Friday, November 16, 2012

Tanzania Day 3

Michael McCord presented an overview of the findings from the Micro Insurance Learning and Knowledge (MILK) project.

Although there is no single definition of Microinsurance , it is difficult to track the exact numbers, but one conclusion is that by any definition, microinsuruance is growing dramatically around the world and especially in Africa.

Here are some of the numbers presentated:
Microinsurance Insurance is in 39 countries in the Africa (Michael is standing in front of map in photo in presentation). There are now 511 microinsurance providers (70 percent are mutuals , cooperatives, and community based covering 44.4 million people with 598 different products.  The vast majority are for life insurance 33.9 million.  Property and agricultural insurance is lagging far behind with only 800,000k policyholders for property and 300,000 for agriculture.The growth has been dramatic. When the first study was completed in 2005 was only 3.5 million policyholders. By 2008 that had risen to 14.7 million.

One surprising finding, for me anyway, was that more than 60% of microinsurance in Africa is in South Africa. (I probably shouldn't be surprised by this because of the thousands of page views on this blog, views from people in South Africa are second only to those from the USA.) This is mainly due to life and credit life and demand for funeral insurance in South Africa. West Africa has the greatest number of people covered by health insurance (non-government) mainly due to community-based health insurance programs.  

As mentioned earlier mutuals and cooperative are the most common MI provider but the market includes MFIs, NGOs, and the second most common type is commerical insurers. African mutuals and community based organizations were the most prevalent delivery channel for MI followed by MFIs. Mobile phone companies are the fastest growing channel. The lack of knowledge about insurance is still cited by 67% of organizations and 78% of low income individuals. Despite this lack of awareness insurance is expected to continue to grow rapidly in Africa. For more information see MILK report of The Landscape of Microinsuance 2012 at Microinsurance Centre,  or

Monday, November 5, 2012

Tanzania Day 2

Day 2- ICMIF workshop (see photo of particpants)

Well, my 15 minute trip to the Blue Pearl hotel became a 40 minute trek through Dar Monday morning traffic. The driver gave me a lot more scenery driving through dirt roads and back alleys to avoid the traffic.

I left an hour in advance, so I got to the workshop with some time to spare and catch up on the news. This time I was greeted by another person asking about the American elections. This time a man from Tanzania.
He wanted to know what was going on with the chaos in Florida. I said I hadn't heard and he showed me the top story  of Google Tanzania . Florida voting debacle causes chaos and confusion.

I surfed CNN and couldn't find anything. I even went to the Miami Herald and it was not in their top stories. I searched the paper and there it was. Several pages back. Evidently a polling place in Miami had decided to not open because the mayor and deputy mayor of Miami, couldn't decide whether to open the polling for 4 hours on Sunday. Florida had evidently disallowed early Sunday voting this year because of the large turnout in the last presidential election on Sunday which had favored Obama. Someone, changed that at the last minute without the mayor's consent, and well it ended in confusion. If you want the details here is the story as it didn't seem to appear in network news outlets at the time I am writing this.

I told him that it appeared to be an isolated incident at one poll in Florida, but I think he found that hard to believe since it was the top stories that came up when he opened up Google. I don't think he really believed me. So for the second day in a row I had to concede that I just didn't know and the "I guess democracy can be a little bit messy at times."

It did make we question how other people in the work view us based on the news stories they see that we may not, and what kind of algorithm Google in Tanzania has that pulls up this story when it is not covered in most U.S. news outlets. I am fascinated by how much interest there is in U.S. elections. I suppose in the U.S. we don't have an equivalent event where another country's election would affect our growth and stability in the way that our government does other parts of the world.

