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									            INTERNAL PROGRAM REVIEW

      CASE STUDIES FROM COLOMBIA AND
            DOMINICAN REPUBLIC




8201 Greensboro Drive, Suite 300 • McLean, Virginia 22102 • USA
telephone: +1 703 245-8077 • fax: +1 703 610-9005 • e-mail: info@aacmis.org •
                               www.aacmis.org
EXECUTIVE SUMMARY ................................................................................................ 4

BACKGROUND ................................................................................................................ 5

PART I. THE IMPLEMENTATION PROCESS .............................................................. 6
  A. Project Description of CDP with focus on Dominican Republic: ............................ 6
    1. Background and Overview ................................................................................. 6
    2. Project Objectives and Strategy:......................................................................... 7
  B. Project Implementation......................................................................................... 10
    1. Project Management and Organization............................................................. 10
    2. Project Reporting/Monitoring........................................................................... 11
  C. Impact of the Project............................................................................................. 11
    1. Impact on the target population: ......................................................................... 11
    2. Potential for Institutionalization: ...................................................................... 11

PART II: THE PARTICIPATING COOPERATIVES.................................................... 12
  1. Cooperativa Nacional de Seguros in the Dominican Republic ...................... 12
     A. Organization and Governance: ......................................................................... 12
     2. Leadership and Decision Making: ....................................................................... 12
     3. .Membership and Member Participation: ......................................................... 13
     B. Business Operations: ............................................................................................ 13
PARTICIPATING COOPERATIVE 2 ........................................................................ 15
  2. LA EQUIDAD SEGUROS COOPERATIVO IN COLOMBIA........................ 15
     A. Cooperative Organization and Governance ........................................................ 15
     B. Business Operations: ....................................................................................... 16
IMPLEMENTATION PROCESS: AAC/MIS-LA EQUIDAD PROJECT
IMPLEMENTATION....................................................................................................... 19
  A. Project Description................................................................................................ 19
     1. Background and Overview: .............................................................................. 20
  B. Project Implementation:........................................................................................ 20
     1. Project Management and Organization............................................................. 20
     2. Project Reporting/Monitoring: ........................................................................ 20
  C. Impact of the Project: .............................................................................................. 21
     1. Impact on the target population: Zero................................................................. 21
     2. Potential for Institutionalization ........................................................................ 21

PART III: LESSONS LEARNED .................................................................................. 21
  A. Lessons Learned During Project Implementation:................................................. 21
  B. Lessons Learned in Addressing Problems/Issues: .................................................. 23
  C. Participant Perspectives on the Value of Project Assistance .................................. 23

PART IV: FINANCIAL ANALYSIS.............................................................................. 24




                                                             2
ANNEXES

CoopSeguros Financial Information                     Tab 1

CoopSeguros Annual Reports, 2001 and 2002             Tab 2

LaEquidad Financial Information                       Tab 3

LaEquidad Annual Reports, 2001 and 2002               Tab 4

LaEquidad Rankings                                    Tab 5

LaEquidad Presentation to Board/Regional Assemblies   Tab 6




                                                 3
AMERICAS ASSOCIATION OF COOPERATIVE/MUTUAL INSURANCE SOCIETIES (AAC/MIS)

                                          Internal Program Review

                CASE STUDIES FROM COLOMBIA AND DOMINICAN REPUBLIC



EXECUTIVE SUMMARY

The Americas Association of Cooperative/Mutual Insurance Societies is composed of 45
cooperative/mutual insurance companies representing the United States, Canada, Central and South
America and the Caribbean. The association members believe in cooperative business development
because it is what they do; they support access to insurance products as part of development because it is
their roots. Much of the AAC/MIS work is implemented by companies in the South helping others in the
South.

It is important to remember that the people who have the greatest need for insurance are those that have the
least resources to access it. Development requires risk reduction; development requires asset protection.
Many AAC/MIS members are the largest in the country by clients served, but in the bottom half when
companies are listed by premium volume. These markets are of little interest to large insurance companies.
If not cooperatives, who?

This study highlights two AAC/MIS companies, LaEquidad in Colombia and CoopSeguros in the
Dominican Republic. Both are owned by different kinds of cooperatives and that is an advantage.
LaEquidad is now in a position to set standards for developing countries and to pursue its own development
activities.

In this exercise, AAC/MIS has learned important general lessons that should be shared and some important
business lessons that may be limited to insurance.

The most important of these lessons is that a company without values has no foundation, no direction, no
standards. Not just values that are written on a piece of paper, but values that are lived from top to bottom
of the organization. As AAC/MIS companies look to grow their markets with alliances, it is essential that
they know who they are and what they are trying to do under what conditions. Just as important, they
know the values of the groups they are trying to work with. As they develop new products, it is essential
that they do that based on the risk mitigation needs of the people they are trying to reach, but always within
a values framework. This is so important that AAC/MIS should choose development partners, not just on
the basis of business possibilities, but also on the basis that a compatible value system permeates the
organization. Otherwise, little development will occur.

A second lesson that deserves highlighting is that many cooperative shortcomings can be overcome by an
outside director. Most businesses today are too complicated to be run by people who need the business, but
can neither read nor write. This makes them very vulnerable to abuse by managers, board, and employees.
An Outside Director might be an appropriate answer, but in investigating the appropriateness of such a
step, the cooperative needs to know that the Outside Director lives compatible values.

A third that merits special mention is the need for insurance education throughout Latin America and the
Caribbean. People who don’t have access to it, don’t know much about it, don’t understand it. Education,
coupled with appropriate products, will explain the importance of insurance for a family and/or business




                                                      4
BACKGROUND

The AAC/MIS is an association of 45 cooperative/mutual insurance companies in the United States,
Canada, Central and South America and the Caribbean. The association is the Americas regional
organization for the International Cooperative and Mutual Insurance Federation (ICMIF). 123 insurance
groups in 65 countries make up the ICMIF membership. Membership in ICMIF provides, among other
things, access to reinsurance services that is critical for smaller companies in developing countries. The
AAC/MIS places great importance on its development activities that include strengthening the companies
to ensure their viability, as well as providing access to appropriate insurance products to more people in the
region. The U.S. members of the association are Nationwide Insurance, Shelter Re, Amalgamated (owned
by the labor unions) and American Agricultural Insurance Company, as well as Seguros Multiples and
COSVI in Puerto Rico. Multi Plan and CUNA Mutual are also affiliated with the association.

AAC/MIS members are each examples of the importance of the cooperative/mutual business development
as a tool to meet people’s insurance needs. Each was founded to serve markets that had no access to
insurance. To illustrate, Nationwide Insurance was founded to provide car insurance to farmers, because
no other company would write vehicle insurance in rural areas.

Few development practitioners have appreciated the importance of insurance in the development process.
Therefore, the support that AAC/MIS has received from USAID/PVC through the CDP is seen as very
cutting edge. Activities under the two year extension include focus on increasing access to products to
larger groups of people with limited incomes and documenting lessons learned so that others can benefit.
This program is the association’s only funded development activity, and it is complemented by association
resources and contributions.

