Page 23

at a different conclusion. They know

applications, significantly bringing down

they pay a lot, if not too much, for their

operational costs by reducing paper work

insurances but they can afford to and

to the bare minimum and outsourcing

factor in other considerations such as

data processing to specialised firms.

piece of mind and longer term liquidity

Simplification of products and procedures

and asset protection. On top of that,

may further cut down operational costs.

many types of insurance in their countries may be mandatory, so clients simply

Third, reinsurance and risk-sharing at

stop calculating.

global level may reduce risks and increase leverage allowing for substantial scaling-

Whilst appreciating the validity of the

up, which will further reduce operational

cost calculation, the debate about

costs. But most of all, rethinking of

affordability can not be decided by that

established industry conventions may

argument alone.

contribute to lower cost structures and higher levels of affordability.

Efficiency gains

Takaful – Islamic insurance. As in microfinance there is a growing demand for Islamic insurance as well. The basic fundamentals underlying the Takaful concept are very similar to co-operative and mutual principles, to the extent that the cooperative and mutual model is one that is accepted under Islamic law. These principles include the prohibition to derive advantage at the cost of others and the spreading of both losses and gains over the insured community. The European Council for Fatwa and Research declared it unlawful for European Muslims to take insurance products from commercial companies if there would be a good mutual or co-operative system in place. Some mutuals have special takaful windows for their clients, such as Bumiputra in Indonesia and Folksam in Sweden. Shiekan in Sudan is a full takaful insurance provider and the Takaful Nasional authority of Malaysia is preparing a micro-takaful scheme for the low- income sector in the country. Takaaful Trinidad and Tobago is already pioneering this micro approach. 21

have a built-in tendency towards risk aversion and industry standards prefer consistency over creativity. In developed markets mutual insurance schemes are under some pressure these days. There is a trend to ‘corporatise’ or even ‘commercialise’ co-operatives to keep up with the genuinely commercial competition. Underlying this trend is a push to cash in on shareholder value, even if the assets to be sold off may have been accumulated over generations by hard-working members following a social appeal. Typically, these days mutuals do not compete with commercial insurance firms on issues such as social or human capital, but

If microinsurance is to succeed on a

Back to the roots

massive scale, costs have to come down

For that, it may be needed to go back to

considerably, plain and simple. That

the roots of the mutual insurance system.

paves the way for greater affordability

These were set up by and for low-income

and, hence, social acceptance. And in

groups and their interests were placed

practice many providers are experimenting

at the centre. The continuous drive to

with various, and often rather creative,

meet the needs of members, rather than

but for many. That is why it would be good

ways to do so, mostly in the field of cost

clients, used to work very well as an in-

for the support sector to invest consider-

reduction at agent level.

centive to thinking out of the box, exactly

ably in training, transfer of knowledge and

the mindset needed for stimulating crea-

product design to get microinsurance to a

A second line of major innovations may

tive solutions to complicated problems of

higher level, in terms of outreach as well as

come from the rapid development of IT

risk management.

affordability. 21

44 MICROINSURANCE

Micro-insurance.indd 44-45

But as said before, insurance companies

only on price levels and customer satisfaction. Yet it is the social appeal that has driven mutuals to make the uninsurable insurable indeed in the past and it holds the promise of making microinsurance work not for a few

Source: www.icmif.org/takaful.

45 MICROINSURANCE

7/4/05 4:45:04 PM

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Microinsurance brochure

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