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“The ‘power balance’: the small client versus the big firm.”

A mutual scheme means that clients come together to set up their self-controlled and financed insurance system. A co-operative system may work the same way, but also allows for clustering of affiliated co-ops. In that case not the individual clients but their co-ops own the insurance scheme. 14

bution system that is in place already. In urban centres this potential disadvantage may not be so pressing. Moreover, rapid developments in the fields of information and processing technologies may open up rural areas quickly in the coming decade.

OCMC is a member-owned co-operative in the Philippines providing health insurance within the circle of members. Reportedly, the system has a built-in check on moral hazard and fraud, offers customised products and promotes members’ participation. Small size of operation poses some limitations as well: management capacity for instance.15

A somewhat hybrid model of co-operatives is the system where not individual clients act as members but where for instance a farmer co-operative or an NGO, or a chain of those, set up their own insurance co-op. They become the owners of the new insurance company,

Lastly, there is the potential disadvantage

which is expected to service the

of the ‘power balance’: the small client

members of the affiliated organisations.

versus the big firm. Not a pretty perspec-

Advantages can be witnessed in the

tive in case of dispute over a claim. One

realm of self-control and self-manage-

This model has been in place for a long

would be tempted to argue in favour of

ment, which add to clients’ social capital

time and is quite popular in many

the MFI as go-between here, but that

base. Moreover, mutual systems do not

develo-ping countries. An educated

may carry the burden over to the MFI

have external shareholders but members.

guess has it that these affiliate insurance

without it being able to actually mediate

Any profit made will return to them,

co-operatives to date have carried the

between client and firm: the catch

either as ‘dividend’ or in the form of

bulk of the task of providing insurance

22 situation.

lower or zero premiums.

products to lower-income groups. Rather

Self-help, mutual and

A disadvantage, in the first option of full

needs to a commercial firm, the NGOs

co-operative models

self-insurance, is that risk leverage is very

and co-ops establish their own organisation.

A fourth frequently used model is the

small which often implies a relatively slow

Potential advantages are obvious: the

upgrade of old self-insurance systems. In

process of growth and expansion. And as

new firm is statutorily obliged to service

than outsourcing its members’ insurance 14

the new set-up the group members either

the membership remains small, transaction

organised low-income clients, it can avail

The second is distribution. Particularly in

continue to insure themselves by setting

costs remain high as costs have to be

of the distribution networks of its

rural areas with poorly developed

up their own (health) insurance scheme,

spread over only so many policy holders.

affiliates, and profits remain in the system

communication and transportation it may

or bargain a collective deal with an existing

and do not leak away to an external

be more cost-effective to rely on a distri-


third party. 15


Micro-insurance.indd 30-31

Affiliated co-operatives

“This model has been in place for a long time and is quite popular in many develo-ping countries.”

Source: Microinsurance No. 2 (November 2003); Research paper for the Micro Insurance Centre by Michael J. McCord and Sylvia Osinde, November 2002. 13

Microcare Ltd. was established in Uganda in 2000 to provide health insurance to low-income people. Initially it exclusively targeted clients from MFIs. To establish firm controls throughout the system, the company established its own check-in counters in medical facilities providing care to its clients. And to bring bureaucratic requirements for its clients back to a bare minimum, the company settles the bills for medical treatment directly with the care provider. While this system worked well to prevent fraudulent claims, co-operation with the MFIs was more difficult than expected. MFI staff had little experience with selling insurance products which led to inefficiencies in the system. Whilst continuing co-operation with MFIs, and working towards loan provision for premium payments, Microcare now also targets private sector companies with low-income employees and, on top of that, looks for acquisition opportunities to reach more clients. Performance is reportedly satisfying for an early expansion type of company.13

Gaby Ramm, GTZ, slide show presentation at KfW Microinsurance Symposium, Frankfurt, October 2004.


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