Microinsurance: The win-win-win value proposition

January 6, 2014

The microinsurance breakout session at Building Women-Focused Finance: The Global-Local Experience gathered experts from both insurance and microfinance. Fatina Abu Okab, Deputy General Manager at Microfund for Women (MFW), and Mazen Nimri, Deputy General Manager for the Life and Health Department at the Jordan Insurance Company, were moderated by Michael McCord from the MicroInsurance Center, who brought his vast microinsurance experience and insights to the discussion.

Microfund_JO_imageFatina explained the rationale behind MFW’s decision to start offering microinsurance products to their clients, which ultimately resulted in the launch of the Ri’aya (Caregiver) product. MFW is a client-centric institution that prides itself on striving to meet their clients’ needs. In the process of analyzing the life cycle of their clients, they realized that there are many circumstances where clients face health-related issues that involve many expenses and often loss of income, all of which have a negative impact on the financial stability of the household, maternity and child birth being the most common. With Women’s World Banking’s support and product development expertise, MFW set out to create a product to cover clients facing those health emergencies.

Bayan-Al-Dousoqi-Microfund-For-Women-Caregiver-ClientVIDEO: Meet Bayan Al Dousoqi, a Caregiver client

MFW faced several challenges when developing the product. The most important one was trying to change the image of insurance inside Jordan, as insurance was often thought as something only wealthy and educated people could afford. Fatina herself confessed that she had not had health insurance for a long time due to lack of information and preconceptions about insurance.

MFW’s management believed in the Ri’aya product from the very beginning and they were committed to making it a success. For Fatina, developing a strategic partnership with the Jordan Insurance Company was key to their success. She said, “For microinsurance to work, it has to be a win-win-win value proposition; for the client, for the insurance company and for the microfinance institution.” MFW went through a thorough selection process before choosing Jordan Insurance Company because they believed in MFW’s vision for the product, they were flexible and above all very transparent.

Jordan Insurance Company, the largest insurance company in Jordan, was the first in Jordan to enter the microinsurance segment. They started with a high loss ratio, but they knew that it was a long-term project and rewards would come later. They managed to collect a wealth of data that allowed them to keep adjusting the product’s features and even used the data to inform the design of their other more conventional offerings.

The Ri’aya product that was finally launched in 2010 is a compulsory health microinsurance product for all clients of MFW. It is a cash indemnity paid when a hospital stay occurs, which can be used by the client as she sees fit to cover expenses like transportation, meals and income foregone during hospitalization. The cases of fraud have been very few and far between.

For the Jordan Insurance Company, a relationship between the insurer and the microfinance institution (MFI) is based in trust and commitment. This trust allowed them to delegate some of their paperwork to MFW, thus cutting down on operational costs and transferring the benefits of this savings to the clients through lower prices. Their success with the Ri’aya product gave them unparalleled exposure to the market segment, primarily low-income women, and priceless marketing strength that would have been otherwise impossible.

MFW tracks several indicators to assess the performance of the Ri’aya product: number of insured clients, number of claims, expense ratio, coverage ratio, claims frequency, hospital stay length, claim processing duration and claim rejection ratio among others. The Ri’aya product has proven profitable and MFW is now considering adding more family members as beneficiaries of the policy.