Adolf Kloke-Lesch, Director General at the German Ministry for Economic Cooperation and Development (BMZ), “Microinsurance reduces the vulnerability of poor people to risks. The Access to Insurance Initiative sets the right path for improved framework conditions to achieve this security for all. That is why we gladly lend our support to the initiative.”

“I am thrilled to see the emergence of this Initiative from the cutting edge work of the Microinsurance Network over the years,” said the ILO’s Craig Churchill, who also serves as the Chair of the Network. “The ILO strongly supports the Access to Insurance Initiative because we believe that it has the tools and expertise to assist policy makers to create an enabling environment for microinsurance, which can help to advance the ILO’s Decent Work Agenda.”
“Access to insurance is the new frontier for financial inclusion in emerging markets”, remarked Maya Makanjee, CEO of FinMark Trust. “We look to this Initiative to play a strong role in spreading the message amongst regulators and supervisors.” The secretariat, responsible for the day to day operations of the Initiative, will be hosted by German Technical Cooperation (GTZ).Related Posts:

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SKS Microfinance, Bajaj Allianz to provide microinsurance to spouses now

Microfinance Focus — Wed, 16 Sep 2009 17:32:37 +0000

By Naagesh, N.

Microfinance Focus, Sept. 16, 2009: To provide additional financial security to potentially 50 lakh (5 million) families, SKS Microfinance, in partnership with Bajaj Allianz Life Insurance has now launched its best-selling micro-insurance project ‘Swayam Shakti Suraksha’ to cover husbands of SKS members, who are usually women.

‘Swayam Shakti Suraksha’ scheme that presently covers SKS members will be extended to cover members’ husbands. The premium payments are Rs. 20 ($0.4) per week and the sum assured under the policy is Rs 5,000 ($100). It also offers additional accidental disability and death benefits. The minimum term of policy is five years and for the customer convenience the claim settlements are done at the centre meeting.

“There was a huge demand for this micro-insurance scheme from our members as ‘Swayam Shakti Suraksha’ is an exclusive product that SKS launched jointly with Bajaj Allianz last year. It has been a huge success story in the insurance sector, covering nearly 1.7 million lives within 10 months. Introducing this scheme to member’s spouse will further strengthen a sense of financial and personal security amongst our members”, said M R Rao, COO, SKS Microfinance.

Kamesh Goyal, Country Manager, Allianz & CEO Bajaj Allianz Life Insurance, said, “We are happy that the insurance product has been widely accepted among the members. The extension of the product for members’ spouse is a result of the demand amongst them that we and SKS have felt for the last one year.”

The initiative is being rolled out in a phased manner and is currently being offered through 10 urban branches of SKS Microfinance in Andhra Pradesh. Around 4,000 spouses have already been provided the insurance cover. The initiative will be rolled out to all the SKS Microfinance branches located across 19 states in the days to come, the company said in a press release.

“In the coming days, we will be launching the product across 90 new branches in Kurnool and Vijaywada in Andhra Pradesh, Bhopal in Madhya Pradesh, Kochi in Kerala and Jaipur in Rajasthan”, explained Vice President, Retail Insurance Sandeep Ralhan, SKS Microfinance.

SKS Microfinance is a non-bank finance company (NBFC) that provides financial services to the poor. Established in 1998, SKS Microfinance is India’s largest microfinance organization with an annual growth rate of 188 per cent. It currently serves five million clients across 62,000 villages and urban slums in 19 states. Presently, it is considering to raise funds from an IPO. Its other product plans include small housing loans for its customers.Related Posts:

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