MicroEnsure and CARE have named the unplanned nature of a death in the family as one of the largest risks a family faces. To address this issue, they have jointly developed a low-cost funeral benefit product to distribute to village savings and loan associations (VSLAs) via community-based trainers (CBTs). CARE´s VSLAs are built by women living on less than USD 2 a day who pool savings into a common fund. CBTs will provide VSLAs with initial training on the basics of microinsurance and the benefits of the funeral product. VSLAs will then have to unanimously vote on whether or not they would like to purchase the product. MicroEnsure, a wholly owned subsidiary of Opportunity International, provides a range of products including health, life, property and weather index-based insurance to over 3.5 million people across 10 countries. CARE is a global NGO that has supported over 800 poverty alleviation projects in 72 countries to reach more than 59 million people.
By: Stefanie Rubin, Research Assistant
Additional resources:
CARE homepage: https://www.care.org/
Original press release:
Product Specification
In discussions with village savings and loan associations (VSLAs) and their community-based trainers (CBTs), the unaffordable cost and unplanned nature of a death in the family was mentioned as one of the largest risks a family faces. This led the team of MicroEnsure and CARE to develop a low-cost funeral benefit product that could be distributed to VSLA members via CBTs.
Operations
Training Process – Pre-Implementation
The pilot will begin with the MicroEnsure team providing training to the CBTs on (1) the principles of microinsurance, (2) the specifics of the funeral product, and (3) the enrollment and claims processes. A training guide has been developed by MicroEnsure to be utilized during the training sessions.
VSLA Training
After training, CBTs will be empowered to train their VSLAs on the benefits of the funeral product. MicroEnsure will provide a training guide that walks them through the training on the basics of microinsurance, the funeral product, and how it will operate. At the end of the training, VSLAs will be asked to vote on whether they would like to purchase the product. It will be an all-in or all-out decision per VSLA.
Sales/Premium Collection Process
The CBT’s sales process can occur throughout the year whenever a CBT chooses to present the product to VSLAs or they make the decision to purchase. The MicroEnsure project manager (agent) will be responsible for providing policy forms to the CBTs and collecting premiums and policy receipts to execute policy registration. The MicroEnsure project manager will provide the IPO with a tracking form that shows which VSLAs are enrolled during the course of the year.
Claims Process
At time of death, the VSLA member or other beneficiary will present notify their CBT of the death (who should notify the MicroEnsure PM) and gather the police report and/or death certificate.If these aren’t available, then VSLA members will need to provide letters (on official letterhead) from the priest and local council chairperson confirming the death with an additional letter from the VSLA group leader.
Once the documentation is collected, the CBT will SMS the MicroEnsure PM who will collect the claims forms.From there, the PM and the rest of the MicroEnsure team works with the underwriter to process the claim and remit payment to the beneficiaries.Payment will be provided to the beneficiary through the MicroEnsure PM and will include transport costs for either the beneficiary or MicroEnsure PM.Once documentation is received by the MicroEnsure agent, claims are executed by the underwriter and MicroEnsure in 14 days.
Why Funeral Coverage?
Worldwide, MicroEnsure has found the cost of a funeral to be prohibitively expensive and perilous for a family. This was echoed during the time CARE and MicroEnsure spent with Tororo’s VSLAs:
·One VSLA had members earning an estimated 50,000 shillings a month, yet they estimated funeral costs at 300,000 shillings.
·Welfare/social funds or contributions from VSLA members provided 5-15,000 shillings in relief, but this was a paltry sum in comparison to the amount needed.
·This led many members to borrow as much as they could from the VSLA and then find the rest from family members, local lenders, etc.As we’ve seen time and again, this is an untenable situation and can push families further into poverty.
· One VSLA had attempted to create their own funeral insurance product to combat this risk, but failed due to the limited pool of capital they were able to raise.
Appendix III – MicroEnsure Introduction
MicroEnsure is a multi-national insurance intermediary dedicated to serving poor households and the rural market with a tailored, affordable range of insurance products. We partner with organizations that currently serve the poor such as microfinance organizations, rural banks, SACCO’s and humanitarian organizations. In addition to providing services through existing networks, we also seek to develop direct sales distribution methodologies that utilize technology to minimize transaction costs.
As well as being involved in the distribution of insurance products to the poor, we also engage in the design of the products and the back-office administration of those products. We have discovered that our market position allows us to design suitable products that the poor can understand, and that it is in our interest as an intermediary to play a role in designing products that are very scalable. We have also found that, with an average premium of $1 to $2 per month, minimizing the cost per transaction is critical. As a result we have developed significant back-office administrative capability which, coupled with our scale, allows us to offer a wider range of sustainable products.
MicroEnsure has its roots within Opportunity International, a large microfinance network. We began working in 2002 on the development of a range of life, property, livestock, weather index and health insurance products. We currently serve more than 3,500,000 people in ten different countries. We also provide project management and pricing support to the World Bank’s CRMG unit on their weather index crop products across Africa.
MicroEnsure operates as a fully owned subsidiary of Opportunity International, a global network of microfinance organizations. Opportunity International has lending operations in 29 countries serving over 1,100,000 active borrowers with a loan portfolio in excess of $500,000,000. Although its heritage is as a NGO, for the last five years it has established new operations exclusively as regulated institutions such as commercial microfinance banks and NBFC’s.
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