MR Microinsurance_2012_03_29.indd - International Labour ...

Current trends in microinsurance
and to being misled by disreputable fi rms. Th ese observations highlight the
importance for insurers going down-market of carefully considering whether
they are providing client value value (Chapter 15), for policymakers and insurance asso-
ciations of promoting eff ective consumer protection (Chapter 26), and for regula-
tors of cracking down on illegal insurers that could undermine the fl fl edgling
insurance culture in low-income markets (Chapter 25).
Insurers need to be aware of the BoP criticisms, and respond accordingly. Few
insurers would claim that they had any intention of reaching the very bottom of
the pyramid, but were more interested in expanding the insurance market by
including under-served segments. In addition, the provision of insurance should
not replace local risk-management strategies, but rather enhance their eff ectiveness.
In fact, insurance is fundamentally diff erent from shampoo or salt, the con-
sumer goods often highlighted in BoP business models, because it provides an
essential risk-management service that really can enable low-income families to
stave off destitution.
Th e emerging focus on the profi tability of microinsurance, analysed in
Chapter 18, has spawned eff orts to reduce operational costs and have eff ective
processes to serve masses of clients. To support scale, insurers recognize the need
to effi ciently process huge volumes of data, while securely linking into delivery
channels’ systems to facilitate data transfer. At the same time, front-offi ce
technology, from handheld and point-of-sale devices to mobile phones, are
beginning to improve sales, premium collection and even claims settlement. Th e
role of technology in microinsurance is explored in Chapter 24.
Some reinsurers have been interested in fi nding a role in microinsurance for
years. With supply dominated by simple life covers, most commercial schemes
had little need for reinsurance. However, as client demand has been better
understood, and insurers have been interested in addressing those needs,
reinsurers have become more important to the equation. Insurers in many cases
have needed not only the reinsurers’ fi nancial safety net, but also their expertise
in navigating the risks of more complex products. As noted by a senior person
at Swiss Re, “Insurance is a cornerstone of economic growth and stability,
and [we] … are proud to contribute our expertise so that even the poorest
farmers and their families can cope when crops are ruined by drought, fl ood or
other climate-related impacts” (Swiss Re, 2011). Reinsurers have contributed to
developing more complex products, such as health and index-based insurance,
and enabling disaster covers to be written. Indeed, with index insurance, most
if not all of the risk is ceded to the reinsurer (see Chapters 4 and 11, and section
20.2).
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