MR Microinsurance_2012_03_29.indd - International Labour ...

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18 Is microinsurance a profitable business
for insurance companies?
Janice Angove and Nashelo Tande
This chapter is adapted from Microinsurance Paper No. 11, published by the ILO’s Microinsurance Innovation
Facility. The authors express their gratitude to the insurers for their participation in the case studies. They would
like to sincerely thank Guillermo Lopez from Aseguradora Rural (Guatemala), Anne Wambui from CIC (Kenya),
Rakesh Jain from ICICI Lombard (India), Gema O Cheng from Malayan Insurance (Philippines) and Colette
Patience from Old Mutual (South Africa). They would like to acknowledge the valuable input from Yogesh
Gupta from Allianz (India) and his general insights on the profitability of microinsurance. They also extend
their thanks to Arman Oza and Maud Monget, who conducted the research for the case studies of ICICI Lombard
and Aseguradora Rural respectively. They also thank Alexander Thomson from Quindiem Consulting for
contributing the analytical framework and Doug Lacey for his valuable guidance and insights during the
project. The authors wish to convey special thanks to Richard Leftley (MicroEnsure), Brandon Mathews (Zurich),
Michael McCord (MicroInsurance Centre) and Kelly Rendek (actuarial consultant) for their valuable insights
and useful comments. We would like to thank Aparna Dalal for her work in editing this chapter.
The question “Under what circumstances can insurance companies generate
profits from microinsurance?” is important, because in many markets insurers
are showing an increasing interest in expanding into the low-income market. To
maintain the involvement of commercial players in this market, microinsurance
needs to contribute to the overall profitability of the insurer and generate value
for its shareholders. Profits over time must be sufficient to justify the investment
required to support the development of the business.
This paper presents a case study analysis of the profitability of microinsurance
provided by five insurers operating in different regions across the globe.
– Co-operative Insurance Company (CIC) in Kenya offers a compulsory
credit life product and Bima Ya Jamii, a bundled voluntary health and life cover.
– Old Mutual in South Africa offers a group funeral cover.
– ICICI Lombard in India offers Manipal Arogya Suraksha Yojana (MAS), a groupbased
health insurance product, as well as crop cover based on rainfall index.
– Aseguradora Rural (ASR) in Guatemala offers a death and disability cover as
well as a student cover, which provides a life policy with an additional health
cover.
– Malayan Insurance in the Philippines offers a life cover with additional benefits
such as fire assistance.
Although the experiences in these case studies are unique, the challenges and successes
of these microinsurance initiatives provide insights into possible approaches
to improving viability for other players in the market.
This chapter considers exclusively the commercial viability of microinsurance,
but there are other reasons for insurers to target the low-income market (see