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German insurance giant to launch micro-policies in Indonesia
02/2006
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[ Microinsurance ]
Next stop Indonesia
Allianz Group, the German insurance giant, last month decided to start a pilot project in Indonesia to test the potential of microinsurance. The idea is to provide poor people with a basic safety net. All too often, the illness or even death of a bread-winner causes destitution for the rest of the family. So far, affected people normally have to rely on microcredit to cope with the situation, a solution which obviously leads to additional indebtedness in an already difficult situation.
According to Allianz spokesman Michael Anthony, Bali will most likely be the initial target region in Indonesia. Aceh is also considered an interesting – if challenging – option. After the devastating Boxing Day Tsunami of 2004, interest in social security matters has grown on the archipelago.
Allianz is already insuring well-to-do clients in Indonesia. As Anthony told D+C, the new engagement in microinsurances is about pursuing two goals. The short-term aim is to demonstrate that a Western-based multinational need not only be interested in highly profitable markets, but may also care for pro-poor development. In the long run, Allianz hopes to be tapping into a larger market, which, however, has yet to develop.
German Technical Cooperation (GTZ) and the United Nations Development Programme (UNDP) have consulted Allianz on doing business with disadvantaged social strata in Asia. This public-private partnership is assessing demand and drafting distribution strategies. After initial success with microinsurance in India, it was decided to explore other markets. Feasibility studies were done for Laos and Indonesia, but according to GTZ research, Laos did not look promising.
In the Indian state of Tamil Nadu, Allianz has some 70,000 customers for micro-lifeinsurance. Clients pay a monthly fee equivalent of ¤0,87. In the case of the death of an insured person, the family receives ¤350. On average, that sum will cover ongoing expenses for six months.
The scheme was set up in cooperation with GTZ, the UNDP and a local non-governmental organisation over the past four years. Allianz states that the scheme is profitable and viable in the long term.
Indian regulations require foreign insurance companies to do 15% of their Indian business in rural areas. Because most of the rural people are poor, this rule serves as an incentive to get involved in microfinance. The microsector activities of Allianz are likely to increase as the corporation expands its Indian operations.
According to Allianz, it is helpful to cooperate with local NGOs or trade unions when reaching out to disadvantaged people. Doing so is said to be easier in India than in Indonesia because of India’s decades old democratic culture. In both countries, however, people are already familiar with various microcredit operations. In Indonesia, Allianz is not legally obliged to work in rural areas.
From the point of view of GTZ, the public-private partnership on microinsurance with Allianz is about much more than merely helping a German-based multinational to gain a better foothold in Asian markets. Rather, the emphasis is on the services delivered to the poor. “Peasants, market women and self-employed artisans need to be enabled to protect themselves from fundamental risks”, says Rüdiger Krech of GTZ. Microinsurance, in his perspective, is a promising instrument, which can contribute to achieving poverty reduction in the sense of the UN millennium development goals. (dem)
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