AAC/MIS activities under the current CDP are focused in Guatemala, El Salvador, Nicaragua, Honduras,
Peru, Ecuador, and the Dominican Republic. Most of these companies are owned by credit unions and are
corporate entities because the laws in these countries, as in the United States, do not allow insurance
companies to be organized as cooperatives. Their insurance activities have mostly grown out of the CUNA
credit union development approach in Latin America and the Caribbean of the sixties and the credit union
philosophy that debt dies with the debtor. The most common product offered through these companies has
been a payment of double/triple the amount of savings and payment of a loan in the event of death of a
credit union member. Quite naturally, the growth of the companies has been very closely tied to the
growth of credit unions, so little product innovation and marketing expertise has developed. The exception
to this is CoopSeguros in the Dominican Republic that is one case study company.

AID provided support in 1970 for the founding of a cooperative insurance company in Columbia called La
Equidad. The assistance to LaEquidad, delivered by CLUSA (now doing business as the National
Cooperative Business Association), helped in the feasibility study and in the writing of the company’s by-
laws. Today, LaEquidad is very successful in the highly competitive Colombian insurance market, totally
dedicated to cooperative principles and its responsibilities under these principles and serves as a benchmark
for developing country companies. It offers, in addition, several important lessons learned over time.
LaEquidad is chosen as the second case study for two reasons: To demonstrate what is possible when a
cooperative insurance company is run as a business and always maintains its cooperative principles and
values and to share a small development activity that AAC/MIS and La Equidad undertook under the
Micro-enterprises Best Practices Program in 1997.

It is important to note here that the AAC/MIS member companies in developing countries are usually the
largest insurance companies in the country when the criteria is number of people insured. They usually
rank in the bottom half of all companies when ranking is by premium volume. All member companies are
supervised by the Superintendent of Insurance/Banks. Most of these offices do a ranking of companies
every three to six months; this enables AAC/MIS to monitor company performance and provides useful
benchmarking for the companies.

All AAC/MIS members also meet capital requirements in their respective countries. Most of the capital
has come from credit union and cooperative owners. As a result, many companies are viewed as arms of


                                                      5
the owner cooperatives and have not been allowed to operate as independent companies with their own
vision and values. All companies are covered by reinsurance with highly rated companies.

AAC/MIS carried out two studies “When Cooperatives Own Insurance Companies” and “The Role of an
Outside Director” that will be annexed to this review. Much of the information contained herein came
from information collected in the writing of these two reports.

In this report AAC/MIS refers to the companies by their country location to facilitate ease of reading. For a
reader who might be more familiar with insurance activities in a particular country, the companies and
countries are linked below:
Colombia                            LaEquidad
Dominican Republic                  Cooperativa Nacional de Seguros (CoopSeguros)
El Salvador                         Seguros Futuro
Ecuador                             CoopSeguros
Guatemala                           Columna, Compania de Seguros (Columna)
Honduras                            Cooperativa Equidad (Equidad – note that this company is in process
                                    Conversion to a corporate structure. Under Honduran interpretation of
                                    the Cooperative Law, the company was only allowed to sell within the
                                    Cooperative sector, though had same capital requirements as an entity
                                    authorized to sell to the general public.)
Nicaragua                           Central de Cooperativas de Ahorro y Credito (not yet an insurance
                                    company, operating under Cooperative Law as a department of the
                                    Central)
Peru                                ServiPeru

All companies, except Honduras and Nicaragua, are allowed to sell to the general public, but most do very
little outside of their cooperative ownership.


                             PART I. THE IMPLEMENTATION PROCESS

A. Project Description of CDP with focus on Dominican Republic:

    1.   Background and Overview

    The AAC/MIS used the first five years of its CDP program to focus on company strengthening. While
    all of the companies now meet insurance company capital requirements in their respective countries,
    most are very small in terms of the potential of their market. The investments in ownership weren’t
    always made for promotion of cooperative values and expanded access to insurance; it was viewed as a
    funding source for the owners.

    The two year extension allowed some important program adjustments and a very important strategy
    change: For the first time, the companies are telling AAC/MIS what they need rather than being told
    what AAC/MIS is going to provide. It has not been an easy transition on either side: the companies
    are too often to say what they think for fear that AAC/MIS will withdraw support; AAC/MIS has not
    figured out a way to provide effective, measurable support that benefits the companies and
    documenting that support for use by others: Consultants may be the answer; full time staff assigned to
    a company may be more effective; perhaps a combination of both is the answer. Each side is working
    on more effective communication.

    a.   Project Setting and Target Groups: The setting obviously varies from one country to another, but
         AAC/MIS finds many common needs among the companies. The target is middle and lower
         income groups who currently have little or no access to insurance products or knowledge about
         their importance. AAC/MIS member companies in developing countries provide an excellent base
         for reaching these target groups that are typically of little interest to other insurance companies.




                                                     6
     Reaching these targets is part of their cooperative principles and values, but has been little
     explored in the past.

     Specifically for the Dominican Republic some special conditions are noteworthy:

      Dominican Republic has just had a 30%devaluation that follows gradual devaluation over the past
     year. The economic situation is deteriorating rapidly. The inflation rate is projected at 35% for
     2003. A major bank has failed leaving the Government with US$2.2 billion in losses, plus the
     third largest insurance company in the Dominican Republic that was owned by this bank has also
     failed.

     In response, the company has opened accounts outside the country to protect value of reserves,
     and a cost cutting campaign has already reduced administrative costs by 2%.

     There are 350 active cooperatives in the country with 1,350,000 members. There are very large
     credit unions, but they are not supervised. The President of the country is very pro-cooperative;
     the AID program does not work with cooperatives; and IDECOOP, the government group
     responsible for cooperatives, is unfocused with lots of employees helping to develop cooperatives.
     There is some attempt to focus on the business aspects of cooperatives, but regrettably many are
     still formed primarily for social reasons and have insufficient members to make a viable business.

b.   Intended Beneficiaries: In this phase of the program, the intended beneficiaries are primarily
     members of owners of the insurance company. For companies that sell insurance to 100% of their
     owners, the focus shifts to other cooperatives and then to other groups, like micro-finance
     organizations, labor unions, professional associations, etc., that share values similar to cooperative
     values and represent good business opportunities for both the group and the company to create a
     win/win situation.

     In all of this it is very important to remember that the people who need insurance the most
     are the people with the least resources to buy it. This idea now motivates AAC/MIS members
     to understand their potential client base and to develop products that are appropriate to their needs
     and ability to pay.

2.   Project Objectives and Strategy:

a.   Objectives:
     The AAC/.MIS objectives of CDP program are:
         • 100% of all members of company owners are insured by the company (Honduras, El
             Salvador, Dominican Republic)
         • 10% of all members of non-owner cooperatives are insured by the company (Guatemala,
             Nicaragua, Peru)
         • 3% of a company’s clients are from non-cooperative groups (Guatemala, El Salvador,
             Honduras, Nicaragua, Dominican Republic).
         • Empower and energize company boards and employees to develop leadership and create
             an organizational identity and culture. (Guatemala, El Salvador, Honduras, Dominican
             Republic, Ecuador)

     Objective 1: Achievement of this objective is being actively pursued by all companies, except
     Honduras, at this point in time. The following table indicates the progress of the
     companies in insuring their owners and their owners’ members. The information
     relates only to group life insurance that is a basic product for all companies and
     avoids duplication in counting beneficiaries.




