Asian Development Bank

Regional Conference on Enhancing Social

Protection in the Asia and Pacific Region, 21-22
April 2010, Manila

Presentation by
Emil Anthony
Deputy Managing Director
SEEDS (Guarantee) Limited, Sri Lanka

Disclaimer: The views expressed in this paper/presentation are the views of the author and do not necessarily reflect the
views or policies of the Asian Development Bank (ADB), or its Board of Governors, or the governments they represent.
ADB does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any
consequence of their use. Terminology used may not necessarily be consistent with ADB official terms.
Micro Insurance in the
Informal sector
-SEEDS Experience
Relationship between Sarvodaya
and SEEDS Credit Plus
Services -

SE
Enterprise

E
Development

DS
Spiritual Economic Services, Capacity
Development Development Building

M
gs
in

icr
Moral Social

av
Development Development

oC
oS

red
ic r
M

it
Cultural Political
Development Development

Micro Insurance
 Evaluation of Micro
Insurance Activities of SEEDS
SEEDS is managing two type of
risk mitigation schemes known as
Credit Life Security Fund (Mutual
Funds) and “SATHKARA” Life
Insurance scheme, a product of
ADB Micro Insurance Sector
Development Project.
 Credit Life Security Funds
(Mutual Funds)
There are two mutual Security Funds
„ Loan Risk Fund
„ Loan Risk Assurance Fund
„ In case of Death or Total Permanent Disability of a
borrower or his/her spouse, the loan outstanding
will be written off
„ Loan balance already repaid at the event is
refunded to the dependants
„ 20% no claim bonus (discount) will be offered at
the next borrowing
 Past performance as at 31st
December 2009 of the Loan Risk
Funds

Total Claims
Total Fund As
honoured as st Dec
Name of the Fund at 31
at 31st Dec
2009
2009

Loan Risk Fund (as at 31th 1,104,842.50 168,714,196.25

December 2008)

Loan Risk Assurance Fund 6,599,544.00 49,349,498.61

Loan Risk Assurance Benefit 157,176.00 6,209,938.78

Fund from Nov. 2008
Formalization of Micro insurance
Partner Agent Model

Micro Insurance sector

development project in
Sri Lanka with technical
assistance of “Sathkara”
Asian Development Bank (Project No: ADBT/4761) Life Insurance Policy

SEEDS entered into an agreement with HNB Assurance

PLC to promote micro insurance to the low-income
community in the country.
 Delivery Mechanisms
Partner-Agent Model
Partner Agent
(MFIs/Micro Insurance
(Insurance Company) Institute)

Product Design Product Marketing

Client
(Low-income earners who are
members of MFIs/NGOs)

Maintenance for
Sustainability and Product Servicing
Product Improvement
 Impact of ADB Project for
SEEDS “SATHKARA”
„ A micro insurance unit was established at SEEDS
Head Office with 3 staff solely for micro insurance
„ SEEDS signed MoU with HNB Assurance
„ 20 Societies were identified from each district
„ Existing field staff were identified and trained on
insurance
„ Identified SEEDS field staff was trained in the
areas of marketing of insurance products, while
Head Office staff was trained on insurance
administration
„ Literacy on insurance was created among SSS
membership and office bearers
 Challenges Faced
„ Inadequate revenue to cover up
administrative costs of SEEDS as an
intermediary company, due to low level of
business at the initial stage.
„ Implementation of the scheme in Batticaloa
and Vavuniya (in Nothern and eastern parts
of Sri Lanka) resulted in high operational
costs and extra risk for SEEDS to bear and
consists of operational difficulties.

Contd.…….
 Contd.…….

Challenges Faced
„ Members demand a maturity benefit for
the product and reluctant to buy an
insurance product without that feature.
„ High work load of existing field staff
who engage more in micro credit
distract them from selling insurance for
a less attractive incentive.
“Yasiru” Mutual
Provident
Society
 Evolution of “Yasiru”
Mutual Provident Society
„ Evolved from the concept of the funeral aid society,
reflecting the needs for a more broad coverage.
„ Yasiru was registered in 2000 under the Societies Ordinance
1891, with the support of the Rabobank Foundation,
Netherlands and technical assistance of Interpolis.
„ A cooperative structure meant that the members (the insured
parties) are the ultimate owners
„ Interpolis introduced a software package for insurance
operations specially developed for cooperative insurance
companies.
„ This agreement also led to re-insurance cover, first covering
the life component, later extending into health insurance
component
Five elements were considered
essential for the risk
management scheme

„ A proper institutional structure

„ A balanced selection of products

„ A good administration

„ A reinsurance contract

„ Technical Assistance
 The product offered
covers
„ Total permanent disability or
death of the insured person due
to accident
„ Partial permanent disability of
the insured person due to an
accident
„ Natural death of the insured
Total Beneficiaries Served by “Yasiru”
Program
(Up to 31st December 2009)
24,018
80000 74,445
70000 2003
66,868
60000 2004

50000 2005
41,416
40000 2006
30000 22,609 23,780 2007
20000 2008
8,151 9,472
10000 2009
0
07
03

