MR Microinsurance_2012_03_29.indd - International Labour ...

Microinsurance intermediaries
development of microinsurance in some markets. In specific cases, insurers or
delivery channels can drive innovation independently and develop effective
working models, though in most cases, they do not have sufficient motivation to
push the boundaries of microinsurance products, services and processes. This is
not surprising considering that the focus and origin of such organizations is in
other areas, such as traditional insurance, microcredit and retail.
It may be too much to expect any more from insurers and delivery channels.
Given this reality, intermediaries may be needed as market makers to develop,
promote and innovate so that microinsurance can realize its full potential. However,
a different approach to insurance intermediation is required. Given the
unique hands-on requirements of serving the low-income market and of fostering
a paradigm shift in the insurance industry, microinsurance intermediaries
may require full vertical solutions to market creation from product development,
grassroots distribution and claims administration to portfolio micro-reinsurance
placement. Many of the intermediaries profiled in this chapter appear well
poised to integrate and implement such solutions.
The challenges of microinsurance are exemplified by the conflicting needs of
value chain participants: insurers, intermediaries and delivery channels need to cover
their costs and earn a fair margin, while simultaneously offering consumers a lowpremium,
high-value product. The microinsurance-focused intermediaries have all
experienced financial difficulties and less business volume than originally anticipated,
and have had to make substantial adjustments to their strategies to find a way
to break even. Developing sustainable microinsurance businesses takes time. However,
the business case for microinsurance intermediaries is not yet proven.
The commercial intermediaries profiled with mixed product offerings are
possibly better positioned for profitability because of the economies generated by
offering business across the insurance market continuum.
Despite the uncertain business case, it is clear that there is a potentially
important role for intermediaries. If managed effectively and efficiently, the role
of the intermediary could be a significant driving force for up-scaling microinsurance.
We need to watch the efforts going on now to transform these entities as
they work to find the right fit for the microinsurance market-maker role with a
structure that can be profitable. It is quite possible that the emerging solution
will lie with insurers establishing somewhat independent microinsurance departments.
The initial operating results and teething troubles could be “ring-fenced”
from the insurer’s mainstream operations. The insurer’s shareholders and Board
would need to extend to this department the vision and patience that the microinsurance
market now so evidently requires for long-term success.
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