5 tips from the 'godfather' of microinsurance

Thinking about starting your own microinsurance institution? Aris Alip has a few tips. Alip is the managing director and founder of the Center for Agriculture and Rural Development Mutual Benefit Association. CARD MBA is part of a 14-company social business conglomerate — the CARD Mutually Reinforcing Institutions — that got its start as a microfinancing operation in the 1980s and now boasts 11 million members, mostly poor women. The microinsurance operation was launched a decade later and Alip is — quite literally — considered the godfather of microinsurance in the Philippines. To make sure the intended beneficiaries will receive their due, CARD MBA has gotten into the marriage business. Undocumented common law marriages are the norm in the rural outback, but without marriage and birth certificates, spouses and children would be hard-pressed to make insurance claims. “I have been the godfather to tens of thousands of people [as a result],” Alip quipped. Inexpensive and dependable insurance is crucial to help poor communities build the resilience they need to recover from the destruction of extreme events and hold up in the face of natural hazards, according to a recently released report by the University of Cambridge Institute for Sustainability Leadership. Insurance is “an essential policy instrument” in the drive to meet the sustainable development goals, said Ana Gonzalez Peleaz, a CISL fellow and co-author of the study. CARD MBA offers both life insurance and what could be termed casualty insurance. The latter is offered in partnership with private firm Pioneer Insurance. In the aftermath of Typhoon Haiyan in 2013, CARD MBA paid claims worth upward of $8 million to 179,000 families within days. In an exclusive interview with Devex, Alip outlined some of the lessons learned while nurturing CARD MBA to maturity: 1. Run it by the numbers. Hire an actuary and follow professional advice when setting premiums and benefits. Otherwise, said Alip, you will not break even and will not survive. “Don’t follow your heart, follow the calculations,” he said. 2. Give people ownership. Like its sister microfinance arm, which is owned by borrowers, CARD MBA is owned by its policyholders. “I am always an advocate of ownership,” Alip said. “Not only access. … Fraud and dishonesty are much less, or zero.” 3. Get professionals to manage operations. The policyholders act as shareholders, and “the owners define policies and procedures,” Alip explained. But day-to-day operations are left to trained professionals. “You cannot run it with volunteers,” Alip said. “You have to uphold standards, ensure that there is no fraud and ensure speed of payment.” To guarantee a steady flow of qualified employees, CARD has begun to work with universities in the Philippines to develop degree programs in microfinance and microinsurance management. 4. Respond quickly. “We are the first responders,” Alip noted. “Our staff is in the field.” CARD MBA has a 1-3-5 policy. Respond in one day under normal circumstances. If there is a question, process within three days. And provide a final decision in five. “With microinsurance it is important to process the claim in the best possible time frame,” he said — and he wants to speed up the process further. “I want to raise the bar,” he added. “If we’re able to process 97 percent of claims in one day, it would be even better to respond within eight hours instead of 24.” 5. Educate the regulators. It took CARD MBA three years to earn official recognition from regulators in the Philippines. “It took time to educate them,” Alip said. “But we are very lucky that the regulators are with us.” Improvements in the regulatory environment ranked at the top of the recommendations in the CISL report and Alip agreed that it is “always a good thing” for regulators to understand what a microinsurance outfit is doing. “They help you when they understand,” he said. Check out more funding trends analyses online, and subscribe to Money Matters to receive the latest contract award and shortlist announcements, and procurement and fundraising news.