Anyway, I was glad when the workshop started  as I was on firmer ground discussing insurance. Had some good learning lessons on the simulation running the microinsurance company . Here are some insights from the day

1. Factors Affecting the Microinsurance Purchase Decisions
  • Perception of Insurance (unfortunately there have been several examples of insurance agents who sold products and then collected the money and took off or of companies that were undercapitalized and went under).
  • Understanding the Insurance Concept (Examples from Mongolia and other countries where insurance did not exist made it difficult to distribute microinsurance as people had no idea what insurance was). It was interesting to see that most microinsurance companies have public education as part of their expenses and they even have an education expense ratio.
  • Product/Demand Match- This came up in discussions yesterday too. Too many commercial insurers take off the shelf products and try to sell them in the microinsurance market and they fail. The needs for simplicity, affordability, understanability, value, and efficiency for microinsurance requires custom products and processes. 
  • Easy Payment Mechanism- Has to be a way to make smaller affordable payments from location where poor live and work.
  • Cost of Coverage- Product has to have relevant limits and benefits but has to be cost effective.
  • Available Income for Insurance- This came up last year at Rio conference. And it was mentioned several times in this workshop. Companies do market research, develop products that meet what people say they want and then few people buy it because they need the money for seeds, or to send their kids to school, or something like that. I spoke with one executive with an Indian mutual insurer who was frustrated by this issue who said that they just started developing four or five products to offer and then see what people take up.  (He admitted that the regulatory environment for mutuals there permitted that kind of experimentation, but that doesn't usually exist with insurance regulation).

The keys to success in microinsurance were seen as 1) knowing your clients, 2) knowing how to reach those clients, and 3) being efficient.  Trust was seen as critical for success as well. Important goals to sustainability were 1) to have access to large number of insureds, and 2) offering low cost policy.

As mentioned earlier, cost is critical. In order to lower costs company has to be efficient and have at large pool of policyholders in order for pooling of risks to work and adverse selection to be avoided.

Paying claims was also seen as a way of driving up demand. One partcipant said here company  saw its policies go up by five after it paid off on a flood loss.

Another said that his company had a requirement that the agents pay the funeral insurance coverage while the famiily was AT the Funeral. This gave them the largest exposure since all the mourners were there and saw the payment being made. This helped in getting the word out about insurance and developing trust. (I think this should come with warning: Please don't try this at home"

Examples of how microinsurance products have adapted include:
Going from hard to sell and understand individual policy rating to community rating
Including spouse as insured as well as the borrower in credit life insurance
Reducing the exclusions for life insurance as the date for when claim was made  moves farther from inception. Originally had lots of exclusions. Basically just put in a waiting period with limited payment amounts for first six months and then after that exclusions were lifted.

Make documentation required for making claim easier in order to be able to process claims quicker.

After the workshop I took off for Best Western. Fought through rush hour traffic. Got to hotel and had a cold one while watching the fishing boats. See below. The fish were really jumping high out of the water and entertained the patrons while we ate dinner and I wrote this blog.

More tomorrow.

Sunday, November 4, 2012

Tanzania Day 1- Dar es Salaam

Got intto Dar last night. I wasn't able to stay at conference hotel but the consolation prize was the best Best Western I have ever seen. First of all it has an ocean view and then the accommodations are wonderful.
See photos below.

The 2 day ICIMIF workshop precedes the conference and took place at the Blue Pearl Hotel. It was interesting. There are about  40 people there representing about 15 different countries. I was the only American, and only four were from North America. Although the sessions were all in English there were only two of us with English as a first language. I think this an advantage but then I guess that means they all know English well enough to participate in  a 2 day workshop in English. I'm not sure I could pull that off in French, the only other language I know. It was interesting that during lunch everyone wanted to talk about the American elections. They quizzed me on why we have electoral college and states vote in blocks rather than by popular vote. Hmmm. After I recovered from the idea that not only did they know about our election and who was running, but they knew how voting occurred, I answered in about the best way I could, "That's just the way we do it." I may have been able to put together a more learned answer, but that's really probably the closest to the truth.

Workshop was well-facilitated and had a nice mix of the "usual suspects' at microinsurance conference and a lot of new faces from Kenya and Tanzania. It was nice catching up with some of old friends during lunch and I especially enjoyed the discussions and computer simulation with African MFI and microinsurance leaders. The purpose of the workshop was to help address the dual issue of providing a proper insurance product for the poor while maintaining sustainability (profitability) of the insurer.

