MR Microinsurance_2012_03_29.indd - International Labour ...

102 Emerging issues
4.3.3 Claims management
It is virtually impossible to convey the principle of insurance if no losses occur
for years on end. It therefore makes sense to design the product so that claims are
settled from time to time. Allowing for a higher frequency of losses has an immediate
impact on pricing, but is important for acceptance of the insurance concept,
particularly during the launch phase. Consequently, it is useful to consider
different sets of triggers and defined payouts for large disasters, as well as smaller
payouts for more occasional events. If it can be managed cost-effectively, frequent
small payouts will build trust in the insurance scheme and increase the
demand for cover for extreme events.
In the case of natural disasters, claims settlement is particularly complex. On
the one hand, numerous claims have to be processed and settled, while on the
other, those affected are often in shock as, besides material assets, items of sentimental
value can be lost or damaged. In the case of personal injury, the emotional
stress is particularly high. A lack of understanding and a clumsy approach
can easily lead to frustration on both sides. However, index-based products that
do not need extensive loss adjustment may be a cost-effective solution to speed
up the claims settlement process. Claims processing can be further expedited if
the scheme uses automated weather stations that regularly transmit precipitation
and other weather data directly to the insurer (see section 24.4).
Effective claims management requires considerable preparation before the
insured event occurs. Through scenario planning, attention must be given to the
loss potential – the probable amount of loss and possible number of policyholders
affected – and operational systems need to be established to respond.
Funds for a speedy settlement must be kept in reserve or easily accessible. The
key to a cover’s future success lies in simple claims documentation requirements,
easy administrative processing, clear decision-making channels and timing.
Poorly managed claims handling will discredit microinsurance for years and
undermine insurers’ credibility.
4.3.4 Education and capacity building
Education and an understanding of insurance-based mechanisms require special
attention when dealing with the low-income market. Many publications deal
with the much-cited problem of insurance illiteracy (see Chapter 14), with solutions
emerging at different levels:
– Clients: providing effective client education, cultivating an insurance culture in
the low-income market, satisfying an unmet demand for new products
– Providers: building staff capacity, finding the right business models and delivery
channels