MR Microinsurance_2012_03_29.indd - International Labour ...

19 Teaching elephants to dance: The experience
of commercial insurers in low-income markets
Janice Angove, Martin Herrndorf and Brandon Mathews
The authors would like to thank Felipe Botero (MetLife), Doubell Chamberlain (Cenfri), Iddo Dror
(Micro Insurance Academy), K Gopinath (IFFCO-Tokio), Thomas Mahl (Munich Re), Marc Nabeth (CGSI)
and Dirk Reinhard (Munich Re Foundation) for their insights and suggestions. The authors are also indebted
to numerous anonymous insurance managers who were interviewed about their experiences as background
research for this paper.
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In the second half of the 20th century, many commercial insurers in developed
markets shifted their focus from the middle class to wealthier clients. 1 More
recently in emerging markets however, the pendulum may have been swinging
back the other way as some insurers become optimistic about and committed
to serving the low-income market with what is broadly called “microinsurance”.
Yet these companies – the elephants in the chapter’s title – must generally
work to develop the products, processes and instincts to serve smallholders,
domestic workers, artisans, market vendors and the like, as few insurers are
familiar with the needs and characteristics of this market. Based on the pioneering
experiences of early entrants, this chapter provides some insight into
getting started.
The formal insurance industry has vast capital resources – money, people,
access and experience. The deployment of its resources to benefit low-income
households promises to make a great contribution to poverty reduction. Dercon
et al. (2008) point out that uninsured risk is a cause of poverty. It is difficult to
imagine a more suitable opportunity for insurers to contribute to the betterment
of society. Applying core competencies and motivated by medium- and longterm
profitable growth, insurers can address some of the vulnerabilities that
perpetuate poverty and inhibit economic development. To get there, however,
insurers need a degree of change or innovation.
Whether “low-income” means poor, working poor, or emerging middle class
can be debated. The overarching practical challenge for a commercial insurer in
this unfamiliar market is getting the cost-benefit balance right. Costs include
everything required to drive change – from management time and investments
to project management and reputation risk. Benefits are most easily summed up
as profit, but also include additional value from increased competitiveness
through useful innovations and improved reputation.
1 Wall Street Journal, 3 October 2010: “Shift to wealthier clientele puts life insurers in a bind.”