The opportunity is undoubtedly large, but realising it will require insurers to be persistent, innovative and smart.
- Understand your customers and, in particular, the risks they face. Because customers are likely to be first-time insurance buyers, information will likely be scant. The participation of government agencies or non-governmental organisations will help solve this challenge. Analytics and big data will also play a growing role in this area.
- Collaborate with local partners. This is particularly necessary for global carriers, who are unlikely to have experience with sub-economic consumers. Again, local partners with existing distribution networks and customer bases/ audiences will help bridge this gap.
- Innovate, innovate, innovate. Every business needs to be innovative, to be sure, but the need is acute in order to overcome the challenges. Coming up with ways to develop, distribute and market products in these markets is a tall order, and strategic thinking will have to generate ideas that are truly “outside of the box”. Insurers cannot allow themselves to have fixed ideas about what insurance is, how it works or with whom to partner.
- Focus on agility. Agility is the flipside of innovativeness. For one thing, it’s likely that several iterations will be needed before a product is perfected; for another, the needs, preferences and means of the consumers are constantly evolving—these are after all economies that are often growing rapidly and socially evolving thanks to rapid urbanisation. Operational simplicity will be vital in delivering agility in this high-volume, low-cost scenario, but also in keeping costs down.
Finally, I would argue that insurers should be willing and prepared to apply what they have learned, particularly when it comes to agility and innovation: both are qualities that are going to play increasingly important roles in all insurance markets.
In short, microinsurance is an opportunity to tap into a valuable new market, and one that is growing, in Africa, but it also could prove to be a catalyst for new sources of profit in other markets.