MR Microinsurance_2012_03_29.indd - International Labour ...

Current trends in microinsurance
insurance where members of the group opt in or out, and even voluntary individual
covers.
While previously many products were downscaled versions of traditional
lines, product evolution has embraced reengineering to respond better to the
realities of the low-income market. For example, past policies might have
included a list of exclusions, whereas many insurers now recognize the benefits
of minimizing them to simplify policies and reduce the work involved in
checking exclusions in small policies. Even small changes to products and their
delivery can have important effects on marketability and demand, as discussed in
Chapter 13.
A small change that has the potential to make a significant impact is the
awareness that products need to be more than just risk covers. As in the example
of life insurance that accumulates savings and health insurance with free outpatient
coupons, low-income households need to get some value from the
product even if they do not make claims. If that value-added benefit can also
reduce claims – for example by providing weather information to insured farmers
or health education to reduce the occurrence of preventable diseases – then
everyone benefits.
Since the low-income market is not homogeneous, a related trend is towards
greater market segmentation. Sometimes this happens naturally, since certain
distribution channels reach certain market segments. However, microinsurers are
also considering the requirements of specific segments, including women
(Chapter 16), migrants (Chapter 17), smallholders (Chapter 11) and livestock
keepers (Chapter 12), and designing products that are relevant for them.
For products to succeed, they need to be at scale with streamlined administrative
costs, which is partly why credit life took off. Besides bundling insurance
with credit, more organizations are linking insurance with other transactions to
reach poor households, such as buying seed or fertilizer, or purchasing mobile
phone minutes, or becoming a member of an organization, though these
products can typically only provide very basic insurance with small benefits. This
linkage is often positioned as a free member benefit, a way of distinguishing the
distribution channel’s core product from the competition; consequently, the
premium has to be so small that it does not increase the price of the core
product. If this arrangement enables low-income households to have a positive
experience with insurance, and if the products evolve to include voluntary
options, then the approach could revolutionize the supply and demand sides of
the microinsurance equation – that has not happened yet, but perhaps it will be
the next trend.
Instead, one often finds a lack of product education among people who “buy”
group cover. Since clients do not make choices and there is no financial transaction
specifically for the premium payment, intermediaries often do not provide
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