Product Focus: Political Risk Cover
MicroEnsure, 26 July 2010
When MicroEnsure was opening its new insurance brokerage
in Kenya it conducted research with the borrowers of a number of
microfinance companies. The borrowers expressed concern about the
risk of losing their businesses and possessions during the rioting
and looting that has recently become a part of Kenyan elections; so
our product team designed and negotiated the following product with
our local insurance company partners;
Credit Life
The underlying product is a standard credit life product
that covers the value of the loan upon death of the borrower, but
it is modified to include:
Family Funeral
A sum of Ksh 25,000 ($300) is paid upon death of the borrower,
spouse or children to help with the cost of a funeral
Disability and Critical Illness
If the borrower is unable to pay the loan due to disability of
critical illness then the balance is cleared plus Ksh 5,000 ($60)
is paid
Fire and Natural Disaster
If the micro enterprise is affected by a fire or natural disaster
then the loan is cleared. Many markets where our clients work are
affected by flooding and market fires
Political Violence and Riots
The loan is covered in the event that the borrower is affected by
political violence or riots. This is the only micro insurance
available in Kenya (and possibly elsewhere) that provides this
protection.
The standard credit life, funeral and disability package costs
between 0.7% - 1.2% of the loan depending on the number of
borrowers in a group. The protection for fire can be added for an
additional 0.25% of the loan and the political violence protection
cost Ksh 100 ($1.25) per loan irrespective of the loan value.
MicroEnsure is working with a number of microfinance lenders who
offer this product to their borrowers.