The most obvious aspect of small-ticket insurance in mature markets is that it is dominated by only two products: extended warranties and travel insurance. However, one of the most important aspects is its long and growing tail – the number and diversity of products is expanding rapidly as innovation creates ever-more innovative forms of insurance that consumers find useful and appealing.
The projection that it will grow at an average 6.2 percent through to 2017, when it will be worth $17 billion, together with the fact that it commands wider margins than almost any other type of insurance, make it an exciting opportunity for carriers.
Despite everything it has going for it, most insurers have not thrown a lot of weight behind their small-ticket business. They have been slow to develop innovative new products, and tend to limit their distribution to only one or a few countries. Few have integrated small-ticket insurance with their mainstream business and operating models, while most have left it to brokers, third-party administrators and other organizations to market and sell the products.
I would strongly argue that small-ticket insurance products are used by non-insurance organizations to enhance their customer orientation and service – an approach which I believe the insurance industry urgently needs to replicate.
In the meantime, changes in customer attitudes and behavior, and advances in technology, are making small-ticket insurance an increasingly attractive proposition. Better use of data is making it easier for insurers to identify customers who would be interested in specific types of insurance, while innovative forms of usage-based insurance are giving them viable products to offer these customers.
Just one example is the ability to offer sky-divers a few hours of life insurance coverage when they arrive at their airfield.
As carriers take small-ticket insurance more seriously, they will benefit in more ways than just growing it into a significant contributor to overall revenue. They will also get better at leveraging customer data, predicting how best to sell to these customers or to consumers at large, and engaging with them in ways that enhance loyalty. All of this will spill over to their mainstream lines of business, improving their customer-centricity, sales effectiveness and retention.
In other words, becoming good at small-ticket insurance will make them better providers of all types of insurance.
In my next post in this blog series I’ll take a closer look at small-ticket insurance in emerging markets. If you’d like to read my earlier posts you can find them here; alternatively, you can download the full microinsurance report.