                                                   7
     CRECIMIENTO DEL NUMERO DE COOPERATIVAS Y MIEMBROS INCLUIDOS EN SEGUROS COLECTIVOS DE
                                             VIDA
                                     JUNIO 2002 – JUNIO 2003



                                                     Jun-02          Jun-03          Jun-02         Jun-03
                                                      No. de          No. de
                                       No. de      cooperativas    cooperativas       No. de         No. de
                                                    dueñas que      dueñas que      miembros       miembros        Nuevos
     COMPAÑÍA             PAIS      cooperativas                                                                              % crec.
                                                    compran al      compran al     incluidos en   incluidos en   asegurados
                                    dueñas 2003
                                                     menos un        menos un       Colectivos     Colectivos
                                                    seguro a la     seguro a la      de Vida        de Vida
                                                     compañía        compañía

COLUMNA S.A.          GUATEMALA              26               26              26        306.148        393.952       87.804   28,68%

CENTRAL DE COOP. DE
AHORRO Y CREDITO      NICARAGUA              22               18              22         16.713         20.026        3.313   19,82%

SEGUROS FUTURO        EL SALVADOR            33               27              27         47.419         48.156          737    1,55%
SEGUROS
COOPERATIVOS
EQUIDAD LTDA          HONDURAS               93               65              64        240.572        260.258       19.686    8,18%
                      REPUBLICA
COOPSEGUROS           DOMINICANA             30               10              13         16.800         22.855        6.055   36,04%

TOTAL                                       204            146             152          627.652        745.247      117.595   18,73%
     Objectives 2 and 3:

     As opposed to reaching out to other cooperatives and groups as was anticipated in these
     objectives, most companies have re-evaluated and chosen, instead, to offer other products (than
     protection of loans and savings) to current members. This decision is based in lack of know-how
     on how to find out what the groups really wanted in the way of risk protection; it was easier to
     begin this process with known groups, rather than make “cold calls”.

     For the first time in their histories, these companies are doing market studies to find out the real
     risks faced by members. Strange as this may seem, their primary products were transplanted from
     the United States, and others came later in response to product development by other insurance
     companies. AAC/MIS provides technical assistance to help formulate marketing strategies in each
     company.

     The exception to this is the Dominican Republic. In the Dominican Republic it became obvious in
     2001 that they could not grow the company if they limited business only to the cooperative
     community, so they began to focus on outside groups. While the company still has owners that do
     not buy insurance from the company, the company has successfully moved into the general public
     sector with 21% of their premium income generated by the general public in 2002. (More details
     below in case study on Dominican Republic.)

     Objective 4:

     Various evaluations have shown that cooperative members are not aware that they own an
     insurance company or that this company provides their access to insurance products. Very little
     company salience was observed either among members or in communities.

     Under a subcontract with the Instituto para el Dessarrollo Human in Puerto Rico, five companies,
     including the Domincan Republic, are receiving a set of six seminars to empower staff and boards
     of directors as a way of establishing the companies as their own entities with their own
     organizational culture and values, not just an extension of their owners.

     While it is difficult to quantify the impact of this series of activities, AAC/MIS is beginning to see
     some important organizational changes in the participating companies: staff is more involved in
     reengineering, boards get the message that they have responsibilities in the operation of the
     insurance company for which they are totally unprepared.

     Strategies: After looking at various options for growth, marketing became the biggest constraint.
     Through technical assistance and financial assistance companies have undertaken different
     approaches to marketing: focus groups, a marketing concept that is totally new in this
     environment; market studies using company personnel, and market studies using local market
     firms with marketing expertise.

     The strategy was to get the companies to identify their greatest needs and/or constraints. Once
     those were identified and accepted, AAC/MIS agreed to provide technical assistance through
     consultants or volunteers, financial assistance or both. In the Dominican Republic, the priorities
     were marketing and product development. SOCODEVI, the Canadian partner in this activity,
     provided volunteers to advise on product development; AAC/MIS provided technical assistance
     on various marketing options and helped the company to design the programs of each
     intervention: focus groups with members of cooperatives already insured by CoopSeguros;
     establishment of agencies staffed by CoopSeguros, not the cooperative (a major deviation from
     typical approaches), and direct contact presentations by the manager.

c.   Project Components:
     The project being implemented in Dominican Republic has 3 components:
     Financial analysis and monitoring of financial condition by AAC/MIS

     Organizational development through seminars for organizational cultural development.

     Different marketing strategies to grow the company, including product development to meet
     beneficiaries needs.

d.   Conditions Expected at EOP: Dominican Republic: 100% of owners buy at least one product
     from the company, one new product to meet needs defined by people.

     Financial condition of the company will continue to improve.

     Alternative marketing strategies will be documented and evaluated , and one new product will be
     developed based on identified needs. Measurable impact from marketing efforts to grow the
     company will be documented.

     CoopSeguros has actually taken the lead in development of products to meet consumer needs. It
     has designed and developed an insurance product for motorcycle taxi/delivery drivers that meets
     the governments requirements for civil liability. It does not protect the driver, except it provides
     access to a lawyer if the driver is jailed because of injury/death to others. There are about 5,235 of
     these motoconchistas secured by the company.

     Recently the Government raised the limits of required insurance for all types of motor vehicles.
     This placed a hardship on the motoconchistas because naturally their premiums had to go up.
     CoopSeguros devised a plan whereby they could pay their insurance in installments, rather than
     lump sum. The next step is to develop a life product for the drivers of these vehicles.

     When there is no insurance culture, insurance can be a hard sell; even when there is an insurance
     culture, it can be a hard sell. But there is some creativity coming out of this desire to protect more
     people and their families. Rather than focus on how much insurance a person needs, it is possible
     to focus on how much they can pay for premiums, and let that dictate the amount of insurance.

     With the yearly threat of hurricanes, the development of creative approaches to providing
     insurance to those of limited resources will be very important in the Dominican Republic.

B. Project Implementation

1.   Project Management and Organization

a. Staffing

AAC/MIS has no permanent staff. The Vice President for Development is responsible for the
development program. He is assisted by two insurance consultants from Costa Rica and an
Administrative Consultant.

Company CEO’s , particularly those from the South, volunteer their time so that AAC/MIS really
implements south/south development assistance. To illustrate, the CEO’s of Seguros Multiples in
Puerto Rico, CoopSeguros in Ecuador, and LaEquidad in Colombia gave presentations on their
companies and the various approaches to marketing they had implemented and the value of each to the
Company to developing country companies.

The total resources devoted to CoopSeguros under the seven year CDP program is about $160,000.

b. Organization/Activities Plan:
Activities plan is determined by CoopSeguros in collaboration with SOCODEVI and AAC/MIS. This
defines the technical contributions required as well as the financial resources to help achieve company


                                                  10
objectives. These are not written in stone. As the economy changes in the Dominican Republic,
priorities are being re-ordered.

