Effectiveness of Microinsurance programs in Philippines:

Metrics used for measuring the effectiveness by

MicroEnsure
By: William H. Martirez
Country Manager
MicroEnsure Philippines
July 5, 2015 – Bangi, Malaysia
About Us
MicroEnsure: A specialist provider of
insurance to the low and middle-income
market with active clients in markets across
Africa, Asia and the Caribbean.

We provide a range of life, health, property

and weather-index products via a range of
distribution partners that include
microfinance companies, banks, co-
operatives and mobile network operators. Our business model
Our History
The Micro Insurance Agency is
established as a wholly owned subsidiary
of Opportunity International
MicroEnsure Asia is formed as a joint
venture between Telenor Group and
MicroEnsure Holdings Ltd.

2002 2006 2008 2013

The team starts Opportunity International divests its

developing its first The Micro Insurance majority stake and MicroEnsure
microinsurance models Agency is renamed secures external investment from
MicroEnsure IFC and Omidyar Network
About Us
MicroEnsure Philippines
 MicroEnsure Insurance Brokers Philippines, Inc.
 Started operations in 2007
 Registered as an insurance broker
 Issued more than 9 Million Policies since 2007
 At present, we work with partners in more than 50
provinces nationwide

Innovative Products
 Weather index-based crop insurance
 HospiCash
 Fire & Calamity insurance
o Paid out more than Php318 Million in Calamity
insurance claims covering around 61,000 families
What is Microinsurance?
Microinsurance is the protection of low-income people against
specific perils in exchange for regular premium payments
proportionate to the likelihood and cost of the risk involved.
~Protecting the poor
A microinsurance compendium

Microinsurance is providing the poor access to a basket of risk

protection, support and services in exchange of affordable
premium payments in pursuit of poverty reduction.
~MicroEnsure

Microinsurance is an activity providing specific insurance,

insurance‐like and other similar products and services that meet
the needs of the low income sector for risk protection and relief
against distress, misfortune and other contingent events.”
~Technical Working Group (TWG, 2010)
Metrics used for measuring the
effectiveness of Microinsurance
program in the Philippines
Protecting the poor:
A microinsurance compendium
Excerpt:
Performance standards are operational goals that help a
microinsurer achieve viability, while indicators are used to
measure the extent to which the established standards are
achieved.

These indicators, both qualitative and quantitative, should be

primarily focused on key financial measures since these
provide a rapid assessment of the organization.

For these to be useful and manageable, there should only be

five to twelve initial key indicators.

The primary indicators used to measure the performance of

Microinsurance service providers are:
• The number of new policies
• Amount of premiums collected
Protecting the poor:
A microinsurance compendium

Indicators in four key areas:

By Denis Garand and John Wipf

1. Marketing and distribution

- Participation Ratio, Renewal Ratio, Persistency Ratio

2. Financial management and viability

- Net Income, Liquidity Ratio, Solvency Ratio

3. Efficiency and client value

- Expense Ratio, Incurred Claims Ratio, Time to Payout

4. Investment management
- Asset diversification, Asset quality, Asset-liability
matching, Matching interest rate guarantees
Protecting the poor:
A microinsurance compendium
Indicators in four key areas:
1. Marketing and distribution
• Participation Ratio – refers to the proportion of eligible members of a
target population participating in the MI program at a given point in time
Participation rate = total number of members s
eligible members of the target population

• Renewal Ratio – is the percentage of clients who had coverage in the

previous year and are still eligible for renewal, who are renewing their term
coverage
Renewal rate = (number of clients from Year X continuing coverage in Year X + 1)
(number of clients in Year X)

• Persistency Ratio – refers to the number of clients from a cohort continuing

their coverage at a later date divided by the number of clients from the same
cohort with coverage in Year X
Persistency Rate = “same with the renewal rate but is more general because it applies
to both term and continuous coverage”
Protecting the poor:
A microinsurance compendium
Indicators in four key areas:
2. Financial management and viability
• Net Income – reflects performance in all activities in the
period reviewed. It is the net of subsidies and grants
received
Net Income = Earned premium + investment income – claims
incurred – operating expenses – reserve increases

