The Future of PPP: "We Want the Private Sector to Come in…"
The basic concept of Public Private Partnership (PPP) is to combine the individual strength of a public and a private partner to contribute to better microinsurance products and services that are profitable and have a development-policy benefit. This is a general statement but what is behind PPP in microinsurance? Who are those that benefit and in which way? Is there an additional value beyond the benefits of the actors involved? Under which circumstances does PPP work well? Where are the gaps and what needs to be done? This article will endeavour to answer these questions.
Who are those that benefit and what is the value addition in PPP?
There are several different types of PPP collaborations but in microinsurance there are primarily two prominent models: either donors or local governments collaborate with a variety of private actors.
Donor - insurer partnerships
In a donor - insurer partnerships, the insurer will first off receive information about a specific untapped market facilitating the accessibility. In addition, the insurer will obtain assistance for insurance literacy and marketing, learn about participatory (demand & product development) methods, and can work with already developed delivery channels. The public partner can build upon the technical knowledge of the insurer in product design, and can offer a potentially higher scaling up effect. All in all, this will contribute to the overall development goals of the project: reducing the vulnerability the low-income population. Both parties benefit through reducing investment costs.
Government – private partner collaboration
In a government – private partner collaboration, the government will serve the low-income population better and save public funds because people will be contributing to their protection through microinsurance. At the same time, the government can focus on the very poor and enhance the social safety net. The benefit for the private partner depends on who the actor is. For example, a technology provider could enter into new business opportunities, a health care provider could improve its services due to additional (insured) patients, pharmacies and health laboratories could increase their income, and the insurance industry could gain reputation and credibility. Moreover, the private sector enhances its understanding of how the regulatory environment of microinsurance is dependent on government policies. The role of the public and private sector is to coordinate with the governments to create an enabling environment.
Private partners can also indirectly affect the market by encouraging other partners to join the business, which can potentially strengthen the capacity of the delivery channels. Raising risk management education will help build an insurance culture for the low-income population and convince them that the small insurance premium is not just another financial burden, but more like a form of long-term protection, resulting in a win-win situation for all parties involved.
Under which circumstances does PPP work?
Experience shows that there are certain conditions that make PPP work better. Learnings from recent donor-insurer projects reveal that both partners need to develop a clear understanding of the potential and limitations of the PPP instrument. On this basis, they need to derive at a common understanding of the objectives (commercial and development goals) and their roles within each of the tasks. Public and private partners have different '(working) cultures' that need to be harmonized. Furthermore, while projects are usually developed at the head offices, they are normally implemented at the country level. In order to enhance ownership, the local offices on the ground should be included in the project design as early as possible with sufficient resources available.
One of the preconditions of a successful implementation is the availability of suitable and qualified delivery channels. It is recommended that this be verified prior to starting joint collaboration. In case of different views regarding implementation issues between the PPP partners, it is advised to test various options and review those experiences over time. Involving the potential clients and delivery channels in product development stage contributes to product acceptance (even if it is time consuming). During independent evaluations, including client satisfaction survey, it is important to guarantee the proprietary rights and confidentiality.
What works – selected examples of available PPP
Although several effective public-private partnerships exist, PPP started with 'simple' products such as (credit) life and slowly expanded to more complex products and services:
- Governments financing private schemes to support 'uninsurable' benefits such as basic drugs, diagnostics, transportation through equity fund; and/or provide subsidies to ease access to insurance for the poorest (as a form of social assistance)
- Private insurance providers design and offer innovative products for low income market and for risks that they would not insure without public support from donors and governments (e.g. index-based products)
- Private sector experiments using different delivery channels and fine-tuning the services contributes to better services for the low-income market (e.g. collaboration with NGOs, mobile phones providers)
- Integrating microinsurance through private insurance providers into Social Protection Bills such as in Rwanda and India. The Tanzanian Government supports Community Health Funds through cooperation with private companies, etc.
Where are the gaps and what needs to be done?
Despite of the fact that a number of projects and models exist, many of the most challenging issues are still unsolved. This includes all aspects of microinsurance: products and services, delivery channels, linking microinsurance to social protection and policy issues. The following topics are just examples selected to illustrate the complexity of future PPP.
Innovation in product design
Not all products available in the market respond to demand or provide good value to the customers. For this reason, innovation in product design is still needed for PPP. Challenges for improving inpatient benefits such as maternity, pre and post hospitalisation, HIV/AIDS and covering outpatient care including management of pharmaceutical costs remain unsolved. Initiatives need to be linked with improving the services of health care providers. Index-based insurance against catastrophic risks in partnership with local governments and meteorological institutes and preventive measures can foster an enabling environment for reducing vulnerability.
During the past few years, the delivery of microinsurance received a boost in term of effectiveness and innovation. However, many organisations are still struggling and other channels need to be further explored and developed: technology for scaling up, improving efficiency & quality of services such as cashless systems, smart cards, and Radio Frequency Identification Device (RFID) for reducing fraud with livestock products. Increasingly microinsurance is sold through retailers, mobile phones, etc. to individual customers but hardly any assessment is carried out about misselling, product knowledge of customers and claims settlement process. The insurance industry, research institutions and private delivery channels in cooperation with donors (and even the regulator) could highlight the challenges and good practices.
Strategies for extension
Development goals aim at social protection for all. How can microinsurance help governments to move toward universal (health) coverage? More strategies need to be developed to extend the community-based (health) schemes into national government health policies. Joint initiations with the governments, insurance associations, health care providers, employers and civil society can pave the way for more suitable legislation and pilot projects.
Additionally, linking microinsurance with broader issues such as work safety and health prevention by combining products with sanitation programmes and/or increasing safety at the work places, accidents and diseases will as a result be reduced. Subsequently, these 'packages' can lower the premiums and encourage insurance providers to develop more innovative health products.
Although policy issues are not easily tackled, regulators (and the government) have shown some openness to regular dialog with the insurance industry and other organisations that support microinsurance. Some countries have already passed microinsurance regulations but much more is required. This includes standardisation and/or certification of microinsurance agents (or even brokers) and qualification in cooperation with educational institutions, civil society and insurance associations. Increasingly important is consumer protection across all levels (good value products and services, dispute resolution measures)
Despite many successes, there is still a long way to go. In order to stimulate the collaboration between public and private partners, more analysis of the opportunities and obstacles would be benefit not only all those already involved, but could also result in specific strategies to encourage other actors to join.
The Microinsurance Network is a member-based network of donor organisations, multilateral agencies, insurance and social protection providers, policymakers and academics. It provides a platform for information sharing and stakeholder coordination with the aim to promote the development and proliferation of insurance products for low-income persons. For more information please visit www.microinsurancenetwork.org.