MR Microinsurance_2012_03_29.indd - International Labour ...

384 Insurers and microinsurance
between 80 per cent and 100 per cent seem to indicate that most of the insurers
in this case study appear to have achieved this (as seen in Table 18.5).
– Old Mutual’s distribution model requires agents to sell business in and around
the community in which they live. This promotes a relationship of trust between
the agents and the policyholders. This was an important factor in its growth,
especially in the case of burial societies, which are community-centred. While
Old Mutual has been able to reach a large number of lives using this model, the
policy volumes do not support the costs of the salaried agents and there are other
players in the South African market that have reached higher policy volumes
using partnership distribution models, e.g. through church groups and retailers.
– All the insurers have been involved in building the capacity of partners. Insurers
helped partners set up infrastructure and systems to achieve efficiency in processes
and ease of flow of information between the insurer and the partner.
Affordability and competitiveness of premiums
Setting premiums at a level that is appropriate for this market is critical. It is
often difficult to balance provision of the benefits demanded by the market with
premium affordability and financial viability. The insurers in the case studies
handled the issue of affordable premiums in the following ways:
– For the life cover and weather products, the insurers deal with the issue of affordability
of premiums by offering products with limited benefits.
– Old Mutual and ASR introduced a range of benefit-level options to allow customers
to select an affordable price point, while the cover level is still of value.
For Old Mutual this was in response to a finding that a number of burial societies
were lapsing as they were forced to select options that were too expensive.
– Flexibility in premium payment options is important. ASR allows for monthly,
quarterly or annual payment of premiums. By contrast, CIC indicated that its
annual premium payment for the Bima ya Jamii product was too expensive for
many prospective clients.
– Competitiveness of premiums is an important issue in the group funeral insurance
market in South Africa. The premium amount is often a key consideration
in the selection of an insurer for the larger funeral parlours and burial societies.
To remain competitive, Old Mutual has had to maintain premiums at a lower
level than that which would support the high cost of distribution of the initiative
until business volumes reach a commercially viable level. This fiercely competitive
environment was not found in the other case studies, but may become an
issue as more players enter the various markets.
– The difficulty in reconciling provision of the benefits demanded by the market
with premium affordability and financial viability is illustrated by the experience
of CIC with the bundled health product. CIC expanded benefits on the bundled