Workshop on Microinsurance Insurance and Regulatory Development (IRDA) Institute of Insurance and Risk Management (IIRM) United States Agency for International Development (USAID) Hyderabad 14 - PowerPoint PPT Presentation

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Workshop on Microinsurance Insurance and Regulatory Development (IRDA) Institute of Insurance and Risk Management (IIRM) United States Agency for International Development (USAID) Hyderabad 14

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Title: Workshop on Microinsurance Insurance and Regulatory Development (IRDA) Institute of Insurance and Risk Management (IIRM) United States Agency for International Development (USAID) Hyderabad 14


1
Workshop on Microinsurance Insurance and
Regulatory Development (IRDA) Institute of
Insurance and Risk Management (IIRM) United
States Agency for International Development
(USAID) Hyderabad 14 15 October 2005
Management Standards and Prudential Indicators
for Developing Microinsurance Denis Garand,
Consultant, BearingPoint Inc. John J. Wipf,
Consultant, BearingPoint Inc. Indian Insurance
Reform Project www.bearingpoint.com
2
Presentation Outline
  • Rationale for MI Standards and Indicators (SI)
  • Proposed set of SI
  • Scoring Example
  • Developing SI
  • Way forward
  • Microinsurance Resource Center Concept
  • Conclusions

3
Rationale for Standards Indicators
  • MI around the world is still in early stages of
    development. The main challenges still remain
  • Finding economical solutions for distribution,
    premium collection, claims settlement
  • Access to quality service providers
  • Affordable health care
  • Relevant product design
  • Accurate pricing
  • Sound financial and risk management
  • Enabling policy
  • Standards and Indicators are expected to boost MI
    development
  • Enables benchmarking of MI relative to peers
  • Framework and guide for development and business
    planning
  • To increase chances of long term HMI
    sustainability
  • Proposed set 27 standards and 10 indicators in 8
    categories

4
A. MI Organizational Structure
  • SA.1 Separate MI operations
  • -MI needs dedicated management and accounting
  • -MI is not a sideline activity
  • SA.2 All HMI partners legally registered with
    respective regulator (s)
  • -Indian Partner-Agent model
  • Others?

5
B. Marketing and Distribution
  • SB.1 Clear communication of benefits,
    limitations, exclusions, etc.
  • SB.2 Clients know how to claim.
  • SB.3 Marketing messages are refreshed frequently.
  • SB.4 The MI sets target participation and renewal
    rates.
  • SB.5 Periodic surveys are conducted to determine
    client satisfaction.
  • IB.6 Participation Rates (PR)
  • IB.7 Renewal Rates (RR)
  • IB.8 Market diversity (no measure of this yet)
  • Others?

6
C. Financial Management and Viability
  • SC.1 Actuarial reserves are calculated properly.
  • IC.2 Adequacy of actuarial reserves (actual /
    required)
  • IC.3 Liquidity Measure (focus is on next 12
    months)
  • IC.4 Solvency Ratio (Liabilities / Admitted
    Assets)
  • SC.5 Income Statements, Balance Sheet, Cashflow
    Statements
  • Others?

7
D. Risk Management
  • SD.1 Continuous monitoring
  • -Actual to expected claims
  • -Utilization trends by benefit category
  • -Anti-selection and moral hazard, etc.
  • SD.2 Reinsurance program in place (as applicable)
  • SD.3 Long term guarantees linked to actual
    investment returns
  • -applicable to long term savings products,
    endowment plans
  • SD.4 Annual MI modeling to detect developing
    trends
  • Others

8
E. Investment Management
  • SE.1 Investment policy
  • IE.2 Asset quality and diversification
  • IE.3 Asset-liability matching for long term
    products
  • Others

9
F. Operations Management
  • SF.1 MI is managing per the SI and aims to
    maximize indicators
  • SF.2 MI reports to the HMI industry for SI
    evaluation
  • SF.3 MI partners have 3-5 year strategic business
    plan
  • SF.4 Internal and external audits.
  • SF.5 MI staff training.
  • SF.6 MI sets service standards.
  • SF.7 Operations manuals are updated.
  • SF.8 MIS Database design with actuarial input,
    Management reporting is used effectively, data
    managed as a resource.
  • Others?

