Why should low-income people buy insurance? The quick answer is, of course; because they need it. Studies from across the developing world have confirmed this need for financial risk management tools. However, people who may need insurance do not always want it. If clients have not bought a seemingly valuable insurance product, the considerations outlined in this brief can help to shed light on possible reasons why.

The MILK Project has reviewed some of the data from the Microinsurance Innovation Facility's market study of BanRural clients in Guatemala in order to develop a better understanding of the health financing alternatives available to poor women in Guatemala and develop a hypothesis of the value that microinsurance might have for poor women. This hypothesis will be tested once Aseguradora Rural launches a new product aimed at covering women’s health needs and marketed to savings clients of BanRural in the last quarter of 2011. The MILK Project will then implement its Client Math methodology to study the direct value that the health microinsurance product has on poor women by comparing the financial costs of gynecological health for women with the product to those of women without the product. The Client Math study will also seek to understand the role of insurance in increasing access to health care for low income women.

This brief provides a structure to support decisions about appropriate research designs to answer questions about the value microinsurance has to clients.  It begins by describing what a “perfect” research design seeks to achieve, and what it requires. Then the paper discusses practical considerations that can limit researchers’ ability to implement perfect studies, and end with a discussion of alternative research designs. A short glossary of important research terms is also included at the end.

One of the principal questions MILK seeks to answer is: Does microinsurance help protect people from large shocks (high cost events) in comparison to other alternatives? The problem in the Philippines shines a light on the subtleties at play in this question. If the cost of making a claim (in terms of getting documentation or “bridging” the financing need with other sources of funds) is too high, even potentially valuable products might offer low or no financial value to clients, who may have been better off turning to other financial sources or reducing expenditures significantly following the event.  MicroEnsure and MILK propose to "do the math" to determine the effects of slow claims payments.

Poor households use a variety of tools to cope with risk, including formal and informal savings, loans,risk-sharing, asset sales, and cash and in-kind transfers from family members, communities,governments, and NGOs. Traditionally, informal social networks at the family level have played a particularly significant role in helping the poor cope with risk. This brief examines the importance of family networks and ways in which recent demographic trends indicate a weakening of these networks and emergence of new gaps in risk-coping ability which formal insurance products may be able to fill.

This paper contributes to this discussion by focusing on improving client value rather than proving it. It presents results from the analysis of 15 microinsurance schemes using the ILO’s client value assessment tool called PACE (Product, Access, Cost and Experience). The PACE tool looks at the added value for clients from insurance products by comparing them to each other and to alternative means of offering protection from similar risks (including informal mechanisms and social security schemes). Informal mechanisms and social security schemes provide a benchmark to assess the value of microinsurance in the context of other risk management options.

The PACE tool is structured into the following main dimensions:
Product: describes appropriateness by reviewing coverage, benefit level, eligibility criteria and availability of value-added services
Access: focuses on accessibility and simplicity by investigating choice, enrolment, information, education, premium payment method and proximity
Cost: measures both affordability and value for money, while looking at additional costs to keep down overall costs of delivery
Experience: assesses responsiveness and simplicity by looking at claims procedures and processing time, policy administration, product tangibility and customer care

This brief offers a summary of findings evidenced in the existing research that are relevant to MILK's two main questions to understand client value(1. Does microinsurance help protect against large shock relative to other alternatives? 2. To what extent do microinsurance smooth income or protect assets against small shocks?). While the research is suggestive of financial value of microinsurance, we have few concrete answers. There are simply not enough existing studies, particularly of products other than health insurance, and the studies that are available often overlook considerations that offer a fuller understanding of the value of microinsurance. One of MILK's objectives is to influence and encourage new studies in microinsurance that are targeted toward this broader understanding. This brief aims to provide guidance for researchers, stakeholders and practitioners in framing research questions and to encourage new studies that build a more complete understanding of the added value of microinsurance as a financial risk management tool for the poor.

