In 2012, gross domestic product growth in Western Europe was non-existent. Life premiums shrank by 3.1 percent, and the property & casualty sector was in the red to the tune of 0.2 percent. In comparison, small-ticket insurance premiums for the same period grew to between US$13 billion and $15.4 billion, and are projected to continue growing at a compound annual growth rate of 6.2 percent through to 2017.
According to our findings, microinsurance’s estimated compound annual growth rate is between 10 percent and 12 percent in emerging markets, and 2 percent to 4 percent in mature markets.
In spite of this stunning success, however, Accenture believes small-ticket insurance could be doing even better—we haven’t yet seen its true potential. Last week we looked at what two insurers—Allianz and Bradesco Seguros—are doing to succeed with microinsurance. This week we’ll examine the commonalities that make microinsurance success possible.
In our recent research on microinsurance, Accenture identified these shared success factors:
- Full mobile enablement. Mobile enablement across the value chain enables insurers to take full advantage of the microinsurance opportunity, especially in developing areas where infrastructure may be limited. Mobile money/payments are an increasingly significant enabler, and geo-localization will also apply to both approaches.
- Simplicity and nimbleness. Simple, intuitive product and process features will support customer education and address time constraints. This applies to claims processing and settlement as well as policy servicing and risk management.
- Seamless integration. Integrated operations and management across the value chain are required to make small-ticket insurance profitable, including seamless connection with partners, third-party administrators and the wider supporting ecosystem that’s needed for this business segment.
- Low-cost operations. Driven by cost-efficient technology solutions, low-cost claims processing and settlement are a requirement for sustainable profitability.
- Economies of scale. Increased volume and successful volume management across value chains, product lines and geographic markets will yield reduced unit costs—and increased profitability.
- Advanced analytics. Collection, analysis and utilization of data on customers, processes and performance will improve sales effectiveness and productivity throughout the value chain—for small-ticket insurance as well as other business lines.
Accenture has determined that the capabilities of small-ticket insurers can be plotted along a maturity path. At Level 1 is the single-niche provider, which generally focuses on either small-ticket insurance in mature markets or microinsurance in emerging markets. At Level 2 are the multi-niche providers with a broader selection of small-ticket insurance products, but still with operations that are restricted to a single country or region. Finally, the Level 3 carriers are the integrated, industrialized providers that are best positioned to take advantage of the growth potential of small-ticket insurance.
Many insurers are already in the small-ticket insurance market, but most are failing to optimize their operations. The convergence of micro and mass-market insurance solutions is a critical lever for insurers to achieve economies of scale and commercial viability.
By recognizing the commonalities between emerging-market and mature-market insurance, and deploying strategies and technology solutions that support both, insurers will find it easier and less costly to achieve the key success factors for both markets: simplicity, affordability and accessibility.
Next week I will examine the unique role that mobile connectivity is playing in the microinsurance revolution.
For more information download the report: Big Opportunities in Small-Ticket Insurance