MR Microinsurance_2012_03_29.indd - International Labour ...

516 Delivery channels and intermediaries
– one has abandoned its external agent model, merging these operations into the
insurance company and discontinuing its support from international headquarters;
– another has had to make substantial changes to its business model twice in three
years; and
– the third does not see profitability other than through cross-subsidies from its
micro-reinsurance broking results.
For the two companies with significant donor support, impatience and initial
overselling of business prospects or unrealistic expectations may have contributed
to these sobering results and triggered partial mission drift in the quest for
quicker financial returns. It is clear that achieving profitability in microinsurance
takes time, but for intermediaries it is far from clear yet how much time, or in
what institutional configuration.
The three organizations also followed different geographic and product line
strategies in the start-up phase, ranging from concentrating on one or two countries
with a fairly complex product (FMiA) to working in over six countries with a
mix of easy, off-the-shelf credit life policies and other more demanding products
(MicroEnsure), and working in more than ten countries offering primarily credit
life with the intention of adding more valuable products in the future (PlaNet
Guarantee). In terms of the number of clients covered, MicroEnsure appears to
have produced the best results. At the same time, it also has the generous donor
support as well as institutional links to the largest microfinance network among
the three. However, none of these organizations has produced convincing results
enabling a business case to be made for microinsurance intermediation.
These organizations have not yet shown that microinsurance intermediation
pays enough to sustain a specialized company. It remains uncertain whether
there is enough money in microinsurance administration for them to earn a
commercial living while still providing a low-cost, high-quality service. The history
of microinsurance intermediation is still young, so it is premature to draw
firm conclusions. Over time, these institutions should help us to better understand
what is needed to build a profitable business from microinsurance brokering.
23.3 Traditional intermediaries with some microinsurance activities
Commercial brokers typically run lean operations and do not have the capacity
to do the work necessary to make microinsurance profitable, especially given the
additional market-making requirements, but perhaps the tide is beginning to
turn. As described below, a few conventional insurance and reinsurance brokers
have tested the microinsurance waters and begun to make a name for themselves.