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414 Insurers and microinsurance
Organizational arrangements
To integrate old resources with new processes, insurers may use diff erent
approaches to supporting microinsurance: drawing on existing resources, outsourcing
functions, or establishing a separate business unit or joint venture with
dedicated microinsurance resources. Naturally, each approach has advantages
and disadvantages, as illustrated in Table 19.2, but for companies that are really
committed to serving the low-income market over the long term, the “ringfenced”
model appears particularly compelling.
Table 19.2 Various approaches to structuring the business
Coordinating:
Relatively low start-up
Drawing on existing busi- busi- busi- and overhead overhead costs for
ness resources, coordinated microinsurance
microinsurance
by a central micro insurance
team
Outsourcing: Acquiring
micro insurance resources
externally (actuaries, sys-
tems, etc.)
Pros Cons Example
– Constant tension
between traditional and
microinsurance business
– Access to resources is
highly contingent and
unpredictable
– Mutual and Federal and
Santam manage micro- micro- micro-
insurance under their
New Markets and Emerg- Emerg- Emerging
Markets business divi-
sions respectively
– Relatively low start-up – Limited learning oppor- oppor- oppor- – Allianz relies on its part- part- part-
costs
tunities for insurer ner PlaNet Guarantee to
– Higher fl exibility – Limited ability to capture manage microinsurance
to choose between diff er- long-term value
relationships with various
ent systems
– Reliance on outsourcing MFIs in African countries
– Ability to get “proven” partner for innovation (Gradl et al., 2010)
solution for systems, etc. projects
Separate business unit – Better accessibility of
– Higher start-up costs
or joint venture (ring- resources
– Need to utilize resources
fencing):
– Greater fl exibility to uti- uti- uti- built up fully, loss of
Building separate division/ lize ring-fenced resources short term fl exibility
joint venture with with the in an appropriate manner
resources needed for micro- – Build a microinsurance
insurance
culture that supports
innovative approaches
– Develop a sound under- under- under-
standing of the market
needs and preferences
– Address competition for
resources and attention
with other business areas
– Metropolitan Life set up
Cover2go as an innova- innova- innova-
tion hub outside the
headquarters with its own
IT system and a mandate
to innovate (Smith and
Smit, 2010c)
19.3 External outreach: Building market relations
While establishing a solid internal platform, the focus must also include the
external environment, particularly the client and the distribution channel.
While alternative distribution (see Chapter 22) and client value (see Chapter 15)
are covered in depth in other chapters, this section focuses on the special
challenges faced by commercial insurers to industrialize and manage partnerships.