Microinsurance provides poor people with coverage for only a few dollars a year. Jean-Jacques Laffont from Allianz AGF in Paris explains why a commercial insurer is interested in low-profit business in Egypt.
 | Jean Jacques Laffont, Allianz AGF"We will duplicate the experience in all the African countries that we serve" (Photo: Allianz) |
Was it difficult for you as a commercial insurer to develop microinsurance?
No. We were developing an insurance solution for microentrepreneurs in Egypt, but it works according to the same model as our normal products. It is insurance against death and invalidity provided to someone who is taking out a loan from a local microfinance institution. Our branches in Egypt now provide insurance linked to a loan that automatically covers microentrepreneurs.
The whole process is really simple, because premiums are so low – sometimes only one or two dollars. We delegate the administration to local microfinance institutions (MFIs), which run the scheme and provide us with the necessary data.
Why do you hand out work to local organisation?
Well, there are no margins for this operation. The commitments are very small and it is not possible to invest a lot of time. We work in a very standardized way with little modification from country to country. And the loans covered are quite small, maybe 1,500 to 2,000 dollars on average.
Does this mean that such a product could be offered to a large number of people at low costs?
Yes, we will duplicate the experience in all the African countries that we serve. There is always a little fine-tuning necessary, because the client profiles are not always similar in these countries. And now we have gathered some experience, so it works quite well.
 | Access to Finance (click the image to enlarge) |
Isn’t it difficult to convince colleagues in local offices to work on microinsurance given the little money that can be made?
No, I think they were quite interested in the whole approach. This is also an advantage in the sense of sustainable development and our relationship with local authorities.
Traditionally, we are used to catering to clients that are relatively well-off or international companies. Microentrepreneurs were a clientele that we didn’t know until now. This new experience is extremely well-received. Our local teams now have a social impact that is very rewarding. And in the same time, we also hope that some of these people will progress and become future clients for other products.
We also have a very important female clientele, who are often disadvantaged. To participate in an economic activity for them is a source of emancipation and prestige in their communities.
So far, you are only providing death and disability insurance. Do you have any other plans?
That is a tricky issue. We have thought about health insurance, but it is very difficult in these countries and for people with very little means. A huge part of the population has no access to health services whatsoever. The people don’t even have the means to pay the premiums necessary for health coverage. We might be able to develop a standardized model for the future, but the comparatively low premium for life insurance is already an extra burden that is added to a loan, which is not free either. Adding a premium for health insurance to this would be too much for many borrowers.
The situation is similar for insurance covering harvests. We are thinking about insurance that could cover investments in seeds, but we have to discuss with a lot of actors including the reinsurance market. In the end, you have to plan around natural disasters in areas with lots of climatic problems. You need local means to verify whether conditions justify specific claims. You need technical equipment to check hydrology, precipitation, and temperatures. It is quite complex, it is not cheap, it is difficult to verify, you need lots of meteorological stations, and that is not easy to install.
publishing date: May 14, 2005
editor: Thilo Kunzemann
