MR Microinsurance_2012_03_29.indd - International Labour ...

Current trends in microinsurance
the range of risks to which the poor are exposed, while improving design so that
products are more relevant for the target market.
1.4.1 Th e evolution of product types
As illustrated in Figure 1.5, microinsurance started with basic products, particularly
credit life, which helped to demonstrate the viability of microinsurance.
Besides being simple to off er and manage, credit life provided risk carriers with
the opportunity to develop a quantitative understanding of the market. Th is was
a huge step in product evolution because – from an insurer’s perspective – one of
the biggest problems was the lack of data, which inhibited them from serving an
unfamiliar market.
When products were off ered, the lack of data often resulted in relatively high
premiums, since additional loadings were added to compensate for the uncertainty
(see Chapter 21) and the unnecessarily high premiums further hindered
demand. Th rough this initial experience, the ability of insurers to gather data on
risk and the potential for profi tability built a foundation for the development of
more complex products. With a growing understanding of client demand, some
delivery channels also pushed insurers for better products. Each time insurers
ventured into new products for this market, more was learned and this facilitated
the evolutionary advancement to the next level.
Figure 1.5 Evolution of microinsurance products and processes
Phase I:
• Mandatory;
credit-linked (MFIs)
• Simple products:
life, funeral
• Easier to administer
Phase II:
• Greater product
sophistication; voluntary
• New distribution
channels
• Increasing benefi ts,
choice, outreach
• Use of technology
Source: ILO’s Microinsurance Innovation Facility, 2011.
Phase III:
• Increasing innovation
• More complex
products and choice:
health, agriculture
• Multiple partners
(e.g. hospitals; mobile
phone provider, publicprivate
partnerships)
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