Here are some insights from the day.
Some  challenges identified include
1. Length of time to become sustainable. Usually 3 years for many products (life insurance might be quicker and health insurance longer)
2. Connecting the needs of the microinsured policyholder with the operations of the microinsurer. Policies are often "off the shelf" and incomprehensible by microinsureds, and may not cover their needs. Micro Insurers live in different worlds than the people  that purchase their products. Need better understanding.
3. There are already informal ways of managing and pooling risks. These are understood by the poor. Insurance needs to find ways to link to these informal mechanisms.
4. There is a need for training microinsurance staff but challenge is in reaching them. Online offers some possibility but the design must reflect the technology available. Internet connections exist but can be unreliable. (For example we lost internet connection on the workshop several times. And this was in a nice hotel. Internet connections in even less technologically advanced areas is even for inconsistent.

The second half of the day focused on key performance indicators (KPIs) for microinsurers and this was followed by a computer simulation. KPI's include the following categories:

Product Value 
Expense ratio-  <25 br="br">
Claims ratio- >65%)
NI ratio - around 10 percent (at least that holds true for a mutual)

Customer Satisfaction
Retention rate > 85%
Coverage ratio need to have at least 25% of market for products like health insurance or else you get adverse selection
Growth rate

Service Quality
Claims -Days to Settle
Claim rejection ratio-

Financial Prudence
Solvency ratio (assets/liability
Liquidity (cash over ST liabilities

They didn't mention it but I would have included premium earned to surplus ratio of less than 3 to 1.
Companies can get in trouble by growing to quickly and if they are highly levered their mispricing can lead to insolvency (So IMHO I'd add that).

Had some good discussions during  breaks about how to overcome challenges to online education, and need to build actuarial capacity. Went back to my hotel, sat out on the patio next to the Indian ocean, and worked on my laptop while I ate dinner and had some local beer. (See below)

Looking forward to tomorrow.


Saturday, November 3, 2012

Arrived in Tanzania

On my way to Microinsurance conference in Dar es Salaam.
Arrived in Tanzania today at Kilimanjaro airport (about the size of a regional airport in the States. I looked out of the plan window there were no visible lights except that of the runway. Decided to stay at hotel Protea near Moshi. Wanted to get some time in around the countryside before heading to Dar es Salaam. It was raining today so I didn't get to do as much as I would have liked. Couldn't even see Kilimanjaro even after it stopped raining. (You can where I would have been able to see  Kilimanjaro had it not been cloudy there on the view below) .

While I was waiting for my flight to arrive at the nearby KIA hotel I got to see some interesting wildlife like the blue and orange lizard below and several colorful birds. 

I did get to talk with a farmer near the Moshi area. Now that rains have come they are preparing their fields. He will plant second season of maize in December with expectation of May harvest. Also plants potatoes (I think sweet potatoes along with the maize ) . He said that had an "average" harvest in September. He also works job at local hotel. Will head into Dar tonight. I had planned for an afternoon flight by 540 Aviation decided to do maintenance on planes this month so they cancelled their flights to Dar. Rebooked for this evening which i tried to avoid. Not a fan of arriving in a unfamiliar city at midnight. Oh well, best laid plans...

(Blog update) I did may it on the 5 p.m. flight. I guy named Robert from Fly540 Aviation really worked hard on getting me on once he discovered there was an available seat.  A lot of other people wanted that but he got me on after about 30 minutes with the folks at Precision Air.
 Looking forward to the conference and meeting with people to discuss what they are working on Will try to get some info back to the research team back home. Thanks to John for the NDVI satellite images from BOLE. Interesting. Thanks for sharing comparison with MClean county too. Thanks to Aslihan for crop yield updates too. Askar your questions about planting cycles are on my list, so hope to have the answers soon for you. It's nice that we now have people with Katie looking at three different solutions, weather index, area based crop yield, and NDVI satellite remote sensing. I'm agnostic about which approach works best, but will meet with a researcher who has been doing a lot of field work on insurance demand. Will share results of that discussion with you. Later, Jim

Thursday, February 17, 2011

Weekend Around JoBurg

After meeting with everyone over the past few days I decided to see more of the cultural aspects of SA especially in the Joburg area. My first stop was the Apartheid museum in Joburg near the traditional black township of Soweto.