• Liquidity Ratio – cash equivalents in paying claims and

expenses
Liquidity ratio = cash and cash equivalent investments
probable payouts within a year

• Solvency Ratio – is the total liabilities of the

microinsurance scheme divided by its admitted assets
Solvency ratio = total liabilities s
total admitted assets
Protecting the poor:
A microinsurance compendium
Indicators in four key areas:

3. Efficiency and client value

• Expense Ratio – is the proportion of the premium
earned in a given period consumed by incurred
operating expenses in the same period
Expense ratio = Incurred operating expenses
Earned premium

• Incurred Claims Ratio – is the total incurred claims

divided by earned premium in a given period
Incurred claims ratio = incurred claims
earned premium

• Time to Payout – is the days it takes for a client to

receive a payment after the occurrence of an event.
Paying claims promptly is an important aspect of service
and good value.
Protecting the poor:
A microinsurance compendium
Indicators in four key areas:

4. Investment management
• Asset diversification – reflects the amount invested in
a particular asset including a related organization
• Asset quality – reflects the overall quality of the
portfolio
• Asset-liability matching – requires projections of
liability streams such as claims, expenses, maturities, etc.
• Matching interest rate guarantees – a microinsurer
offering long-term interest rate guarantees must have
ready access to quality investment instruments with
matching term and interest rates to cover payment of
guarantees
Performance Standards for Microinsurance
in the Philippines
By Philippine Insurance Commission
The SEGURO indicators are divided into the following categories:
• Solvency and Stability – measure the degree of safety, soundness
and strength of MI provider
o Margin of Solvency Ratio, Liquidity Ratio, Leverage Ratio
• Efficiency – determine the ability of MI business to generate
sufficient earning to cover the expenses and claims incurred
o Underwriting Costs Ratio, Operating Expense Ratio, Claims or Loss Ratio,
Time to pay-out
• Governance – determines if the conduct of the MI business
complies w/ the principles of good governance
• Understanding of the product by the client – comprises a set of
indicators that determines clients’ understanding of the product
and services provided by the MI provider
o Renewal Ratio, Claims Rejection Ratio
• Risk Based Capital Ratio – determines the sufficiency of the
insurer’s capital to support the degree of risks associated w/ the
entity’s operations and investments
• Outreach – determine the extent of the MI business
o Growth in the number of MI clients and volume of MI business
Regulatory Framework for Microinsurance
in the Philippines

Characteristics of Microinsurance Contract

Clearly states the face amount, benefits, and terms

of the insurance coverage;

Is easily understood by the insured and printed in

English or Filipino;

Has simple documentation requirements;

Has contributions/premium collection that coincides

with the cash flow of the insured and are not
onerous for the insured; and

Claims are paid in not more than 10 days

PACE Analysis
The ILO Microinsurance Innovation Facility’s client value assessment tool called
PACE (Product, Access, Cost and Experience)

1. Product
1. Coverage, service quality,
exclusions, waiting periods
2. Sum insured to cost of risk
3. Eligibility criteria
4. Value-added services

product
appropriate

4. Experience 2. Access
1. Claims procedures 1. Choice and enrollment
2. Claims processing time responsive simple accessible 2. Information &
experience
& quality of service cost understanding
3. Policy administration & 3. Premium payment
tangibility method
4. Customer care 4. Proximity

affordable
access
3. Cost
1. Premium to benefit
2. Premium to client income
3. Other fees & costs
4. Cost structure and controls
PACE Analysis
• This study was scored using the four core dimensions of a Microinsurance
Product such as: Product, Access to the Poor, Cost and Experience
COOPERATIVE
INFORMAL PARTNER-AGENT MBA INSURANCE MICROENSURE