CoopSeguros also does its own strategic planning with the board, management, and staff. The plan for
2002 was completed with objectives successfully achieved. Objectives were:
• Institutional Strengthening and Consolidation of the Company measured by balance sheet.
• Promotion of Investment and Profitability measured by balance sheet.
• Improved ranking in Dominican insurance market and differentiated products to meet needs of
    persons of lower incomes measured by sales to general public and marketing success with product
    for motoconchistas.
• Meet the insurance needs of the cooperatives and cooperative members meased by increased sales
    to each.
• Continue to improve communication with clients and potential clients and promotion of new
    products measured by balance sheet.

2.   Project Reporting/Monitoring

a.   Baseline Data and Performance Monitoring: Monitoring is done by AAC/MIS consultant on visits
     about every two months. Baseline data and evidence of directions is taken from accounting data
     and annual reports.

b.   Levels of Output:

     These are targets set through the strategic planning process and monitored by management and
     Board. Between 2001 and 2002, CoopSeguros grew auto premiums by 41.67%, Group life by
     28.44% and Fire by 18.98%. Between 2001 and 2002, insurance sales to the general public grew
     from 0 to 21% of premiums.

c.   Implementation Problems/Issues:

     The concern is that CoopSeguros may grow too fast, particularly in its rapidly changing
     environment. Actions of today may have consequences years from now. The continued
     involvement of the Outside Director gives some confidence to all interested parties.

     Another concern is rotation of staff and board members. The Outside Director helps to mitigate
     the situation, but it does not solve the continuity issues in a small organization.

     The very small staff of CoopSeguros is trying to do a lot in a short period of time. In this
     environment it is not clear that the visits from the consultant fit with the priorities of the moment.

C. Impact of the Project

     1. Impact on the target population:
     Evaluations of people who receive insurance benefits indicate that they had no knowledge of the
     insurance company and seldom were aware of the existence of the member benefit. In most cases,
     they were relieved that the loans were paid, and that, though the savings were probably small, it
     provided some immediate funds to meet personal expenses and/or continue business operations.
     This will guide organizational development and promotion in the future, as well as increase
     understanding of insurance among target groups.

2.    Potential for Institutionalization:
     The interventions stand good chances for being institutionalized because of the growth results they
     are yielding. The threat will come from the owners looking to generate profits rather than provide
     appropriate products at reasonable cost.




                                                  11
                              PART II: THE PARTICIPATING COOPERATIVES
1.   Cooperativa Nacional de Seguros (CoopSeguros) in the Dominican Republic

     A. Organization and Governance:

     AAC/MIS did not offer assistance to CoopSeguros in the Dominican Republic until 1999. The
     company began in 1993 and suffered an institution-threatening loss in the first month of operation.
     Five AAC/MIS members donated $7,000 each to keep the operation going under the condition that
     CoopSeguros allow them a board representative. This representative came from Seguros
     Multiples in Puerto Rico, and probably has been the saving grace of the company. It is the
     intention that this was a loan that will be repaid by CoopSeguros. AAC/MIS works in
     collaboration with SOCODEVI of Quebec, Canada on this common development activity.

     1a. Vision: To be a vanguard business by offering excellent quality service to our clients.

     b.   Mission: To provide ………..and efficient insurance services that contribute to the socio
          economic development of the cooperatives, affiliated entities and corporate members.

     c.   Values:

     •    Respect for the cooperative principles, the laws of the country and the by-laws and internal
          policies of the company;

     •    Believe in team work and the continual education of our staff;

     •    Total satisfaction of our clients is the basis of our customer service.

     •    Preserve our natural resources and the environment.

     d.   Status: The company is organized as a cooperative under Law 127 of the Dominican
          Republic and began operations in 1993. It is a recognized insurance company supervised by
          the Superintendent of Insurance and meets the $500,000 capital requirements established for
          insurance companies.

     2. Leadership and Decision Making:

          CoopSeguros has a staff of 12, including the general manager who comes originally from one
          of the owner cooperatives. There is a board of directors of 13, including the outside director
          who has now been named a permanent member of the board. The Vigilante Committee
          numbers seven elected members.

          The Cooperative Law establishes that at the Annual Meeting a delegate may be elected for up
          to a three-year term. After that, the delegate can serve consecutive terms of two years and
          then one year. After that, s/he must leave the Board for one year; then the person can be re-
          elected following the same cycle.

          The Law provides for the Board members to choose among themselves the persons to fill the
          offices of the board for a period of one year. Though the law does not provide for it, the
          person can be chosen to fill the same position for additional years.

          The challenge that has faces CoopSeguros is that the cooperatives view the position on the
          Board as their “spot” after an election and proceed to change the people elected at will. This
          has given very high rotation among board members and makes leadership difficult. Also,



                                                   12
many of the cooperatives still view a position on the board as a personal “reward”, and this
does not guarantee that the best people serve on the board.

Since the Board comes from the cooperative owners, there is little insurance expertise. Many
Board members are more preoccupied by the activities in their own cooperative than
interested in the operations of the insurance company.

To the Board’s credit, they seldom make a decision without consulting their outside director,
their insurance expert. The outside director, Jose Martinez, who recently retired from a long,
distinguished career with Seguros Multiples in Puerto Rico, is consulted on all decisions
involving insurance by both the Board and the Manager. The most important part about the
role of Mr. Martinez, well beyond his considerable insurance knowledge, is that he is a
cooperator who believes in cooperative principles and practices cooperative values. Also, the
outside director has helped them to understand the distinction between responsibilities of
board members and responsibilities of the manager.

CoopSeguros also operates under Law 146-02, the Law for Insurance and Finance of the
Dominican Republic. The Superintendent’s Office makes an annual inspection of
CoopSeguros. Further, every three months, the company must submit financial statements
along with indicators of solvency, liquidity, capital, and verification of reserves and
investments. Every two years the superintendent makes an inspection of retained taxes
against paid taxes. Also, every two years, the superintendent reviews the reinsurance
contracts.

CoopSeguros gets some marketing help from the government of the Dominican Republic.
Insurance is required on all motor vehicles, including motorcycles used for hire. (This is not
the case in any other developing country where AAC/MIS works, though Guatemala, El
Salvador, and Honduras flirt with this requirement from time to time.)

3.   .Membership and Member Participation:

CoopSeguros is owned by 57 members. Of those, 31 are classified as “active” members,
members that have placed some insurance with CoopSeguros and 26 “passive” members,
members that have no insurance with the company. However, of these 26 passive members,
10 are in the process of liquidation. During 2002 there were two new active members and two
passive members became active.

22,855 cooperative members were insured under a group life policy with CoopSeguros at the
end of 2002, representing an increase of 36% over year-end 2001. Two initiatives have been
undertaken by CoopSeguros to bring more member attention to the company:

To increase member awareness and direct participation, CoopSeguros has established
agencies with high visibility in the larger cooperatives’ offices. The one-person staff works on
salary and commission, maintaining direct contact with the members.

The cooperatives have been induced through win/win arrangements to include insurance
education in their training programs to increase member understanding of insurance and its
importance in protection of families. Training/education is a huge part of Dominican
Republic cooperatives; members are required to attend a meeting once a week to reinforce the
importance of the cooperative and to hear presentations on topics of interest.