The museum is a multimedia experience telling the story of the birth of South Africa, the era of apartheid, (which lasted for abut 50 years and ended in 1990) and the era of political violence between 1990 when Mandela was elected president in 1994It inclused stories of he people who died fighting to bring democracy to South Africa. It also chronicles the life of Nelson Mandela and his abilty to reconcile a divided country. During one politically intense time in which a beloved friend of Mandela was killed by a racist, he urged people at a mass rally to "Throw their weapons into the sea".

The museum has a representation of the small cell where Mandela was kept from 1964 until 1982 when he was moved to another location. One of my favorite quotes from Mandela that illustrated his character and belief in the potential for reconcilation are:

"I always knew that deep down in every human hart, there is mercy and generosity"

He also understood that revenge against his oppressors would not lead to a free country. On the front of the museum is his quote which says:
"To be free is not merely to cast off one's chains, but to live in a way that respects and enhances the freedom of others." Mandela 1999.

There is a theme park across from the museum that looked a lot like a Six Flags type theme park you would see in the states.

The next day I went to Rhino and Lion park outside of Johannesburg. I've included some photos from that visit. I also uploaded a video where the family I was travelling with encountered a white lion walking toward them. You can hear the kids excitement as the lion approaches. That was pretty cool. I uploaded that to You Tube.

All in all, this was an incredible trip. I have a pretty good idea of how to structure the internship now.

I'm back home now and recovering from jet lag. Last night I dreamed of South Africa.


Friday, February 11, 2011

Sandton City

Today was an interesting day for Africa. Mubarak's resignation was a subject of conversation here in SA. It led to further discussions on political risks and how they can be managed.

I spent the day in Sandton City which is the financial and commerce center of JoBurg. Sky rise businesses all over. Looks like downtown financial hub of a major midwestern city. As mentioned in earlier blog two days ago. This barely existed 20 years ago. It was just countryside.

Today was probably the best day for figuring out how we will be organizing the internships. I met with NedBank and found a treasure trove of ideas on managing risks across the organization. I've never seen such a well- designed and documented ERM program. I met with the risk management team and we came up with some ideas for ERM case studies that I will be working with them on later.

When I got to Nedbank I was introduced to the risk management team and they brought me a binder on how risk is managed at NedBank. It was full of jaw-dropping detail on how the universe of risks are identified and managed across the organization. It is at least a generation ahead of anything I've seen in the states on ERM,( which isnt saying a lot since we are remarkably still in our infancy on ERM in the states). It was inspiring to see an organization that had a organizational culture that valued risk management and sustainable prosperity over short term quarterly earnings. (I keep mentioning culture don't I but I think this corporate culture comes from a larger national culture. That's my working hypothesis anyway).The investments they made in risk management did not pay off immediately but have over years yielded tremendous benefits to all stakeholders. They were so open with wanting to help with this internship project and help in the development of the next generation of leaders that I truly felt overwhelmed with the sense of good fortune in finding such great partners in this program. Our students and their future employers owe a debt of gratitude to these folks. I'll be back to work with them on case studies. They have some great ERM stories that we can turn into case studies. I think the students should start with this firm when they come here to learn about risk management in SA.

Next I met with Alexander Forbes. A broker/risk solutions firm that provides risk engineering, risk financing, and of course market broking services. This should be the second firm the students visit. They have a breadth of expertise across industries and will allow the students to begin to think like consultants before going out to the business clients to assess their risks. Another great partner for this.


I finished up the day and walked through the shopping mall (see photo) to get to Nelson Mandela Square which is surrounded by restaurants.I ended the day at the famous Butcher Shop restaurant in Nelson Mandela Square with Gert and his wife. An nice T-Bone steak, Hensa Beer, and finally South African Amarillo Creme to top off unbelievably productive day. Tomorrow I go to Apartheid Museum. So this is a nice place to end the day. Mandela Square with children black and white playing in the fountain under the fatherly gaze of Nelson Mandela's statue.

