Parallel session 13 When donor money runs out: Making MI commercially viable

Parallel session 13 When donor money runs out: Making MI commercially viable

Hosted by Women’s World Banking

By Maria Victoria Sáenz Most insurers believe that offering insurance to the low-income market is not viable. This session hosted by Women’s World Banking discussed how to build customer-centric, commercially viable life and health insurance schemes using a responsive, data-driven optimisation approach to product development that achieved breakeven.

Government-sponsored health insurance programmes in Egypt are not easily accessible to the informal sector, comprised mainly of lowincome women. Commercial insurance companies have also largely focused on the middle and upperincome segment and little innovation has been done to develop microinsurance solutions for the low-income segment beyond credit-linked insurance. Women’s World Banking joined hands with Lead Foundation in Egypt to increase low-income women’s access to formal health insurance. Lead Foundation is the second largest MFI in Egypt. There are currently over 200,000 active borrowers in its portfolio. Lead provides both group loans (US$ 50 to 700) and individual loans (US$ 170 to 2,800) to low-income women entrepreneurs. In addition to microcredit, Lead also provides life and health insurance to its clients.

With the technical advisory support from Women’s World Banking in 2014, Lead started with the design of the Hemayet Lead insurance programme to provide affordable health and life insurance to its customers. The Agence Française de Développement provided critical funding support in the very initial phases, and later the Swiss Capacity Building Facility (SCBF) became a catalytic partner (see Figure 35). Various stakeholders in the microinsurance delivery model in Egypt It took both Lead and Women’s World Banking almost 16 months to get the pilot started. During these 16 months, the two organisations worked together to conduct customer research, develop a product prototype, circulated an RFP (request for proposal) to find the right insurance company and build Lead’s capacity to become pilot-ready. The pilot was launched in November 2015 and after 6 months of the successful pilot, Lead scaled up the insurance operations and rolled out the programme in all the branches.

Figure 35 Various stakeholders in the microinsurance delivery model in Egypt15

Donor Technical advisor

Reinsurer Intermediary

Insurer Customers

15 The dotted line represents the relationship of the technical adviser, in this case WWB. The technical adviser relates to all the partners, directly and indirectly. The straight blue line represents the direct relationship of each partner to its fellow partners. As WWB organised the scheme, it has relationships to all the partners, albeit on different levels.

Parallel session 13 When donor money runs out: Making MI commercially viable

Hemayet Lead Scheme Number of people insured: 185,932

Insured risks: Hospital cash that gives EGP 300 (US$ 17) per night of hospitalisation and life insurance equal to 3 times the loan amount disbursed.

Premium: The average monthly premium is EGP 16 (US$ 1) for a low-income woman who may have a loan of EGP 3,500 (US$ 175). Claims ratio of the programme is within the target range of 55 % – 75 %. Hemayet Lead Insurance Programme is bundled with every loan. The insurance provides a hospital cash benefit of EGP 300 (~US$ 17) for each night an insured person spends in the hospital. There are no exclusions and all hospitalisation reasons are covered, including childbirth and pre-existing conditions. The life insurance sum insured is equal to three times the value of the initial loan. In the event of death of the loan customer, the insurance pays the family the sum insured, net of the outstanding loan, if any. The successful implementation of the insurance programme required rigorous focus and investment from Lead (see Figure 36). Lead took the responsibility of the bulk of the claims operations to ensure that customers get hassle-free claims settlement16. Donor money from SCBF and Visa Inc. was crucial in receiving the much-needed technical advisory for managing and upscaling the insurance operations. As the programme started to demonstrate success, Women’s World Banking brought in Swiss Re (a global reinsurance company) as a thought partner in the delivery to ensure a commercially viable product in the long term. Swiss Re has been able to provide critical support through data and insights on risk management, as well as technical knowledge around building commercially viable microinsurance programmes.

Figure 36 Lead’s involvement

Microinsurance unit: New unit established to manage the entire claims operations, fraud investigations, and preparation of KPI dashboard

Claims operations backend

Core project team: Microinsurance Head, Training Head, Marketing Head and Deputy Executive director

Dedicated team

Integration with core system: In-house IT development to set-up and integrate insurance workflow, data collection, reporting and record management

Hemayat Lead

IT set-up

Marketing Training

Simplified communication: Development of marketing collateral in local dialect with the use of imagery, phone surveys and customer awareness trackers Change management: Regular communication and handholding of the branch staff to build conviction and confidence, repeat trainings

With a strong focus on generating value for end customers, Swiss Re clearly sees the opportunity of the “missing middle” emerging clients. Its participation therefore came as a natural process, helped by the fact of outstanding technical assistance from and participation of the SCBF. For Lead, counting on Swiss Re was counting on sound and deep knowledge of risk management.

75

76

77 75 — Amir Nafie, Deputy Executive Manager, Lead Foundation, Egypt 76 — Mario Wilhelm, Head of Emerging Consumers, Swiss Re, Switzerland

77 — Hans Ramm, Swiss Agency for Development and Cooperation (SDC), Switzerland Lessons learnt

Conditions to make a programme successful:

• the customers need a product that works for them, • the intermediary must be fully committed and have the capacity to implement the programme, • the insurer and the reinsurer must participate along with the rest of the stakeholders in the design of the project, and • the expectations of the donor must be fully aligned with the objectives and capabilities of the project implementing agency. • To achieve financial sustainability, the donor and technical assistance partners must be committed to upscale the MFI. They must have in mind that sometimes the process takes longer than planned. • Careful planning, and monitoring and evaluating constantly, are key. • The partners in Egypt were fully committed to sharing the same goals, despite each having an agenda (Lead: social mission and sustainability), Swiss Re (serving the missing middle or emerging consumer), SCBF (demonstration effect, generate a commercially viable project) and ultimately

Women’s World Banking (advancing women’s financial inclusion).