 B. Business Operations:

 1. Management: The manager is the ultimate salesman. He provides the leadership and
 continuity to the cooperatives that was missing as the management passed from one person
 to another. The manager served on the board during its period of losses, and, while he is not


                                       13
an insurance expert, he is a quick study of the field, and the assistance provided by the
outside director and AAC/MIS and SOCODEVI technical assistance and volunteer
mentoring has been very important.

a.     Policies and Procedures: Now being documented.

b.     Personnel: Fairly high turnover of a small staff. This has slowed considerably with the
       beginning of the organizational culture and values seminars, as staff feels more
       empowered, and board members understand more ways to be more effective.

2 .Business Activities:

a. Planning and Performance: Strategic planning sets goals, and these have been exceeded
during the past 3 years.

b Transparency/Accountability: This is less of a problem with insurance companies who
have supervision by government and outside auditors. Nonetheless, there is improving
transparency between management, board, and members.

3. Financial Analysis. See Annexes 1 and 2.

4. Salience

 a. Value/Importance to Members:

 Improving as CoopSeguros develops products that meet individual’s recognized risks.
 Most members, unless they have an individual product, have little understanding of
 insurance or who provides their product, so there is a long way to go However, the
 motoconchiastas (motor cycle delivery people) know exactly who provides their insurance,
 and CoopSeguros has achieved salience in this group of more than 5,000. This is because
 CoopSeguros is the only company providing a product designed to meet their needs and
 within their ability to pay.

 b. Significance to the Community:

 When there are only 33,000 people, out of a population of 7 million, insured with the
 company, it is difficult to achieve community significance. Large scale promotional efforts
 are too expensive. But collaborating and supporting the efforts of some of their
 cooperative members, CoopSeguros participates in activities that support the community.
          • Sponsorship of designated parking spaces for Motoconchistas
          • Sponsorship of the children’s choir of Altagracia Credit Union
          • Sponsorship, with Cooperativa Telfonica, the distribution of school writing
              pads to children from low-income families.

     c. Importance in the Business Sector:

 To understand this development effort with AAC/MIS and LaEquidad under the Micro-
 Enterprise Best Practices Program, one needs to know LaEquidad first. Therefore, the
 outline for this case study is reversed, first to explain the operation of the participating
 company and then the development effort.




                                        14
                               PARTICIPATING COOPERATIVE 2

2. LA EQUIDAD SEGUROS COOPERATIVO IN COLOMBIA

  In a population of 40,000,000, today’s Colombian cooperative sector has 5,231 organizations, of which
  3,674 are cooperatives, 1,475 are employee Funds, and 172 are mutual associations. There are
  3,346,000 members and employees number 80,000. The share capital of all cooperatives totals
  US$1.552 million. La Equidad serves over 3,000,000 people with their insurance products. (See
  Annex 5 for Colombian ranking information.)

  The idea for the formation of the LaEquidad began in 1966 when it was proposed to create an
  insurance broker that would lead the formation of an insurance cooperative. The Cooperative League
  of the United States of America (CLUSA), with funding from AID, did a feasibility study and
  facilitated the writing of the first by-laws. The company was to fill a cooperative market niche, with
  operations based in mutual benefit and solidarity.

  In March, 1970, Seguros LaEquidad Sociedad Cooperativa was created as a cooperative partnership
  and granted legal cooperative status though neither the Superintendent of Banks nor the Superintendent
  of Cooperatives understood it. There were 41 founding cooperative members and $33,405 in capital.
  By 1975, there were 162 owner cooperatives with 65,700 people insured; that was about 27% of the
  members of the owner cooperatives. Today 1214 Colombian organizations, mostly cooperatives, two
  foreign cooperative insurance companies, and 133 cooperative workers make up the ownership of
  LaEquidad, insuring over3 million people, and with share capital of US$9.104 million. From the
  beginning, LaEquidad ownership included cooperatives from all sectors.

  Back in 1970, when it came to appointing a manager, there were two options: choose someone who
  would know about insurance, or someone from the cooperative sector, as there was nobody who knew
  about both. It was determined that cooperatives were easier to learn about than insurance so the Board
  selected a person who had been working for Insurance Central and had a strong sense of social
  responsibility.

  In 1995 the company divided into two entities. It created Seguros de Vida La Equidad Organismo
  Cooperativa to work the traditional insurance of life and health as well as other such as pension
  systems, health and professional risks and LaEquidad Seguros Generales Organismo Cooperativas to
  handle casualty insurance.

  Of special note is the increase of foreign companies operating in the insurance market: in 1990, when
  a new constitution for Colombia opened the insurance market, 12% of the companies were foreign; in
  2002, 38% of the companies are foreign. This entry has led to many price wars in which LaEquidad
  has refused to participate. LaEquidad counters that the financial solvency of the insurer and the quality
  of the service should constitute a bigger guarantee to the users of the protection services than a low
  price. Some cooperatives leave the company to buy their insurance cheaper and sometimes they
  return, but most have remained loyal largely because of educational efforts made through
  Fundequidad.

  A. Cooperative Organization and Governance

  1a. Vision: La Equidad aims to be recognized as the best association business and insurance model
      providing service to the largest number of Colombians.

  b.   Mission: We are a cooperative insurance company with a clear focus on service that satisfies the
       needs of protection of people, organizations, and the general social sector of the economy. We
       promote integration and economic strengthening, the dignity of work with our collaborators, the


                                                  15
     participation in ownership, the preservation of the environment and the presence en the cultural
     and civic life of the community.

c. Business Values: We believe in solidarity, democracy, equity, and good will, as pillars of a just
   and balanced society. We act with honesty, justice and responsibility in relations with our owners,
   our clients, and our collaborators.

d. Status: The company is a registered cooperative operating under Law 79 , the Cooperative Law of
   Colombia, as well as under the supervision of the Superintendent of Banks.

2. Leadership and Decision Making: There are nine members on the Board of Directors and four
Board of Oversight. In the event a member can not participate, each position has an elected stand-in.

3.   .Membership and Member Participation: There are 1242 owner organizations, plus 133 workers
     Approximately 3 million people are insured by LaEquidad. Members participate through 835
     member representatives to district meetings.

B. Business Operations: Until recently, the company has marketed solely through its associated
   cooperatives to their members. There were agencies set up in the larger cooperatives. The
   organizations received commissions for the products they sold. This has been the primary product
   distribution channel.

     La Equidad distributes surplus to its members based on use of the insurance services, not on the
     basis of their capital investment.

     The Cooperative Law requires that 20% of any surplus be dedicated to education.

1.   Management: Most unique to LaEquidad, they have had only two managers in their 33 years.
     This is viewed as critical to their success for both individuals brought a strong commitment to the
     social responsibility and a well-run business.

