MR Microinsurance_2012_03_29.indd - International Labour ...

Microinsurance intermediaries
23.1.3 Microinsurance intermediation
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Selling and managing microinsurance can require a significantly different
approach for intermediaries. In traditional markets, products are well defined,
clients understand insurance concepts, policy volumes are limited and operational
processes are well established. The peculiarities of microinsurance obscure
otherwise comfortable aspects of insurance product delivery behind a fog of
ambiguity.
To serve the low-income market, a new paradigm is needed because empirical
understanding of potential clients and their demands is limited. Addressing this
experience vacuum often requires extensive research, product development, market
education and delivery channel staff training to prepare for managing huge
volumes of transactions arising from new products with different and limited
controls. This all takes time, requires personnel and can be costly. Even if the
intermediary does this additional work, its fee or commission on a per-policy
basis is tiny. More work and less income per policy makes the business case questionable
and certainly requires a very skilled manager. Once these issues are considered,
it is not surprising that only a few traditional brokers have entered this
market.
Table 23.1 identifies some of the key differences between traditional and
microinsurance intermediation. Traditional intermediaries are fundamentally
matchmakers, matching demand with existing supply. Microinsurance intermediaries,
however, must often be market makers, identifying unmet needs,
developing products and overseeing their delivery through hands-on training of
delivery channel staff, and adapting or building systems to manage policy and
claims administration. The role of a market maker in microinsurance is much
more significant than that of simply a matchmaker.
To make a market, every component of a microinsurance value chain, including
identification of the target client base and delivery partner, product development,
client education and motivating insurers to engage in this new business
segment, has to be built. To do so effectively, market makers must have a deep
understanding of poor households and the related constraints and demands.
Hence, microinsurance intermediaries are commonly not mandated by a customer
collective, a delivery channel or by an insurer, but act on their own to build a
market and economic base to subsist upon.