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Microinsurance is Exciting

By Claude Penland, Associate of the Casualty Actuarial Society

www.InsTrends.com


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What?

  • Microinsurance is generally designed for low-income businesses and individuals who aren’t typically covered by traditional insurance.

  • It is usually sold at low premiums and low coverage limits / caps.


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Who?

  • Some insurance analysts have said that microinsurance is an untapped market for emerging economies, especially in India, Bangladesh, China, the Philippines and many parts of Africa.

  • Latin America should also see growth.

  • In fact, microinsurance has a possible customer base of around 4 billion people.


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When?

  • Interestingly, 200-300 years ago, sickness benefit societies, friendly societies and fraternal insurance plans were implemented in the United States and in Europe.

  • These plans were essentially microinsurance, too.


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Why?

  • Swiss Re reports that the microinsurance market has an eventual potential annual premium of up to $40 billion.

  • Credit life is presently a leading microinsurance product.

  • Going forward, some expect other insurance products that are found to be necessary in the developed world – for example, health and property insurance – to develop a microinsurance following as well.


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How?

  • Barriers to microinsurance growth include inadequate local regulation.

  • Actuaries can find it difficult to price products with a lack of appropriate actuarial risk and exposure data.

  • Insurance product distribution, claims handling and underdeveloped microfinance sectors are also high hurdles to jump.

  • And, finally, cultural acceptance and education can be significant barriers.


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Wrap Up

  • Some insurers and governments are considering private-public partnerships to help develop the microinsurance sector.

  • Reinsurance broker Guy Carpenter has even recommended microinsurance to reinsurers as a growing market where they could devote some excess capital.

  • It is indeed an exciting time to consider the microinsurance market.

  • Thank you!


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