Prospects for Microinsurance in Transition Settings

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Prospects for Microinsurance in Transition
Settings

• MFC for CEE and NIS
• Annual Meeting 2005
• Bucharest, Romania
• Michael J. McCord
• President, The MicroInsurance Centre
• mjmccord_at_bellsouth.net

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What makes a country appropriate for
Microinsurance?

• Large population is a benefit, but not the only
  concern (Albania vs. Georgia)
• Deficiencies in the social security structures
• Existence of private insurance industry
• Flexible political conditions enabling
  development of customized products and procedures
• Insurance provision gaps in existence or quality
• Strong demand from the low-income market
• Excited insurers and intermediaries (champions)
• Well managed economy (inflation, currency values,
  stable policies)

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Georgia Insurance Industry at a Glance
Insurance State Supervision Service of Georgia
Insurers Association
Companies Act
Insurance Brokers (2002 8/14) (700K290/410
for 73K comm.) (about 4 of gross premiums) (Aon
80)
Microinsurance Products (Aldagi / Constanta)
(Using current exchange rate of GEL1.96 to US1)
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Premium Growth
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Life versus Non-Life
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Insurance Penetration (Premiums to GDP)
Europe and World 7.8 // Sri Lanka 1.2 //
Kenya 1.9 // India 2.0
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Insurance Density (Premiums per Capita)
Europe 918 // World 363 // India 6 //
Russia 40 // Estonia 60 // Turkey 200
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Loss Ratios
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SOME Options1 A Microinsurance Broker

• Problem
• Tremendous interest from all parties. Limited
  understanding.
• Impact
• Problems with product development, delivery,
  innovation, and quality. Will delay new products
• Intervention
• The introduction of a specialised microinsurance
  broker

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SOME Options2 A Custodial Company

• Problem
• Confidence is very weak in insurance companies.
  Private pensions are beginning to grow. Several
  companys ownership is offshore.
• Impact
• Without confidence pensions will not grow to
  potential. Companies could abscond with funds,
  seriously damaging market and the poor.
• Intervention
• The introduction of a custodial company to
  control possession of pension funds.

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SOME Options3 Caucuses Centre for MI in Georgia

• Problem
• Tremendous interest from all parties. Limited
  understanding.
• Impact
• Problems with product development, delivery,
  innovation, and quality. Will delay new products

• Intervention
• 3 year Caucuses Centre for Microinsurance in
  Georgia

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Issues for Consideration

• Potential for unstable regulations
• Market mistrust of insurers and institutions
  (impact on pensions)
• Requires high credibility (entrepreneur,
  examples. Know brokerage and micro-market.
  Professional custodians. International name?)
• Relatively small market, but regional
  possibilities (replication in other countries,
  branches in Armenia and Azerbaijan)
• Profitability? (possible given very preliminary
  numbers)
• Demand? (insurers, MFIs, others interested,
  clients? Need additional market research)

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What else is happening in MI?
Working Group on Microinsurance
(Some members GTZ, ILO DFID, MIC, KfW, IRDA,
plus SIDA, World Bank, USAID, Interpolis, and
others)
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The MicroInsurance CentreDeveloping
partnerships to insure the worlds poor
www.microinsurancecentre.org