It’s my firm view that microinsurance – the term we use for small-ticket insurance in emerging markets – is where the industry will find most of its growth over the next few decades. The numbers are simply irrefutable: a vast and growing market of about 2.5 billion consumers who earn approximately $8 a day, and a current penetration of only 5 percent. This leaves a potential for 3 to 4 billion policies, or $30 to $50 billion in annual premiums.

While it’s true that it has been notoriously difficult to unlock this potential, factors such as rising affordability, widespread adoption of mobile phones and the maturation of innovative payment mechanisms are all helping to break down the barriers to success.

Big opportunities in small-ticket insurance
Read the report.

 

What’s more, the determination of a number of global insurers to succeed in this market has resulted in new products, business models and partnerships. Often through trial and error, this has provided valuable insights into how microinsurance can be made to work.

Insurers don’t have to do it all on their own. Governments, state agencies and NGOs in most countries offer a range of incentives for both local and global insurers to extend their services to less affluent citizens. At the same time, organizations that have the trust, the extensive networks or the technology to reach large numbers of low-income, often remote consumers are leveraging their assets to partner with carriers that lack this access.

These factors will go a long way to helping insurers develop efficient, scalable business models that unlock the vast potential of microinsurance. But there are also some key steps which they themselves need to take to ensure the effectiveness of their models.

Next week I’ll discuss what I believe insurers need to do to overcome the challenges of small-ticket insurance. You can read the earlier posts in this series here, and to download the full small-ticket report.

 

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