This paper presents a case study analysis of the profitability of microinsurance provided by five insurers operating in different regions across the globe. The insurers selected for the case studies are sampled from differing environments, and approach the problems of commercial microinsurance in different ways. To bring consistency to the analysis, and to facilitate comparison between the cases, a framework for the assessment of microinsurance profitability was developed. The framework is based on three main drivers of profitability:

• generating sufficient income by reaching scale
• managing claims costs
• managing acquisition and administration costs

How the insurers balance these three often competing aspects of the business is investigated through the case study analysis. Although the experiences in these case studies are unique, investigating the challenges and successes of these established microinsurance initiatives provides insights into possible approaches to improve viability for other players in the market.

This brief summarizes the findings of a landscape study performed by MILK. The full report is also available on our website.  Contained in this brief are short descriptions of lessons learned and a list of opportunities, challenges, and questions about a business case for micrionsurance the MILK aims to address.

Esta nota evalúa el caso de negocio del microseguro a través de estudios de caso de cinco iniciativas de diferentes compañías de seguros, Co-operative Insurance Company (Kenia), Old Mutual (Sudafrica), ICICI Lombard (India), Aseguradora Rural (Guatemala), and Malayan Insurance (Filipinas). El estudio utiliza un marco para identifi car los principales factores de la rentabilidad a través de indicadores clave de desempeño y una evaluación cualitativa de la información recogida. Los factores a evaluar son los siguientes: 1) escala, 2) costos de los siniestros, y 3) costos de adquisición y administración.

Cette note évalue la rentabilité de la micro-assurance à travers l’étude de cinq initiatives de sociétés d’assurance, Co-operative Insurance Company (Kenya), Old Mutual (Afrique du Sud), ICICI Lombard (Inde), Aseguradora Rural (Guatemala), and Malayan Insurance (Philippines). L’étude identifi e les principaux moteurs de la rentabilité à l’aide d’un cadre comprenant des indicateurs de performance clés et une évaluation qualitative des informations rassemblées. Ces moteurs sont : 1) l’échelle, 2) les coûts d’indemnisation, 3) les coûts d’acquisition et d’administration.

This note assesses the business case for microinsurance through case studies of five initiatives of insurance companies, Co-operative Insurance Company (Kenya), Old Mutual (South Africa), ICICI Lombard (India), Aseguradora Rural (Guatemala), and Malayan Insurance (Philippines). The study uses a framework to identify the main drivers of profitability using key performance indicators and a qualitative assessment of the information gathered. The drivers are: 1) scale, 2) claims costs, and 3) acquisition and administration costs.

This briefing note presents results from the analysis of 15 microinsurance schemes in India, Kenya and the Philippines using the ILO Microinsurance Innovation Facility’s client value assessment tool called PACE (Product, Access, Cost and Experience). The PACE tool looks at the added value for clients of insurance products by comparing the products to each other and to alternative means of protection from similar risks (including informal mechanisms and social security schemes).

Cette briefing note présente les résultats tirés de l’analyse de 15 dispositifs de micro-assurance en Inde, au Kenya et aux Philippines, analyse effectuée au moyen de PACE (Produit, Accès, Coût et Expérience), l’outil d’évaluation de la valeur pour le client proposé par le Fonds pour l’innovation en micro-assurance. Cet outil procède en comparant différents produits d’assurance entre eux et avec des solutions alternatives de protection face à des risqué similaires (parmi lesquelles les mécanismes informels et les dispositifs de sécurité sociale).

En esta nota informativa se presentan los resultados del análisis de 15 programas de microseguros en la India, Kenya y Filipinas, utilizando el instrumento de determinación del valor para el cliente del Fondo para la Innovación en Microseguros de la OIT denominado PACE (Producto, Acceso, Costo y Experiencia). El instrumento PACE examina el valor añadido para los clientes de los productos de seguros, comparando los productos entre sí y con medios alternativos de protección contra riesgos similares (incluidos mecanismos informales y regímenes de seguridad social).

This document provides and overview of the MicroInsurance Centre's MILK project, such as what questions MILK is trying to answer and how this will be achieved.

This document is a short summary of the Client Value Landscape Study that we recently completed to look at what is out there already in terms of work that has been done, is currently under way, or is planned, to research aspects of the question - is there value for clients in microinsurance?