     Now LaEquidad is entering the development business again. With all the AAC/MIS discussion
     about access to insurance products, LaEquidad examined its environment and found over 100
     communities around Bogota where there is no insurance provider. They undertook a major
     promotional campaign so that they would be known and trusted by the communities. They held
     discussions with the community representatives and employed a very reputable Colombian firm to
     do a market study. The product designed reflects the needs of the people in these communities and
     is very cutting edge: it provides for the option of a 50% payout if an incurable disease is
     contracted so that the insured can use the funds to seek medical treatment, pay bills, etc.
     Otherwise, the funds are payable on death to a designated beneficiary. The cost is $xxxx per
     month. Further, to reach these individuals, the company is using its own agents for the first time.
     It made a small effort with direct selling to reach individual micro-enterprises that was not too
     successful. But from that they learned about the selection of agents and the training required.
     They began selling this product on August 1, 2003.

     It is this effort to reach Colombians without access to insurance that led to the change in the by-
     laws that will allow individuals to become owners of the company just like cooperatives, worker,
     and other affinity groups.. The change allows for individuals to serve on the board and to receive
     patronage refunds based on their management of their insurance policies. AAC/MIS will move to
     include Colombia in our development program, as this is exactly the kind of responsible social
     action, coupled with good business opportunities, the Association wants to see from its members.

a    Policies and Procedures: Policies and procedures are in place and developed by an Executive
     team with suggestions solicited every three months from all staff. The President of the Company
     meets quarterly with every department to update staff on the company as well as acknowledge the
     suggestions made and the executive response.


                                                 16
 d.      Personnel: La Equidad has 194 employees throughout the country.

     2. Business Activities: The business activity is selling insurance to the solidarity sector and to the
        general public. There are two companies, one to handle life products and the other to handle
        casualty products.

     a. Planning and Performance

     b   Transparency/Accountability: Required by law for insurance companies with reports to the
         Superintendent of Banks, outside auditors, and reinsurers.

 3.      Financial Analysis: Included in the annex are annual reports from 2000, 2001, and 2002, plus the
         report to the General Assembly on the economic results and social activities.

         Here it is interesting to note that the Vice President of Administration and Finances has developed
         an indicator that shows company performance. It is not yet adopted by the industry or the
         Superintendent, but it is an indicator that rolls all aspects of operation into one; it is called the
         technical performance of the insurance company. The Vice President says, “It is not the same as
         with any firm; it is not only to look at a series of income and disbursements. Most important of all
         is the combined index, the relation between the issued premiums and the aggregated cost of paid
         expenses and losses. In this indicator everything converges: the risk selection, policies, rates; in
         summary, the technical performance of an insurance firm. The sector has not published this
         index; it is not reported, but it is something in which LaEquidad is much farther ahead than the
         industry.”

 4.      Salience: LaEquidad was chosen as this case study not primarily because of its attempts to offer
         insurance to small and micro-entrpreneus, but marily because of its efforts to achieve salience. An
         AAC/MIS evaluation in 1998, concluded that while LaEquidad was a well-run company, those it
         insured weren’t very aware of the company. Because products were delivered almost exclusively
         through the cooperatives, insurance was viewed as work of the cooperatives. As part of the effort
         to increase awareness of the company, a mascot, Equi, was created, and Equi is now part of all
         branding and promotional efforts.

         LaEquidad also formed Fundequidad, the LaEquidad Foundation for the Development of
         Solidarity. It is through Fundequidad that the social and community responsibilities of LaEquidad
         are carried out. The 2002 budget for Fundequidad was 1,000,000 Colombian pesos, or $388,050
         at the average exchange rate of 2577 pesos to the US dollar.

a.       Value/Importance to Members and Workers: Fundequidad, formed in 1990, carries the
         responsibility of education of associates (owners) as required under the Cooperative Law which
         authorizes the organization to stimulate and spread all types of artistic, cultural, scientific,
         technical, educational or social activities that promote the development of solidarity, with
         emphasis on the Economic Solidarity Sector.

          Its mission is to design and develop programs of education that satisfy the needs of the
         cooperative associates of LaEquidad and contribute to the strengthening of the future directors of
         these organizations.

         The Foundation, whose motto is United for the Wellbeing of ALL, has four work areas.
         Cooperative leaders’ training, cooperative education, publications and social contributions.

         1. Cooperative leaders’ training is considered most important. The objective is to guarantee the
         cooperatives’ future, to assure that in the future the cooperatives are well administered by people
         with high professional skills and social values. The program includes participation in youth
         workshops and a speakers’ competition for children between 8 and 15 years of age. The only


                                                      17
     requirement to participate is that one of the parents must be working in a cooperative, a
     cooperative member, or that the participant attends a cooperative school. In 2002, the workshops
     were titled “With an efficient leadership and solidarity, we are constructing our dream of Nation”.
     This program covered 424 youth in 7 cities, and 241 participated in the speakers’ content.

     Outstanding, active participation in the workshops and speakers’ competitions and demonstrating
     good grades at school are required to be accepted for the National Youth Exchange, a program
     begun in 1997. In 2002, 40 children participated in this program.

     After having taken part in this national experience, the most outstanding participants have the
     opportunity to travel to Chile or Costa Rica. There they can obtain an international view about
     cooperatives and the experiences of representing not only one organization, but all of the
     cooperative moment in a country. All of this is important to building their knowledge base and
     forming their personal integrity. That is what Fundequidad wants for them in this global world
     where international personal relationship are very important for successful organizations,
     independent of the size or location of the organizations. In 2002, 12 Colombians visited Costa
     Rica and 8 visited Chile.

     The children who continue to show their leadership capacity and social responsibility have the
     opportunity to participate in another international exchange through an agreement between
     Canadian Cooperative Association and CCA. This is an exchange program between Canada and
     Colombia for students 21 to 25 years old who are close to finishing their university careers.
     Depending on their chosen field, participants can begin a work experience in a cooperative and, at
     the same time, improve their Spanish or English.

     All the young people who participate in these activities are maintained in Fundequidad’s data base
     with the objective to find them work in cooperatives and thus complying with Funequidad’s
     objective of training young people to manage cooperatives in the future.

     2. Cooperative Education is especially for the board members of the organizations associated with
     LaEquidad insurance Company. These focus primarily on improving the performance of board
     members. In 2002, 472 board members participated in seminars on Responsibility of the
     Administrators and Directors in Businesses of the Solidarity Economy and 352 in seminars
     focused on the Cooperative Promise and the Administration of Insurable Risks.

     Fundequidad organizes a Forum every year around topics of interest to cooperatives that feature
     international cooperative experts.

     3. Publications: Fundequidad also publishes cooperative documents, including proceedings of
     forums and important events of the International Cooperative Alliance. Recent books include
     Capitalism and Solidarity, The Strength in the Fragility, Identity and Coherence of the
     Cooperative Business, and 15 Affirmations about Cooperatives. Fundequidad also publishes
     an institutional journal and produces videos on cooperative principles and values.

     Fundequidad also offers an award for women in cooperatives to promote female leadership among
     members, directors or cooperative workers.

