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Crossfire: ‘Who drives microinsurance innovation: the international broker or the local insurer?’
01.03.2014
Innovation with regard to product design and dissemination models is key for making insurance work for the poor. Looking at the landscape, one can see creative solutions that helped to redefine the industry. But who was driving this innovation? Insurers, who have the technical know-how, or brokers, who have the flexible networks? To debate this question, we invited Afua Boahemaa Donkor, Executive Director at Star Microinsurance Services, and Richard Leftley, Chief Executive Officer of MicroEnsure, an insurance broker serving the low- and middle-income market. -
The potential of value-added services in health microinsurance
01.03.2014
Value-added services (VAS), bundled with health microinsurance (HMI) products that often cover only hospital events, show promise to enhance value for clients and improve viability of HMI schemes. VAS are healthcare services that offer clients a way to improve access to and reduce out-of-pocket expenditure for frequently occurring outpatient services which over time can be financially devastating to a low-income family. For insurers, VAS can stimulate demand by making HMI more tangible. In addition, VAS providing illness prevention and outpatient treatment may help reduce the cost of claims, while encouraging better health-seeking behaviour. Presently, there are limited data to quantify the possible benefits of VAS to clients and to HMI practitioners and even the scale at which various VAS operate. More VAS interventions should be launched in the next two years, in more developing countries, with additional research to fill gaps in knowledge. In the interim, emerging findings on broad measures often used to assess the effectiveness of healthcare financing or delivery, such as child and maternal mortality, provide initial indicators of impact. VAS, further enabled by technology, promise to be part of a multifaceted solution for HMI to become a more valued and viable mechanism to protect the health (and wealth) of the poor. -
Consumer protection in microinsurance: challenges and good practices from the Philippines and Colombia
01.03.2014
We explore challenges and good practices in consumer protection in microinsurance, defining ‘consumer protection’ as the effective use of microinsurance products by low-income consumers to protect themselves against risk. Consumer protection challenges fall into four main categories: 1) education and information; 2) product and process design; 3) regulation and financial soundness; and 4) capacities and responsibilities. We explore examples from the Philippines and Colombia, and find that consumer protection is best viewed as an outcome, a view requiring all stakeholders, including consumers, to play an active role. Interventions to improve consumer protection outcomes should be informed by market conditions and ongoing monitoring to understand the effectiveness of existing measures and raise red flags as new needs emerge. Consumer protection efforts can further support the value proposition among consumers and also for other stakeholders, as they increase trust and help to ensure that microinsurance is valuable, effective, and sustainable for all stakeholders. -
‘If you can't measure it, you can't manage it‘: microinsurance by the numbers
01.03.2014
Microinsurance is a rapidly growing industry that faces a variety of challenges in providing valuable products in a profitable way. Data allows stakeholders to analyse performance and make better decisions, yet data on microinsurance has been limited. Efforts to promote key performance indicators (KPIs) for individual institutions and to generate region-wide data through landscape studies have been effective but still exist on a limited scale. Expanding these efforts can professionalize the microinsurance ‘industry’ by allowing the development of useful tools to enhance products and identify opportunities. Several constraints to data collection hinder these efforts. These include definitional variability, competitive forces as a disincentive to sharing, and lack of data segregation, among others. Improving data collection will require presenting a strong value case to insurers, getting supervisors to promote KPI calculations and broader landscaping, and then using this data in a way that enhances and expands microinsurance. -
Better microinsurance for MFIs
01.03.2014
Microfinance institutions (MFIs) that offer savings services and/or credit to low-income households and small businesses remain one of the most popular and effective channels for delivering microinsurance. MFIs are evolving beyond basic credit life insurance. However, making the transition to more complex products and business models presents several challenges. This paper outlines 10 key recommendations for MFIs to improve their microinsurance offerings. MFIs need to: 1) understand market needs and preferences; 2) prioritize savings; 3) make mandatory cover valuable; 4) proactively develop the product menu; 5) improve claims processing; 6) apply holistic risk management; 7) create a demonstration effect; 8) build structures for success; 9) build insurance capacity; and 10) monitor their performance. Insurance has the potential to improve the health and welfare of low-income households, and consequently enhance the social and financial performance of the MFI. -
Mobile phones and microinsurance
01.03.2014
Making use of mobile phones can drive the expansion of insurance coverage in low-income markets. It should increase the efficiency of transactions across the entire value chain, improving processes such as enrolment, premium collection, and claims settlement. At first glance, the incentives that drive revenues for mobile network operators (MNOs) and insurers do not seem naturally aligned. MNOs have more customers and more products than insurers and they have fewer difficulties in serving the low-income market. But it is precisely these distinctions that make MNOs such attractive partners for insurers wanting to reach scale and to access the low-income market. MNOs can provide insurers with access to a large, dispersed client base and an established network of distribution points to interact with these clients. It can enable exceptional scale and it can, although not always, improve client value. On the other hand insurance can help MNOs to raise revenues and create adjacent benefits such as reducing churn and increasing average revenue per user (ARPU). -
Reviews
01.03.2014
Microfinance, Debt and Over-Indebtedness: Juggling with Money, edited by Isabelle Guérin, Solène Morvant-Roux and Magdalena Villarreal; reviewed by Thomas Dichter