Driving Inclusive Insurance: The Untapped Potential within The Microinsurance Market
Microinsurance is helping emerging markets improve access to financial services. As there is a lack of insurance cover in many parts of the world, this is a huge market opportunity for the insurance industry. However, the number of insurers pursuing inclusive insurance in emerging markets is low.
The Microinsurance Network (MiN), a non-profit association of international organisations and leaders aims to drive the uptake of inclusive insurance by focusing on the "people protection gap."
We want to cover more countries and we ourselves want to become more sustainable and the way to do that is to have more members and partners in developing countries.
Katharine Pulvermacher, executive director of the network, which celebrates its 20th anniversary this year said: “The MiN, which was set-up 20 years ago, aims to build the resilience of low-income consumers, including households, smallholder farmers and small businesses by improving the supply and use of appropriate insurance services and risk management tools.
"Twenty years ago, most people did not have access to insurance and that is still the case today. It is marginally better but there is a long way to go and there is a need to accelerate growth.
“In many emerging markets the insurers are not necessarily the first movers and the insurers that are involved tend to become pioneers and are driving market development not just in their own countries but way beyond that. "
The MiN's recent study, The Landscape of Microinsurance 2021'found between 179 and 377 million people were recorded as covered by a microinsurance product in the 30 countries covered in the research. This was a significant increase from the previous year's study.
The report cited one of the main reasons behind the uptake of microinsurance was that the Covid-19 pandemic heightened awareness of risk and, in some cases, increased customers’ interest in acquiring insurance, especially health insurance.
Pulvermacher highlighted how investors can play a key role in this drive for more inclusive insurance by investing in the development of this market and how this is an opportunity for insurers despite the challenges they might face along the way.
She said: "Investors in the global north can play a role by investing in the development of emerging markets.
“Larger insurers need to take a more strategic view on sustainability to drive inclusive insurance. They can do this partly through their partners and making financial investments available, while part of it is an openess to innovation."
The insurance industry can use technology to drive progress in this area.
Pulvermacher added: “A handful of insurtechs are using blockchain in the scope of microinsurance in terms of reaching this market customer segment.
"It is being applied very effectively in some markets to reduce fraud but also once somebody gets involved in the programme everybody in the value chain is notified immediately so it reduces delay."
While technology plays a key role in microinsurance, it is not always easily accessible to certain customer segments in developing countries.
She added: “In developing countries, there is a gender gap in terms of access to phones and the internet. It might be that a woman does not own a phone or that data in some countries is quite expensive. If you are on a low income that can make it difficult to access apps.
"A phygital [physical plus digital] approach is also quite important. Although using technology can add value the industry should not lose sight that there are consumers who want some kind of human touch.”
Some of the biggest risks facing developing countries are the rise in interest rates, issues around food security and conflict in parts of the world.
Pulvermacher said: “The reason for the rise in interest rates is that many of the international loans in terms of trade are set in dollars. That will have a negative impact on the trade balance of a country that is a net importer of crucial commodities. However if a country is exporting commodities it could be very good because commodities are priced in dollars.
“A lot of these risks are interrelated. There are huge issues around food security and that is related to climate risk. There are countries that are importing food that probably should not be. The impact of the Covid-19 pandemic and its impact on supply chains as well as ongoing conflict means that there is this concern to return to more locally produced things wherever we can.
“The other big factor is pools of conflict in unstable areas of the world that have never really gone away but haven't always been in the spotlight. Many people in the global north are preoccupied by the conflict that is nearly on European borders. Meanwhile there is ongoing and spreading conflict in the Sahel. For instance, we are seeing a heightening of the tension in Central Africa, around eastern DRC, southwestern Uganda, western Rwanda, and the Horn of Africa is still unstable."
In 2021 health microinsurance became the largest product line in Africa and Asia, reaching 104 million people globally, according to the MiN's 2021 landscape study.
With consumers across these continents and other developing countries facing different challenges, microinsurance can be tailored to meet the needs of specific customer segments preventing individuals, families and businesses from falling back into poverty whenever a crisis occurs.
Pulvermacher said: "The first step is to invest in customer insights and find out what people need. It is about asking what risks they face and how they could better manage those risks.
“In East Africa cervical cancer is a leading cause of death among women. It could easily be diagnosed and dealt with through a vaccine. Yet people don't have the means to go and get tested. There are lots of other examples like simple health checks such as blood pressure checks to pick up chronic conditions at an early stage.
“If people are paying a lot for transportation and nearly all of their medical expenses are out of pocket they tend to leave it too late to go to hospital. Therefore understanding what people's needs are and designing products that would meet those needs and looking at it holistically is important. It is a case of asking people what it is that keeps them awake at night and then understanding their customer journey.”
She highlighted: “One other thing that is important is reaching the customers and having innovative solutions for that. It's asking what are their natural touchpoints; where do they naturally congregate and is there a way that you partner with groups, such as agricultural cooperatives."
The MiN is in its first year of its latest five-year strategic plan and aspires to reach 3.5 billion people by 2030.
Pulvermacher explained: "We want to cover more countries and we ourselves want to become more sustainable and the way to do that is to have more members and partners in developing countries.
"Our business model is to engage directly with national ecosystems and link them to one another to catalyse inclusive market development. We need to have people in those countries working with us.
“Although we are a small organisation, we are investing as much as we can in putting feet on the ground regionalisation, because we believe this approach will drive the change we need to see.
“I do believe that it is feasible to reach three and a half billion people by 2030 with a concerted effort."