Rural banks and insurance companies partnering to offer microinsurance: Experiences from the field

The second panel session on microinsurance during the RBAP-MABS roundtable highlighted the perspectives of rural banks and insurance companies in various strategies to address microinsurance as both groups gear up to work together to offer these services nationwide.

Dinah VeralloDinah Verallo of FAIR Bank discussed her keys to successfully implementing a microinsurance strategy. The fear of the unknown that comes with all significant changes can be mitigated by a disciplined research phase, where both the external market and the internal operations of the organization must be studied. A key step in this phase is researching a microinsurance provider partner. The focus of the implementation phase is on the infrastructure lay-out, training and developing the microinsurance partnership. The infrastructure lay-out includes detailed plans for product development, communications and information systems. Ms. Verallo explains that internal training is also a key component in managing change, ensuring that employees are well-prepared for the new claims procedures and they understand the microinsurance regulatory environment. Additionally, finding the right microinsurance partner that endorses the bank’s value proposition and is willing to support all the promotional campaigns of the bank, Ms. Verallo noted, is an important part of a successful partnership.

Reginald OcampoReggie Ocampo, the President of First Macro Bank, then shared the challenges his bank faced with their microinsurance program and some considerations for banks when choosing an insurance partner. In First Macro’s initial program, clients experienced low rates of claims, insufficient hospitalization coverage, and delayed response in claim approval decisions. The lack of training of the field staff was partly to blame; however, the key is to find the right insurance partner that will meet the needs of the clients. Mr. Ocampo laid out a number of considerations when choosing a partner, such as its profitability, compliance rate, flexibility, pricing appropriateness, understanding of the market, claims reputation and capacity to focus its resources on the microinsurance program. Last year, First Macro Bank signed a memorandum of understanding with MicroEnsure, an insurance intermediary. Since implementation of this new partnership, all four clients who submitted claims were approved as opposed to only a 35% approval rate with the original insurance partners.

Geric LaudeThe next presenter, Geric G. Laude of the Pioneer Group of Insurance Companies, provided the conference attendees with an insurer’s perspective. He discussed the ways where insurers can add value to the promotion and service delivery of microinsurance products. Insurance providers can assist in the development of marketing programs and leverage their experience to take the lead on conducting research, studies and testing. Insurers can also help streamline and simplify product access, product delivery, and claims processing. Mr. Laude noted that a successful program must have reasonable exclusions for coverage along with an effective communication system in order to set client expectations, adding that the market is willing to pay a premium for a solid insurance program. He had a few words of advice for rural banks: co-own the program with the insurers; the benefits of microinsurance far outweigh the initial investment; ensure that the culture and mindset of the organization is ready for this new program; and, choose the right partner…and be willing to grow with that partner.

William MartirezThe second session closed with William H. Martirez, the Country Manager for MicroEnsure Philippines. Mr. Martirez presented his intermediary model of microinsurance delivery. An intermediary negotiates with insurance companies on behalf of the clients to keep premiums to a minimum. Intermediaries provide value in its effective product distribution, sophisticated MIS systems and back office processing, and extensive market research and insurance expertise. Mr. Martirez emphasized the automated insurance management system as a critical component for the timely and cost effective distribution of microinsurance to rural banks and MFIs. This system specializes in large-volume data processing, data management, claims processing and automated reporting. Marketing is another area he stressed as an important part of the intermediary model. A significant hurdle for microinsurance is the inability to differentiate these products from traditional insurance products. This is where an effective marketing program comes into play. For example, MicroEnsure developed comic books in clients’ local languages to provide them with an understanding of managing risk and the ability to distinguish the microinsurance products that are most appropriate to their situation.

Do you have a successful insurance provider partnership? Or have you experienced challenges with implementing your partnership? Have you used intermediaries or do you have a direct partnership with a provider? What is your client claims approval rate? Share your stories and experiences by replying to this post.

Until next time, Mabuhay ang Microinsurance!