PRODUCT 1.8 3.3 3.6 3.7 4.3

ACCESS 4.3 4.0 3.6 3.8 4.0
COST 3.4 4.0 4.3 3.9 4.3
EXPERIENCE 3.2 3.8 4.3 3.3 3.7
Dimension WEIGHT CRITERIA
Coverage, quality of Sum Insured in Relation Value Added
Eligibility
PRODUCT 5 service, exclusions and to Cost of Risk Services
Criteria
waiting periods
Information and Premium
ACCESS 5 Choice of Enrollment understanding in Payment Proximity
relation to complexity Method
Premium in relation to Premium in relation to Cost structure
COST 5 Other Costs
benefit client income and Controls
policy
EXPERIENCE 5 Claims processing Claims processing time administration Customer Care
procedures and service quality and tangibility
MILK Study
(Business Case) MILK Brief #14:
The Business Case for Life Microinsurance in the Philippines:
Initial Findings

Robust growth for the five microinsurance programs covering

the years 2008-2011
MILK Study
Cont…
The Business Case for Life Microinsurance in the Philippines:
Initial Findings

Loss ratios increases during the study period (a high incurred Loss
Ratios could indicate that clients are paying for something they use)
MILK Study
(Client Value) MILK Brief #17:
“Doing the Math” – Calamity Microinsurance in the Philippines

Studying MicroEnsure’s Calamity Insurance in Mindanao and Panay

“MILK defines client value as a combination of financial
value, expected value, and service value. One way to
assess the financial value of this insurance payout is to
compare the premium paid over a client’s tenure with
TSKI to the payout received after the flood.”

“From a cost-benefit perspective, MicroEnsure’s product

has significant financial value for those who received
payouts. Those clients who had been with TSKI for one
year had paid in only USD3.45, therefore the USD230
payout represented an enormous return of over 66 times
the premium paid.”
Performance Indicators For Microinsurance
A Handbook for Microinsurance Practitioners
By Denis Garand and John Wipf

• Product Value
• Indicator 1: Incurred expense ratio
• Indicator 2: Incurred claims ratio
• Indicator 3: Net income ratio
• Product Awareness & Client Satisfaction
• Indicator 4: Renewal ratio
• Indicator 5: Coverage ratio
• Indicator 6: Growth ratio
• Service Quality
• Indicator 7: Promptness of claims settlements
• Indicator 8: Claims rejection ratio
• Financial Prudence
• Indicator 9: Solvency ratio
• Indicator 10: Liquidity ratio
Performance Indicators For Microinsurance
A Handbook for Microinsurance Practitioners
• Product Value
• Indicator 1:
Incurred expense ratio = Incurred expenses
Earned premium
• Indicator 2:
Incurred claims ratio = Incurred claims
Earned premium
• Indicator 3:
Net income ratio = Net income
Earned premium
• Product Awareness & Client Satisfaction
• Indicator 4:
Renewal ratio = Number of renewal s
Number of potential renewals
• Indicator 5:
Coverage ratio = Number of active insured
Target population
• Indicator 6:
Growth ratio = (Number of insuredn – Number of insured)n-1
Number of insuredn-1
Performance Indicators For Microinsurance
A Handbook for Microinsurance Practitioners
By Denis Garand and John Wipf

• Service Quality
• Indicator 7:
Promptness of claims settlements = Analytical breakdown of
service times taken to report
and process a set of claims
• Indicator 8:
Claims rejection ratio = Number of claims rejected
Number of claims in the sample

• Financial Prudence
• Indicator 9:
Solvency ratio = Admitted assets
Liability
• Indicator 10:
Liquidity ratio = Available cash or cash equivalents
Short-term payables
Corner Jayme-Commission Civil St.
Brgy. Benedicto, Jaro, Iloilo City,
5000 Philippines

t: +63 33 329 0729

e: philippines@microensure.com