If you look closely at the organizations that offer some form of small-ticket insurance, it becomes apparent that there are marked differences in their capabilities. What’s more, I believe it’s possible to plot these capabilities along a maturity path. Generally speaking, as insurance providers (you’ll note that I don’t say insurance companies or carriers, and this is intentional) become more experienced in this sector, they enhance their capabilities and improve their integration, scalability and efficiency – and consequently, their results.
I believe the roadmap to success in small-ticket insurance includes three basic stages:
Stage 1: The single-niche provider
At this stage, carriers generally focus on either mature or emerging markets. They offer a narrow product range in a single market. They sell through a limited, partnership-based franchise with few touch points, and utilize multiple third-party administrators. They have limited integration with both, and this affects their quality and service. They struggle to achieve the scale and efficiency they need to move to the next stage, and to achieve profitability.
Stage 2: The multi-niche provider
At the second stage, insurers have a broader selection of products but still limit themselves to a single country or region. They sell through an extended but focused network of franchises and other physical and digital partners, and they benefit by helping these intermediaries improve their efficiency. They use multiple operating platforms, but have a streamlined organization and best-practice processes.
Stage 3: The integrated, industrialized provider
The mature small-ticket insurer is able to market, sell and service a wide range of products in both emerging and mature markets, and in multiple regions and countries. It uses data analytics systematically to design products that meet customers’ needs, and that support underwriting, marketing, sales and claims management. Claims are managed appropriately according to their complexity. An integrated multi-channel and multi-device distribution capability delivers more touch points and supports cross- and up-selling. The carrier uses an integrated, flexible, cloud-enabled operating platform, and takes advantage of managed services and outsourcing – together these allow it to scale effortlessly and without capital investment. Its agility and efficiency drive its profitability, even in volatile markets. After all, these industrialized providers may not necessarily be the insurance carriers, but may simply be relying on some sort of agreement with a primary carrier or reinsurance facility.
It should be apparent that integration is a key factor on the path to maturity. Among other benefits, it allows small-ticket insurers to capitalize on their experiences and innovations in one market to enhance their effectiveness in others. It also enables them to achieve economies of scale much more rapidly.
Next week I’ll wrap up this series of posts by highlighting what small-ticket insurance in mature and emerging markets has in common – and why this is important for insurers. If you’d like to read the other posts in the series you will find them here; alternatively you can download the detailed report.