MR Microinsurance_2012_03_29.indd - International Labour ...

34 Emerging issues
Even basic products, such as credit life (Chapter 9) and funeral insurance
(Chapter 10), have evolved to provide greater client value. Instead of just covering
the loan, or paying only for the funeral service, additional benefits are being
added to enable these products to help low-income families cope better with the
loss of a breadwinner. These products are also being used as entry points to cover
other persons and/or provide protection against additional risks.
More sophisticated life insurance that has a savings element may be well
suited to the poor because it builds up value over time, so that policyholders do
not feel that they have wasted their money if the insured event does not occur.
However, the previous generation of these products provided poor customer
value because of high commissions and frequent lapses (Roth et al., 2006). Consequently,
new variations are being developed, as described in Chapter 8, which
may provide a better value proposition to the market, while still being viable for
insurers.
An evolution is occurring with health covers in some countries (see Chapter
5), although not all schemes follow the same trajectory. Hospital cash products
are reasonably straightforward. Experience with these products can make it
possible to offer hospitalization covers on a reimbursement basis, which may
evolve into “cashless” benefits, as described in Chapter 6. Another dimension to
this evolution is how health insurance can support or complement social protection
benefits provided by the government (Chapter 2). Moving forward, the vanguard
are pushing the frontier to cover outpatient risks or integrating non-insurance
value-added benefits, such as health education, telemedicine services and
pharmaceutical discounts.
The trend towards more complex covers, including index insurance and disaster
cover (Chapters 4 and 11), and composite products that cover multiple risks, is
consistent with the risk management needs of poor households. This trend is not
necessarily consistent, however, with their ability to pay (see Chapter 7), or with
the basic tenet of microinsurance product design: keep it simple. Microinsurance
enablers and delivery channels have long advocated simple products that are easy
for policyholders to understand, where there is no ambiguity or misunderstanding
about what is and is not covered. The primacy of simplicity cannot be lost in
the evolution towards more comprehensive covers.
1.4.2 The evolution of product design
Besides the greater variety of products, the products themselves have been transformed
along this evolutionary path. Group covers, often on a mandatory basis,
were the most common type of microinsurance, and probably still are. However,
there is more experimentation with other approaches, including voluntary group