     4. LaEquidad and six other cooperative business recently formed a mutual fund for their workers.
     6644 workers, including 125 from LaEquidad, have invested their savings in this fund.

b.   Significance to the Community: With the reform of the Social Security System in Colombia in
     1994. La Equidad’s President of the Board noted: “We saw the opportunity of being actors in a
     significant social process. We had asked the associates what they wanted, and they had answered
     that health was most necessary. We would have preferred one health project for the cooperative
     sector, but others decided to do their own thing. The feasibility study of SaludCoop determined an
     initial investment of $5,000 million pesos was needed. To go forward was a courageous decision


                                                18
     on our part as we were creating a firm with $2,534 million pesos only, out of which $440 million
     pesos belonged to LaEquidad. The General Manager of SaludCoop, who worked for previously
     worked for LaEquidad, observed, “The philosophy of reaching popular sectors was clear. Salud
     Coop is the daughter of LaEquidad in all senses.

     Today SaludCoop provides health insurance and health services (much like the model of GHC in
     Wisconsin though SaludCoop has their own medical facilities) to over 4 million Colombians. In
     addition, it has subsidiaries that make uniforms and provide food services to all SaludCoop
     facilities as well as the general public.

     SaludCoop, in partnership with CoopSeguros of Ecuador, recently began a small-scale replication
     of SaludCoop Colombia. SaludCoop is exploring replication possibilities in Mexico, Venezuela,
     and El Salvador.

     Funequidad has created a speial award to motivate the directors, workers and members of
     cooperatives to do something to contribut to a sustaining the environment. Through Fundequidad,
     LaEquidad gives resources to cooperatives who are working in specific projects having clear
     community benefits. Fundequidad and LaEquidad give a lot of importance to cooperatives
     interested in community problems and, of course, the environment is one of those areas. They are
     trying to create a civic conscience about how to care for and protect natural resources.

     The last prize was awarded to a small credit union that invests part of its surplus to transform a
     town garbage dump into the best place in town to drink a delicious cup of Colombian coffee and
     enjoy the spectacular landscape.

     Fundequidad also sponsors community concerts for cooperative members. In 2002, concerts in
     Bogota, Cali, and Villavicencio drew over 2800 people. More important perhaps is LaEquidad’s
     sport club with football programs for young people of all ages that is part of the Football League
     of Bogota. The team, based in cooperative values and principles, has recently risen to professional
     ranks.


     All activities are LaEquidad endorsed and Fundequidad administered. Their general purpose is to
     strengthen the relationship of LaEquidad with the comjnity and to create an ownership sense. At
     the same time these activities give a way for LaEquidad to express a solidarity with the
     community.

e.   Importance in the Business Sector::

     Out of 30 companies operating in the Colombian insurance sector, La Equidad is number one in
     the number of insureds under Group Life Policies, number 6 in total costs/premiums; number 14
     in technical results; number 12 in capital, and number 18 in premiums.

     As evidence of the principle of cooperation among cooperatives, LaEuidad has working
     agreements with the cooperatives, investment in SaludCoop, an investment in CoopSeguros in
     Ecuador, and a small investment in Seguros Futuro in El Salvador.


IMPLEMENTATION PROCESS: AAC/MIS-LA EQUIDAD PROJECT IMPLEMENTATION

A. Project Description: Develop an insurance product that would meet the needs of micro and small
   enterprises in Colombia.




                                                 19
1.   Background and Overview:

a    Project setting and target groups: Colombia has over 100,000 small and micro-enterprises that are
     defined as organizations with less than 10 employees and less than $20,000 in assets. The
     Colombian market had no products designed especially to meet the needs of these groups.
     Interviews with a sampling indicated that they saw insurance as a way to gain peace of mind, e.g.
     a leather-worker never left his house alone because he was afraid he would be robbed; a cabinet
     maker lived in his shop because he was so afraid of fire. These businesses are so fragile that the
     risk of loss is very high; and

b.   Intended Beneficiaries: Small and micro-entrpreneurs and their families.

2.   Project Objectives and Strategy: Design an insurance product to meet the expressed risks of small
     and micro-enterprises.

a.   Objectives To develop a product appropriate product for micro and small enterprises that
     affordable.

b.   Strategy: The strategy was to find out the needs of the target group through a market study and
     then proceed to design and market the product.

f.   Project Components: Market study, design of product, distribution

g.   Conditions Expected at EOP: Small and micro enterprises have access to product; enough sales
     to justify continuation with market development for LaEquidad..

B. Project Implementation:

1.   Project Management and Organization: La Equidad Management team had responsibility for the
     project; it was managed under Fundequidad.

a.   Staffing: AAC/MIS consultants helped to put the development perspective into the insurance
     framework.

b.   Organization/Activities Plan: A marketing firm was hired to do the market study to ensure
     neutrality in the results. They interviewed 700 small and micro enterprises in three sectors,
     manufacturing, commercial and services. The product was designed by LaEquidad and presented
     to market study groups. The most outstanding response from the participants was that the product
     was much cheaper than they ever thought it could be. The market study was a first for LaEquidad.

     The plan was to distribute the product through micro-lending groups. That failed. In the end,
     while the micro-lenders contacted thought the product was necessary, they believed it was too
     expensive for their clients. All micro-lenders, including some cooperatives, ultimately refused to
     be used as a distribution channel. (It should be noted that this happened about the time of the
     failure of Banco Sol, who had been the most interested in the development of the product.) ds.

2.   Project Reporting/Monitoring: A final report on the activity was prepared for MicroEnterprises
     Best Practices.

a.   Baseline Data and Performance Monitoring: In the beginning, there were zero micro-enterprises
     served; in the end there were about 25 policies sold.

b.   Levels of Output : Design of the product and many lessons learned.

c.   Implementation Problem/Issues:




                                                20
It is hard to compensate for a loss of distribution channels of this size. LaEquidad could probably
have used its cooperative distribution channels, but they did not understand the extent to which the
members of those cooperatives are small and micro entrepreneurs.

When this channel did not develop, LaEquidad tried an alternative approach. They hired women
agents to sell the products, because large numbers of small and micro businesses are run by
women. In the end it failed. LaEquidad had never had agents before, so this product was
probably not the place to start. The time required to sell and service each product was enormous.
The product, that had a bit of life insurance, a bit of fire and theft, a bit of funeral was probably too
complex, even though it covered risks identified by the target group.

In hindsight, LaEquidad should have explored more its own distribution channels. Also, the
micro-lenders could have been more involved in project design. But the reason they chose not to
distribute the product…………..it was too expensive for their clients…………….is interesting to
explore. When the micro-lenders were in formation to reach the same target groups, the reasons
used for opposing them was that they would be too expensive for the micro and small enterprises.
Yet, this is the same argument they used against insurance. With some of the micro-lenders
charging interest and service rates of 62%, perhaps the argument is valid, but the clients never had
a chance to determine if the cost was worth the access. (Footnote: Micro-lenders in many
countries are now pursuing insurance. While health insurance seems to have the most interest,
many are looking at ways to insure their portfolios against loss through death of a client….exactly
what many AAC/MIS companies have been doing, some for as long as 40 years.

C. Impact of the Project:

1. Impact on the target population: Zero

2. Potential for Institutionalization: Probably great with modifications to the product design and
developed distribution channels.



                               PART III: LESSONS LEARNED

A. Lessons Learned During Project Implementation:

    1.   Every implementation reaffirms the AAC/MIS vision that every person needs access to
         insurance for protection of life and property. The lesser the resources a person has, the
         more important this is.

