Microinsurance: Beyond a Positive Social Impact

Tags: financial services, insurance

Of late, microinsurance has been generating increasing interest and momentum here in Asia. For instance, Taiwan's Financial Supervisory Commission (FSC) just this week proposed plans to provide microinsurance to a sandwich class of almost a million Taiwanese who hover near the poverty line but do not qualify to receive government subsidies. Incentives such as tax cuts would be offered to insurers to encourage the development of a variety of microinsurance coverage for accident, health and life.

Meanwhile in India, with over 90% of the country’s poor still not covered by microinsurance, insurers are getting into the thick of action. Allianz for example, partnered with Care International (an organization with extensive experience in microfinance) to focus on the provision of insurance for people who live near the coast and work in fishing, agriculture and plantations.

Microinsurance is not just a vital tool in helping to reduce poverty by providing access to financial services and economic development. It is also about extending protection to the excluded population (i.e. the world’s poor), while still being a financially sustainable value proposition for the insurers (provided of course, they have the right administration and management).

Is your company jumping into the microinsurance bandwagon?

What are some principal challenges being encountered? What is the role of technology as a tool to enable microinsurance programs?

I would think that the delivery model to clients would be one issue - in India for instance, the wide dispersal of the microinsurance target population in deep rural areas makes distribution a challenge. To keep distribution cost low, reach prospects and service existing microinsurance clients, these products need to be properly marketed through well established networks, perhaps through leveraging existing microfinance infrastructure.

However, whatever the limitations may be, it seems that microinsurance is fast moving beyond just a social service in Asia...

The Marvel of Manufacturing Management - the Launch of the Nano

Tags: automotive, india, nano

The Tata Nano has now been launched in India. Despite much comment about whether it can be made for US$2,000 or US$2,500, and the issues surrounding the location of the manufacturing plant, the ability of a company to develop a car, which can be manufactured and sold for an amount cheaper than many consumer elctronic goods is an amazing achievement. As for now orders are being taken but the first nanos won't be on the road until July, and It will be in July and onwards where we will see if the dream of the nano matches with reality, and it will only be some months after that where we will see if it translates into profit for Tata.

Let us consider the manufacturing first. The car has a body, it has an interior, it has wheels, it has tyres, it has instruments... All of these have to come from raw materials(which have increased in price since the original design concept was created), which are then processed by companies in the supply chain and then assembled into the final product. It will be a real feat of supply chain management for Tata and its suppliers to manage the supply chain effectively, and the supply chain will need to be as lean as they come, to maintain any level of margin for a car that sells for US$2,000. There is no room for error in the supply chain - any build up of inventory is going to have a serious impact on the owner of that inventory.

As for the engineering, the innovative/cost reduction features include a boot / trunk that is only accessable from the inside, a single windscreen wiper, and the use of glue instead of welding. We will only really know the 'quality' of the product when it starts to be used in any sort of volume, any quality issues caused by the design or by the manufacutring process are going to be very big news indeed, as the Nano has caused such a storm amongst the manufacuturing industry and indsutry watchers will be quick to point out the faults. It will also be interesting to watch the spare part management to see whether the plans the Tata has made for provisioning the various service agents around the country will work.

I am very much looking forward to the arrival of the first nanos on the roads to see if this marvel of manufacturing management really is reality!

Governments should stretch the stimulus dollar

Tags: accountability, economic stimulus, government, transparency

Since the onset of the economic crisis in September last year, governments have gone into crisis mode, bailing out critical institutions and announcing mega stimulus packages in hopes of cushioning the financial impact on their economies.

This avalanche of uncertainty has left a lingering 'bitter-taste' when over a trillion dollars worth of taxpayer dollars are spent on rescuing money-losing businesses. The question for citizens remains, "is my government spending our money rightly and wisely?" as they scrutinize stimulus and budget initiatives unveiled and look for government leadership in rebuilding the economy.

Correspondingly, the challenge for government CIOs is how to stretch the stimulus dollar through IT investments – how to deploy IT capabilities and implementations to reduce operational costs while enhancing efficiency, and how to increase transparency and accountability as public confidence in institutions from banks to government itself dips.

Technology and innovation create immense transformation power to improve the business of government and the lives of citizens. CIOs should optimize the potential of technologies such as Web 2.0 – from blogs, and wikis to other social networking applications – to enhance collaboration and citizen participation, and create workflows and nurture skills for applications that have not been tried before. Likewise, as citizens expect government to behave more transparently and efficiently, CIOs can ride on stimulus initiatives to strengthen a focus on risk management, compliance, dashboards, and other metrics to manage performance and demonstrate accountability. 

However it is important to urge caution not to go overboard with such initiatives to the extent that they are seen to saddle government employees with a greater bureaucratic burden that translates into more red tape that citizens' face, instead of focusing on the original objectives of helping citizens in these new and challenging economic times!

