Succeeding at microinsurance: Background (Part 2 of 5)

Last week, I introduced the idea of how insurers are succeeding at microinsurance in emerging markets. I’d like to take one step back and highlight some of the main differences between traditional insurance products and microinsurance.

Types of microinsurance

Microinsurance encompasses health insurance, life protection, agricultural or property insurance, job loss insurance and catastrophe insurance. There’s no single definition of microinsurance. For example, in South Africa, it’s defined as providing “a maximum benefit of R50,000 (US$6,400) per insured life, per insurer for an insurance related to a death event” while in the Philippines, it’s “the amount of premium [that] does not exceed 10 percent of the current daily minimum wage rate for non-agricultural workers.”

Microinsurance has been most successful in Asia Pacific, notably India, Bangladesh, China and the Philippines. In South America, Brazil, Mexico, Colombia and Peru are flourishing markets. Africa and Eastern Europe are potential—and mostly untapped—markets.

Microinsurance vs. traditional insurance

As you might expect, the premium and insured amount for microinsurance is smaller than for conventional insurance. But there are other points to consider. Microinsurance:

  • Presumes low awareness of insurance as a concept.
  • Assumes that customers are poorly educated, or even illiterate, so communications must be straightforward.
  • Is executed as conveniently and simply as possible, including eligibility requirements, exclusions, payments and claims processes.
  • Relies on group pricing, due to the lack of personal data available.
  • Links premiums to other payments, such as loan repayments.

Profitability of microinsurance—and more

Research from the Microinsurance Network focused on 24 carriers that are in the microinsurance space, and found that 57 percent believe that the business is profitable. And, all but one were convinced that they would achieve profitability within three years.

So now that we’re all on the microinsurance bandwagon, what are the best ways to approach this new product and new markets? Tune in next week as I talk about business models for an effective microinsurance strategy.

To learn more, download Succeeding at Microinsurance through Differentiation, Innovation and Partnership (pdf; opens in a new window).

Michael Costonis

About Michael Costonis

Michael Costonis is Managing Director of Accenture’s Insurance practice for North America. He is responsible for setting the overall vision and strategy for the practice, as well as pursuing new client relationships.

Costonis has twenty years experience developing, managing and deploying large scale technology systems, business processes, and strategies for some of the world’s leading insurers, including property & casualty, life, and multi-line insurance companies. In his career with Accenture, he has worked with more than 50 leading insurance clients in 14 countries around the world.

In addition to his role as North America industry executive director, Costonis is the lead for Accenture’s global claims services. In that role, he oversees claims strategies, assets, capabilities, and sales development. He also has led Accenture’s Insurance Solutions practice in North America, where he was responsible for driving growth for Accenture’s asset-based business in Insurance, including claims, underwriting, and policy administration.

Costonis has authored several articles in leading insurance trade publications, and has been quoted in The New York Times, Bloomberg News, Reuters News, Best’s Review, Insurance & Technology, InformationWeek, National Underwriter, Technology Decisions, and the Philadelphia Inquirer. He has spoken at several leading industry conferences in the U.S. and internationally.

Costonis received a bachelor’s degree in political science from Swarthmore College (Swarthmore, PA). He is based in Philadelphia.

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