1. Insuring the Poor and Vulnerable
Helping the poor weather life’s storms
Richard Leftley - CEO, MicroEnsure

2. The poor do not buy insurance – why?

3. Microinsurance landscape
• Market estimated to be 3bn people by Swiss Re of which
only 3% have access to any insurance products
• Most dominant product is credit life for borrowers of
MFI’s; limited benefit for the poor, it protects the lender
• Strong demand for a “safety net” from the poor
• Increasing interest in the market from insurers
• Issue is how to cost effectively provide access, education
and claims servicing whilst generating profit across the
value chain

4. Insert Title Here
Framework for Microinsurance

5. Microinsurance challenges
• Risk carrier: relatively easy to find willing risk carrier for
life and property, weather index and health are harder.
• Back office: key driver to cost but more importantly a key
driver to level of service and hence “success”
• Front office: we have to “white label” with companies
that have existing client bases. Why will they partner with
us? Are microfinance companies the best fit?

6. 2The economics across the value chain for health insurance
USD/
policy
10.0
MicroEnsure: 1
MicroEnsure provides
enrollment admin services
as part of their service fee,
and sometimes supports
salary of TPA staff
MicroEnsure
does most of
the product
design
MicroEnsure’s
revenues are
supposed to cover
cost of developing
products, supporting
distribution and
administration
8.0
6.0
MFI: 1
0.4
0.6
0.5-0.6
0.6-0.7
14.0
-13.4-13.3
Price to
end
customer
Percent
100
Distribution Risk
fees
premium
paid to
insurer
20
Claims
1
80
Based on target claim
ratio of 60%; however,
claim ratio varies
depending on state/
partner and stage of
product maturity
60
Marketing
other
acquisition
costs
4
MicroEnsure’s
reduces insurers’
distribution costs
(from 25% to 24%)
and increases their
control over cost
Admin fee
to TPA
6
Other
overhead
costs
3-4
Margin to
insurer
6-7
Currently often not Margin to insurer
sufficient to cover negative if claim
costs of servicing
ratio too high
policies
Economics of other
players in the value
chain are tight, in
particular for TPAs
and (depending on
claims) for insurers
1 Based on target claim ratio of 60%. Actual claim ratios vary from 25% to 300%
Source: Interviews
McKinsey & Company |
Working Draft - Last Modified 11/19/2010 5:39:50 PM Printed 11/19/2010 5:39:09 PM
Insurer
TPA
Distribution partner
MicroEnsure
Impact from
higher claim ratios
Typical insurer economics for a MicroEnsure health insurance policy in India (USD)
MicroEnsure will split
marketing costs with insurers
(e.g., printed materials, ads)
INDIA

7. Profit drives scale
• MicroEnsure works with a range of “front office” partners
• Started by partnering with microfinance lenders
• 67 MFI’s together serving 12m active borrowers
• To date, less than 1m insured with MicroEnsure – why?
• Economics: loan = $10+, insurance = $0.20
• MFI’s happy to introduce credit life to protect themselves
but launching more complex products requires investment
of core personnel who could be used more profitably
elsewhere in the operation
McKinsey & Company |
Working Draft - Last Modified 11/19/2010 5:39:50 PM Printed 11/19/2010 5:39:09 PM
• Strong brand, accessible points of sale and ability to
transact cash are all key attributes for a “front office”

8. If not MFI’s; then who?
• Need partners that are trusted, accessible and can
transact payments for premiums and claims
• We tried using VSLA groups and churches – trusted and
accessible but the cost of implementing a cash
transactional system made them not viable
• We asked our clients who they trusted; the most common
answer was “Coke” and “my mobile company”
McKinsey & Company |
Working Draft - Last Modified 11/19/2010 5:39:50 PM Printed 11/19/2010 5:39:09 PM
• MFI’s provide loans to circa 150m families out of the 3bn
available market; how else can we reach the poor?

9. Using mobile networks
• Aim is to get millions of people using insurance for the
first time and for them to see that claims are paid quickly
• Second stage is to offer a “freemium” product; for
example increase your benefit or include your wife for a
small fee
• Third stage is to sell a stand-alone complex product, like
health, with premiums deducted monthly from mobile
wallet
McKinsey & Company |
Working Draft - Last Modified 11/19/2010 5:39:50 PM Printed 11/19/2010 5:39:09 PM
• Typically start by embedding simple product into the sale
of airtime. Increased loyalty pays for the “free” product

10. MicroEnsure growth
Growth in Lives Insured
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0

11. Thank you for your attention
For more information please
visit:
www.microensure.com
email: info@microensure.com