Ready for Growth - China's Mfg Expands in March

Tags: china, manufacturers

The latest news from China is that manufacturing expanded in March with the official Purchasing Managers Index rising to 52.4 in March from 49 in February. Anything above 50 shows an increase. "The PMI not only shows the government economic stimulus package has begun to take obvious effect, but also indicates a stabilising and warming economy," National Statistics Bureau director Ma Jiantang said.

When will the manufacturing sector change in the heavily export driven economies of Taiwan, Korea and Singapore - we will have to wait and see, but finally the news is not all doom and gloom.

With more and more green shoots of recovery starting to appear in the news, does this mean that we are now at the bottom of the recession and can now think about climbing out of it? Companies that have taken the time to analyse processes, invest in efficiency improvments and have kept fuding R&D will be in a far stronger position to take advantage of the upturn. 

Green IT makes business sense

Tags: cooling, green it

The Age of The Stimulus: Which Banks Will Win?

Tags: banks, financial services, government

The total price tag for government-led stimulus programs in the Asia/Pacific region will easily tip over US$1.5 trillion by mid-2009. This massive injections of liquidity will up the ante in the already fierce competition of banks. In Thailand for example, Bangkok Bank has proven that bank network reach is still king, as the bank won the right to distribute stimulus checks for over 10 million Thai citizens. A reported price of 2 baht per check is loose change for a giant institution, but is not a  laughing matter either, given the ardent competition for every revenue generation opportunity.

Meanwhile, banks are expected to realign their loan growth targets as governments highlight priority sectors and greenlight huge infrastructure build-outs. Financial Insights Asia/Pacific's average loan growth estimates for 12 key Asia/Pacific markets is now at 8.7%, reduced further from previous estimates of 10.3% in November 2008. We will get a clearer picture of the aggregate and sectoral loan growth numbers by June 2009. However, we are certain that growth rates in 2009 will still be robust relative to the dire predictions in the United States and Europe. Respectable growth rates are expected out of countries with large populations such as China, India, Indonesia, and Vietnam.

Technology implications for banks?

Banks that are able to showcase operational efficiency aside from reach and distribution will win in the governments' cash-to-the-public programs. In the public spending side, key factors of success will be capability to build out lending models and the capability to scale up growth in priority sectors. Further, loan origination systems was a strong initiative for banks in the Asia/Pacific region prior to the crisis, and will be critical area of focus now.

We estimate that about 60% of loan origination systems of the top 250 Asia/Pacific banks were (and are still) outdated and could not cope with an upsurge in lending. Leading banks are expected to invest heavily in modeling and analytics (good news for leading players like SAS, FICO, etc). Building of course on quality data, these investments in scoring, models, and analytics will help in key areas such as decisioning, pricing, servicing, fraud prevention, and even collections and recovery

The full report, Asia/Pacific Banking in 2009: Opportunities Amid a Crisis, is available on the Financial Insights' Web site. 

Banks Focusing on Credit Risk as They Reel from the Turmoil

Tags: banks, financial services, risk management

While the financial tsunami has washed up the shores of Asia/Pacific and losses to the tune of billions of dollars have resulted in banks slashing technology budgets, there is still money flowing into risk-related projects. These are more easily justified as banks seek to plug risk leakages exposed by the recent market stresses. Consequently, risk-mitigating products and techniques to empower banks to manage credit exposures more proactively becoming increasingly important.

The beneficiaries of these accelerated risk management practices? Vendors operating within the credit risk/Basel II field such as Algorithmics, Moody's Fermat, Fiserv, Misys Almonde, Oracle Reveleus, Quantitative Risk Management (QRM), SAP, SAS Institute, and SunGard.

All nine are worthy contenders in their own right. Those that stood out with particularly distinct features and extensive functionalities include Algorithmics, Moody's Fermat, Fiserv, and QRM. Oracle Reveleus, SAP, SAS Institute and SunGard meanwhile boast a varied footprint of client jurisdictions, while Misys Almonde offers rapid web-delivery deployment and is entrenched with clients in emerging markets.

To ensure alignment of strategies, policy objectives, and business processes with their credit risk framework, banks need to shore up on their current credit risk efforts and nominate a risk champion to ensure that risk awareness pervade the entire enterprise. Beyond ascertaining that vendor functionality offerings correlate with their risk management requirements, decisions also need to be made around areas like the extent of customization preferred, the choice of a multiple versus one-system solution platform, and future functionality requirements.

For a further discussion on credit risk offerings in Asia/Pacific and how banks can enhance their risk framework, please refer to Credit Risk Solution Vendors: Who's Who in Asia (Doc #FIN217509).