         It will be the rare insurance company that is interested in this market; much the same as
         micro-enterprise lenders and credit unions have demonstrated that banks aren’t generally
         interested in this segment. So if not the cooperative companies, who?

         Having said that access is necessary for all, the company that provides the access must be
         a good business; otherwise, the clients are at greater risk. The study reaffirms the
         importance of good business management to ensure sustainability of the company. It
         reaffirms the need for excellent customer service as a distinguishing characteristic of the
         company. A member can be abused by a cooperative as easily as any other type of
         business organization!, but the cooperative may be the best option there is to ensure
         development objectives in the target population.

    2.   The most important lesson learned in this exercise is: if the company isn’t obvious in its
         commitment to cooperative principles and doesn’t demonstrate a strong value system that
         makes a commitment to delivering the best products at the best prices to all its clients, it
         is not an organization that will be a worthy development partner. It is easy to talk the


                                              21
     talk; it is difficult to walk the walk. Without strong values, there are too many places for
     detours and shortcuts, including personal gain, board privileges, and no cost controls,
     among them.

     LaEquidad lives its values and commitment to cooperative principles; CoopSeguros is
     getting there. Both are exciting; values and commitment can be “felt” when one visits the
     company, when one talks to board members and staff, and clients, especially those who
     have had a loss. Values are not easily quantified, but if they aren’t lived, the company
     drifts, doing whatever is expedient at the moment. Focus on the financial aspects of the
     company is absolutely essential and critical, but we should never lose sight of the values.

     This lesson really doesn’t come from any analysis per se. Values are there, or they
     aren’t. They are lived or they aren’t. In a development environment where the objective
     is to provide access to appropriate insurance products, and a company is primarily
     interested in returns to its owners and/or passing on to clients the maximum premium,
     there is not much of a development match.

     AAC/MIS must use this lesson in the selection of its development partners. Just because
     a company is cooperative-owned, in a developing country, and an AAC/MIS member
     doesn’t mean that it is a good development partner for AAC/MIS programs. In some
     cases, other groups might be more appropriate; in some cases starting new groups could
     yield better development results.

3.   The second most important lesson is that there is a tremendous need for insurance
     education in these countries. An insurance culture does not exist, so development work,
     of necessity, begins at very basic levels. Even people who might have access to simple,
     affordable life product do not understand the importance to their families. Insurance can
     be difficult because generally one pays for something they hope not to use.

     This makes business development much more difficult and costly for the companies, and
     yet is absolutely critical in order to development relevant protection for an expanded
     client base.

     AAC/MIS will use this information to design a mass education program that can be
     distributed primarily by radio. It is not designed to sell product, just to educate.

     Then there are business lessons that have been learned by the companies:

     •   Branding is very important. It is important in business development and particularly
         in developing salience. If the members and communities don’t know who is
         sponsoring various social activities, its significance is lost.

     •   Management continuity is essential for business and values development.

     •   It is important that the manager has knowledge of insurance.

     •   Insurance, like most business, is complicated. A company probably can not be
         successful when neither the board members nor management have limited insurance
         experience. An outside director can help solve this problem, but the characteristics
         of the outside director are very important. A person who comes from a cooperative
         insurance background and shares values with the company is the right person. At
         minimum, the person must share common values.

     •   Important that the company be operated on its own not as arm of the owner
         cooperatives and for their benefit.



                                        22
         •    Companies need to understand that client needs must be the basis of their product
              development. Too often they simply use a product developed by somebody else.
              Because they do not have their own identity they have little marketing experience;
              they have no distribution channels outside of their ownership, and some of the
              ownership buys products from other companies. There are strong operational and
              growth messages here that companies need to address in their planning and
              consideration of options.

B. Lessons Learned in Addressing Problems/Issues:

When this exercise began, the similarities between the two companies were not that obvious. All
that was obvious was that they were both owned by different kinds of cooperatives from their
beginnings. Perhaps they were not the best two for a case study. Many of the lessons learned
come from seeing in depth what is happening in both companies, and comparing that to things that
are not happening in other companies. These two companies illustrate the importance of certain
decisions to ensure company viability, and one knows that those same things do not happen in
other companies that are lagging. This is learning by benchmarking. Only the evaluator is the
benefactor. Now the challenge to AAC/MIS is to get other developing companies to benchmark
with these two, perhaps using the same outline and financial analysis.

Companies must find way to make insurance coverage win/win for the group and for the
company.

Innovation need not be difficult; companies must not be restricted to what the competition is
doing.

Having different kinds of cooperatives involved broadens the company perspective and provides
diverse marketing channels. Since cooperation among cooperatives eludes most organizations,
diverse ownership also ensures that there are broader needs to meet.

Consultant interventions need to meet a specific request of a company and be carefully managed,
but appropriately timed interventions with quality consultants may be preferable to long-term
presence. This is something that AAC/MIS needs to weigh very carefully in its program
implementation approach. The challenge is that the consultants do not necessarily come with
values of AAC/MIS or values matching those of the organizations.

C. Participant Perspectives on the Value of Project Assistance

La Equidad, itself, has not received AID project assistance since 1970. Its attempts to develop a
product to insure micro and small enterprises were not successful, but there were lessons learned.
It is again involved in development activities; good business opportunities that fit within its social
mission.

The Manager of LaEquidad serves on the board of AAC/MIS and the thrust of the development
program to reach people who do not have access to insurance, coupled with continued need to
grow his company, have influenced his willingness to embrace these efforts.

La Equidad has now developed a product based on market studies with communities and intended
beneficiaries to serve 100,000 famlies in 50 cities around Bogota where insurance products are not
currently available. LaEquidad has done everything they can to ensure that this is a successful
business venture that responds to the needs of the people, but the upfront investment is large.
Therefore, AAC/MIS, in keeping with the organization’s vision and mission will look for funding
sources to help LaEquidad carry out this activity.

CoopSeguros lists AAC/MIS support in many forms as the reason the company still operates and
is growing rapidly: Seguros Multiples is the source of its outside director; Seguros Multiples of


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        Puerto Rico includes directors and staff in important insurance training events; AAC/MIS
        companies made a small investment to keep the company operational, as well as covers the cost of
        the outside director’s participation on the CoopSeguros board; the board and staff participate in the
        seminars on organizational development and culture with behavioral and attitudinal changes
        already in evidence; and CoopSeguros receives technical assistance, marketing and limited
        financial assistance from AAC/MIS in partnership with SOCODEVI.


                                  PART IV: FINANCIAL ANALYSIS

In the following pages are the requested financial analysis of both CoopSeguros and LaEquidad. There are
also annual reports for the last two years for each company. Though these are in Spanish, the similarity in
insurance terms should facilitate understanding.; however, if translation is desired, AAC/MIS will provide
it.

AAC/MIS has not analyzed with the companies how useful the various ratios are or how accurate the target
projections. The previous Vice President of the AAC/MIS with responsibilities for the implementation of
the CDP program asked companies to report on only 3 indicators: number of employees, Annual Premium
Collection and Capital. To these has been added the company ranking information provided by the
Superintendents of Insurance.




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