04

05

06

08

09
20
20

20

20

20

20

20
 “YASIRU” Number of Claims
Disbursement -Yearly
900

6
88
800

9
75
700
Number of Claims

600

3
61

7
500

47
2
41
400
2

4
38

47
300
2

4
23

200

2
4

96
38 11

26
83
99

100

32 2

4
13 4
40

13
22

38

21
14
1
11

10

10
8
5

8
0

7
6
02

04

06

08
01

03

05

07
Years
20

20

20

20
20

20

20

20
Hospitalisation Auryedic or similar Death by accident
Deth natural <2yr Death natural cause Permanet disability
 “YASIRU”
Total Disbursement Amount of Claims up to
2008
[Total - Rs.8,542,859.00]
6,000,000
5,172,692.50
5,000,000

4,000,000
Amount

2,195,326.50
3,000,000

2,000,000
696,000.00 478,840.00
1,000,000

0
Death Natural Death by Permanent Hospitalization
Accident Disability

Cause
 “YASIRU”
Income and Benefit Payments - Yearly
4,000,000
3,537,585
3,378,180
3,500,000

0
2,919,446

5 ,85

0
3,000,000

68
,27

0,
2 ,3 0

50
02
2,500,000

8
2,
2 ,1

7 ,93
1,847,440
2,000,000

1 ,5 8
,98
1,360,595

93
1,500,000

1 ,1
2
29
7,
1,000,000
3

82
27
9
8

8,
47
88

37
0
20

500,000
9,
9,

53
22
,7
20

2,
44

10

0
2001 2002 2003 2004 2005 2006 2007 2008

Income 50% Benefit Payments

 Evolution of
SANASA Insurance
Company
 Evolution of
SANASA Insurance Company
ƒ Main objective is to provide micro insurance services to
Sanasa Society members and members of other CBOs
affiliated to the Sanasa Movement.
ƒ The first scheme named "Ahethuka Wipath Awaranaya”
(Risk coverage against unfortunate perils) designed with
rural Funeral Aid Societies.
ƒ The scheme was inaugurated in October 1991 with a
participatory membership of 182 persons. The
organization that was established for conducting the
scheme was known as "All Lanka Mutual Organizations"
(ALMAO).
Contd….
 Evolution of SANASA Insurance
Company Contd…

ƒ After 2 years, ALMAO became a registered society and

was declared as a Specially approved Society by the
Ministry of Trade and Commerce under the Societies
Ordinance.
ƒ ALMAO was granted approval by the Insurance Board
of Sri Lanka (IBSL) to establish insurance company
(Sanasa Insurance Company) in year 2003 under
the Regulation of Insurance Industry Act N0. 42 of
2000.
ƒ In the year 2005 the company was able to expand its
operations covering General Insurance.
 Services provided by Sanasa
Insurance Company
ƒ Life Insurance: Individual policies for members of Sanasa
Societies and other CBO and general public
ƒ Motor Insurance: For all
ƒ Loan Protection Insurance: Group policies for
Sanasa Societies
ƒ Fire & Burglary Insurance: For all
ƒ Personal accident & health: Group policies for
sanasa societies and other CBOs individual policies for
borrowers of SDB
ƒ Insurance for Funeral Expenses: Group policies for Sanasa
Societies and other CBOs
ƒ Surgical and hospitalization benefits
 Challenges
ƒ Employing a qualified Actuary is a high
cost burden.
ƒ Actuarial cost for product designing and
actuarial services involve high cost.
ƒ All Insurance Companies have to be listed
in the Colombo Security Exchange, in this
scenario, the existing ownership structure
could be changed.
 Conclusion
„ More emphasis on creating awareness on micro insurance and
its benefits to low income groups is very vital. Poor should be
convinced that micro insurance is an acceptable, affordable and
a useful technique for their risk mitigation.
„ Most of the low income people expect the benefit of a Savings
Product from the insurance product, while expecting the benefits
of risk mitigation as well.
„ MFIs/NGOs could utilize existing field staff who are engaged in
micro credit and savings, to deliver and maintenance of micro
insurance products. But the delivery mechanism should be cost
effective. Having a separate field staff to do micro insurance is
not a viable preposition.
Contd.…….
 Conclusion Contd…

„ Provision of appropriately designed micro insurance products to

meet the low capacity of the poor to pay premiums is another
requirement.
„ Access to reinsurance is another issue to be addressed. At
present Platignum Finance and AIG Insurance have shown a
keen interest for reinsurance.
„ Micro Insurance Providers do not have initial capital requirement
to set-up an insurance company, and they have to perform in
the informal and unregulated sector but in the legal sense this is
risky.
„ Bringing the small micro insurance providers under regulation
and developing a cost effective delivery mechanism are a long
term solutions for the expansion and viability of micro insurance
business
Thank you…
Sarvodaya Economic Enterprise Development Services (Gte) Ltd.(EEDS)
“Arthadharma Kendraya”, No: 45 ,Rawatawatta Road,
Moratuwa, Sri Lanka Tel: (+94-11) 5558081-5
Fax: (+94-11) 2655122, Web Site: www.seeds.lk