Microinsurance schemes can be run (among others) by mutual benefit organizations, NGOs, micro-finance institutions, or commercial insurers. In some cases all the functions are managed by one organization; in other cases, they are shared by two or more organizations, for example in partner-agent agreements.
(1) Pre-existing civil society organizations (MFIs, NGOs, Health care providers, trade union, etc.) that add to their activities the provision of micro-insurance. They implement all insurance tasks and assume the (financial) risks. Although the design and operations of the insurance scheme is usually done in participation with the potential policyholders, the microinsurance system remains in the ownership of the implementing organization.
(2) Community based organizations that are settled for the sole purpose of providing microinsurance coverage, such as mutual benefit associations. The system is owned and managed by the insured groups themselves, and relies on active solidarity mechanisms.
(3) Commercial insurers that sell insurance products to excluded groups. This category includes partnerships between organizations, for example partner-agent agreements and outsourcing of management functions.
In partner-agent agreements the partner is an insurance provider (usually a regulated insurer, occasionally a Government institution or a national agency), and the agent is a civil society organization. In exchange for a commission, the agent sells the insurance products of the partner to its target population and offers its infrastructure for product servicing such as marketing of the product, premium collection, and assisting in claims management. The insurance provider is usually responsible for the designing and pricing of the product, the final claims management, investment of reserves, and absorbs all the insurance risks.
“Third party administrators” (TPAs) are service providers that may take over several functions: the accreditation of health care providers and the monitoring of these agreements, claims management, etc.
Some of the advantages and challenges of the various delivery models
When all the functions are managed by a civil society organization already active in the informal economy or a community based organization, the main advantage is a relative vicinity between the organization and the members which enables to better take into account the needs and demands of the potential insured persons in the product design (which is in some cases participatory) and the operating rules and procedures; to reduce the administrative and transaction costs (no intermediate structure, volunteer work); to reduce some risks like frauds; and to reduce delays (e.g. in claims settlement). Share of resources (equipment, staff) that contribute to limit the overhead costs may also be possible. The main challenge relies in the difficulty to manage all by oneself a whole business whose complexity is intensified by the fact that needed resources are scarce or even nonexistent in many developing countries, that access to financial markets and to consolidation mechanisms such as reinsurance or guarantee funds is limited, that membership is relatively small and geographically concentrated, that it is difficult to collect premiums and build up reserves when members have a low ability to pay.
When several organizations are involved simultaneously in the operation of the scheme, the main advantage is that all partner organizations may focus on their core business and expertise. One of the challenges is that there may be a gap between the supply of insurance and the demand (products marketed by commercial insurers vs. needs of the target population). Another limitation is that such a model is not replicable anywhere; in some Western African countries where commercial insurers are not (until now) interested in the microinsurance “market”, partner-agent arrangements are not feasible; the outsourcing of management functions to third party administrators are only feasible if such structures do exist, which is the case in very few countries today.♦