Thursday, February 10, 2011

Long Day of Surprises

February 10th

Today was a long day (meetings from 8:30 a.m. til 9:30 p.m.) with travel to other cities and full of pleasant surprises.

I started off the day meeting with group risk managers that were doing some extremely innovative pooling of disparate risks from different industries. The surprise was how they had made a profitable business doing things counter intuitive to what is done in the states. They had great ideas for internships for our students including developing case studies. I met with the CEO of a company who is perhaps the most visibly passionate person I have met about how his company contributes to the triple bottom line (people, planet, and Prosperity.). The surprise was the product they manufactured. I met with the director of risk for one of the largest public utilities in the world.Surprisingly her passion was around energy conservation and sustainability. Finally I drove past thousands of government subsidized housing neighborhoods that had been built as part of Mandela's initiative to provide homes to poor people. It was uplifting to see this transformation that replaced the types of houses seen in my previous blogs in other countries. They are simple homes but pleasant. They have used the taxes from businesses that have grown dramatically in SA. Most of the businesses I saw in Sandton City did not exist 20 years ago. Just very dramatic growth and huge opportunities here.

Started off the day driving through town (in a Los Angeles type traffic jam) to Group RIsk Management Services. They are doing some really innovative ways in helping their clients assess and manage risk. It is comprehensive and cutting edge. We discussed how they were able to pool risks from different industries to make them more appealing to the insurance underwriters that may not have wanted to insure them as a stand alone risk.
They had great ideas on how to make the learning experience interesting and relevant for students including developing case studies, taking students on field trips to their clients (including mining operations), and showing students how they model risk.

After that was lunch and then off to Pretoria (administrative Capitol of SA) where we met with the CEO of a multimillion dollar company that has at times employed as many as 6000 people. I noticed the recognitions on the wall for their meeting the most widely recognized international safety standards (OSHA 18001) and quality standards ISO 9001. The company has several government ministers on its board (which had impressive corporate governance structures in place). The CEO was passionate about safety, product quality and creating jobs. We met with him and the executive risk manager. The CEO personally took us on a tour the plant and went through the quality inspection of the products. He knew the employees in the plant by name and joked with them along the way. They obviously knew him and enjoyed working with him. The employees were visibility eager to share their passion for safety and quality too.
They were proud of how few injuries they had. In fact they had the lowest rate that any of us had ever heard of. Back in his office he enthusiastically discussed the need for emphasizing more than just profits. He gave examples of how they helped employees, their families and the surrounding community. He loved animals and enjoyed that they had spring bok and impala that grazed on their campus. (Which is just outside the suburbs as you can see in the pictures). The surprise- they manufacture munitions and the breadth of risks exposures they have are unparalleled. Students will actually see munitions made and detonated in a specially designed building. Hmmm. Perhaps my personal bias but my surprise was hard to conceal. I'm not sure what I expected but this is truly an amazing experience for students that I expect they will talk about for a long time.

On way home I passed several neighborhoods of traditionally poor black homes. The shacks that once existed have been replaced by the homes like the ones you see in the photo. Under the short time Mandela was president more than 700,000 homes were built for the poor and this has grown much more since. There are still shacks (referred to as infromal settlements and often made up of foreign Africans)just outside of Joburg . The development started by Mandela has really made transformed this country.

Finally came back to Joburg and met with executive director of risk for the major public utility and her husband for dinner. She was passionately about discussing sustainability in a truly authentic way (not just a PR stunt like I see too often). Providing energy to a fast growing company like SA in an environmentally friendly way has some spectacular challenges but she was very adamant about how it could be done.
She had perhaps the best ideas on how to select and structure teams for the internships and we spent a lot time brain-storming ideas to help make sure the students had an unforgettable learning experience. She will be a great asset to the program. Had a great meal in Italian restaurant and walked around afterwards still awed by the detail of replicating a Tuscan village (all the way to down to a clothes line with clothes hanging out the window).
It is a bit disney-esque. They refer to it is "funky/trendy"

It's late. Off to bed.
I miss my family terribly but am looking forward to tomorrows meetings.