The potential of small-ticket insurance is undeniable and in emerging markets, the sheer scale of the opportunity is irresistible. But this business won’t simply fall into the laps of insurers. To succeed, they must be persistent, innovative and smart.
It goes without saying that insurers must understand their customers and the risks they are dealing with—which can be challenging given that most customers are first-time insurance buyers, so data about them is limited, especially when the venture is commercial and unsupported by government or charitable agencies. This makes it essential for insurers to collaborate with local partners with existing distribution networks, affinity groups and customer bases. These partners have a sound knowledge of the target customer and more experience of the types of risk that will be covered. If insurance companies will not care about their customers, others will fill the gap.
Operational simplicity is also important to enhance efficiency and retain a low cost ratio, where large volumes are essential to achieving breakeven results.
Finally, insurers that thrive in these markets have thoroughly integrated operations. Their small-ticket products will benefit from sharing the same operating platform, marketing campaigns and sales and service channels as their other products.
Accenture examined how two insurers have approached the small-ticket market, and what made them a success. Here are their stories.
Allianz is one of the global carriers that has been the most aggressive in its exploration of the potential of small-ticket insurance, both in emerging and mature markets. Its retail products range from pet insurance in Germany, to event-ticket and bank-account coverage in Switzerland, and wedding insurance sold through Towergate Insurance in the UK.
Allianz is also among the carriers that has made the greatest progress in emerging markets. The insurer launched its microinsurance offering in 2004, starting in India with credit life cover and partnering with the sustainable development organization GIZ (Deutsche Gesellschaft für Internationale Zusammenarbeit) and Care International, among others. In 2007 it expanded into Africa and Latin America.
By 2012, Allianz had 17 million customers and had generated US $105 million in revenue from its microinsurance offering. The launch of its extended group insurance business helped the insurer more than triple its number of customers and boosted revenues by 37 percent compared with the previous year.
Today, with a geographic focus on India, Indonesia, Malaysia, Colombia and Western Africa, Alllianz markets microinsurance products including term life, endowment life, credit life, personal accident and motorcycle coverage. While India is still Allianz’s largest market for microinsurance, contributing more than half its microinsurance revenue, premiums are growing faster in Africa (79 percent up in 2012) and Latin America (49 percent) than in Asia (34 percent).
Bradesco Seguros, the insurance subsidiary of Banco Bradesco, is a multiline insurer with more than 37 million customers across Brazil. It first offered microinsurance products for the low-income market in January 2010, and sold approximately 1.3 million policies during its first year.
In September of that year, the insurer adapted one of its household products to the house construction features of Favela Santa Marta, in Rio de Janiero, to offer the community affordable protection against fire, lightening, explosions and other risks. Coverage was developed in partnership with the CNSeg-Microinsurance Innovation Facility project.
In 2012, Bradesco Seguros launched a personal accident product to be sold, using point-of-sale technology, through the Bradesco Expresso banking correspondent network, a distribution channel based in the targeted community and including retailers like hairdressers, bakeries, pharmacies and similar stores.
In June 2012, the Brazilian government passed microinsurance-specific legislation that allows insurers to register new customers remotely, and simplified the process of microinsurance broker certification. Bradesco Seguros is currently in the process of broadening its product range and enlarging its sales force as it prepares to offer microinsurance on a large scale.
Next week I will examine the elements that add up to success in the microinsurance category.
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