MR Microinsurance_2012_03_29.indd - International Labour ...

480 Insurers and microinsurance
– Marketing and distribution expenses allocated per policy will be higher in the
start-up years because of the small number of policies sold. Education and awareness
costs may also be higher in the early years, as eff orts to educate the population
are the key to generating sales. Similar to the administration expenses, these
should be amortized over the expected life of the product line or, for example,
fi ve years.
– Credibility of data/experience collected: A small sample of claims and insureds
does not carry much credibility. Adjusting assumptions too soon or on the basis
of a small sample may lead to other errors. Assumptions on claims costs should
be reviewed only once suffi cient experience data has been gathered. Observed
experience may diff er from assumptions, but this should not necessarily lead to a
pricing or assumption adjustment because, for low-incidence events, a large
amount of data is required.
In addition to a quantitative experience analysis, feedback from key fi eld staff
on the product and the processes related to both its distribution and service
could lead to product and process refi nements that in turn change the premium.
Interviews with insureds and potential clients may also help verify the experience
and perception the target population has of the product.
21.7 Summary example
To illustrate the pricing cycle and the challenges of pricing with limited data, this
section provides two actual examples from the same country, described in Boxes
21.5 and 21.6.
Box 21.5 Pricing: Organization A
Organization A delivers rural support services throughout the country. In collab- collaboration
with an insurer and with minimal direct input from its its members, members, Organization
A developed and provided its members with a mandatory mandatory cover for a pre-
mium of US$1.18 plus a fee to cover administration administration expenses. Th e plan covers
individuals from from age age 18 to 65 with with a maximum hospitalization benefi t of of
US$294; maternity is excluded. excluded.