10
G. Economics and Client Value H. Impact and
Community Outreach
  • H. Impact and Community Outreach
  • -Have not developed any SI yet
  • I. Economics and Client Value
  • IG.1 Expense ratios
  • IG.2 Incurred claims ratio
  • SG.3 Net income and sustainability
  • Others

11
I. Health Insurance
  • SI.1 Accreditation and auditing of providers
  • SI.2 Client satisfaction surveys (with respect to
    provider)
  • SI.3 Negotiated tariffs for service
  • SI.4 Treatment protocols
  • Others?

12
Health Insurance Indicator Scoring Example
  • Indicator IB.7 Renewal rates (RR)
  • Tracks and measures a cohort of insureds from the
    past year to determine how many are renewing
    their coverage.
  • Requires proper design of MIS database and
    analytical applications.
  • Is an indicator of marketing effectiveness and
    client satisfaction.
  • Scoring of RR indicator (max score of 1 for each
    product)
  • Poor to Fair, score 0 if RR lt 80
  • Fair to Good, score RR4 if 80 lt RR lt 90
  • Good to Excellent, score RR4 if 90 lt RR lt 95
  • Outstanding, score RR4 if RR gt 95
  • Eg. Renewal rate of 75 scores 0
  • Eg. Renewal rate of 85 scores 0.850.850.850.85
    0.52
  • Eg. Renewal rate of 95 scores 0.950.950.950.95
    0.82
  • Eg. Renewal rate of 98 scores 0.980.980.980.98
    0.92

13
How to Develop SI
  • INFORMATION REQUIREMENTS
  • Existing MI Case Studies / experiences as a guide
  • Draw from and adapt the experiences of the
    commercial insurance industry
  • Consider regulatory limitations
  • ASSUMPTIONS NEEDED
  • Clear goals such as MI industry sustainability
    and solvency
  • -need to establish a context
  • -example, typical MI should be sustainable in 2
    years, solvent in 3 years
  • The PROCESS
  • Define the set of SI (or adopt the BP set
    presented above)
  • Utilize MI models and experiences to test
    plausible / achievable standards and indicator
    ranges
  • Devise a scoring method for each standard and
    indicator based on its relative impact on MI
    success (or use our BP set)

14
MI Industry Collaboration
  • MI Industry players should collaborate
  • Develop SI to stimulate MI / HMI development.
  • Regularly publish ratings of MIs / HMIs that
    report SI to the industry.
  • Continuously refine SI as needed.
  • Develop technologies that enable MIs to meet the
    standards and compute the indicators.
  • -Example, MIS, databases, and relevant
    applications.
  • Philippines example
  • MFIs collaborate in building a microinsurance
    industry
  • Several MFIs capitalized a microinsurance
    resource center which is developing SI,
    repository, and supporting technologies

15
Microinsurance Resource Center (MIRC) Model
Regulators
Service Providers
Insurers
TPA
authorization, accreditation
insurance package design and negotiation
advocacy
reporting, monitoring
rates and services negotiation
  • MI services
  • documenting and promoting best practices
  • negotiation with service providers, TPAs,
    insurers
  • specialized actuarial services and tools
  • product development
  • microinsurance operations admin software and
    tools
  • demand research
  • operations and risk management training
  • auditing
  • networking services such as a credit bureau
  • Sector development
  • data warehousing
  • industry studies using consolidated experience
  • Develop Standards Indicators, MI rating
  • advocacy

premium, commission, claims
Microinsurance Resource Center (MIRC)
enrolment info, claims data
information, technology, services
service fees
franchise service fees
data
MFI1
SHG1
SHG2
SHGm
MFI2
MFIn
. . .
Microinsurers offering MIRC branded products
and services customized to local needs, adhering
to prudential standards and to regulatory
requirements.
. . .
MI1
MIi
MI2
MIn
16
Main Challenges
  • Getting the industry to collaborate
  • Reluctance of MIs to report (fear of losing
    support funding if rating is low)

17
Conclusions
  • Standards and Indicators are needed for MI
    Development
  • Experiences and modeling can be used to develop
    SI
  • Industry can collaborate to develop SI and
    supporting technologies
  • Microinsurance Resource Center is one way to move
    forward.
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