Microinsurance is Exciting By Claude Penland, Associate of the Casualty Actuarial Society www.InsTrends.com
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.
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.
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.
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.
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.
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!