Your mission, should you choose to accept it: target a customer segment that earns a few dollars a day, and drive profitability with policies priced at 50 cents. A few years ago, few insurers would have accepted—but today, more than 30 international carriers are doing just that. Emerging markets are ripe for microinsurance products, and while there’s no single strategy at play, the common attributes for success are differentiation, innovation and partnership.
Microinsurance is on the rise
There are three main trends driving the rise of microinsurance:
- In emerging markets, there’s robust growth in the number of low-income citizens and increasing urbanization.
- Government incentives for private-sector organizations are driving development of insurance products for the previously uninsurable.
- As insurers turn their attention to emerging markets, they have also fostered capabilities to facilitate their expansion efforts, such as innovative product development, novel distribution methods and better use of technology.
Benefits for insurers in microinsurance
For insurers, microinsurance offers three main benefits:
- Access new markets. Insurers can increase shareholder value with the rapid growth that is typical of fast-growing emerging economies, and can tap into the collective spending power of its new consumer base.
- Enhance corporate image. By contributing to local development, insurers can enhance their brand and company reputation, drive employee engagement, and build trust with local government and citizens.
- Achieve competitive differentiation. Offering differentiated products and services to increasingly savvy customers can give insurers a low-cost way to create a competitive advantage.
Next week, I’ll highlight some of the key differences between microinsurance and traditional insurance products.
To learn more, download Succeeding at Microinsurance through Differentiation, Innovation and Partnership (pdf; opens in a new window).