Micro-opportunities

I enjoyed listening to a very good presentation this morning on some of the opportunities and challenges offered by microinsurance.

The talk, at the annual seminar of the International Insurance Society in Berlin, was presented by someone very much involved in the microinsurance effort, Nelson Kuria, managing director of the Cooperative Insurance Co. of Kenya.

Microinsurance is seen by proponents as one tool to help address global poverty, helping emerging businesspeople, entrepreneurs and the working poor to protect their income, the assets they’re just beginning to accumulate and their well-being. We ran a cover story on the topic in the June issue of Industry Focus, noting that a number of major insurers and reinsurers are becoming involved in the effort, seeing it not just as an opportunity to do good, but a chance to do good business.

Aside from micro-health insurance efforts, microinsurance products have thus far proven profitable and sustainable, Mr. Kuria said. But, he noted, for the effort to be successful, insurers have to consider a market that could generously be described as skeptical of insurers’ sales efforts, and make sure they take the steps needed to build a trusting relationship with those new insurance buyers.

“You’re dealing with a highly sensitive sector of the population and a sector that is skeptical of insurance,” Mr. Kuria said. It’s not unusual for the working poor in many Third World or emerging market countries to view those selling insurance as “con men or con women,” he said.

In those markets, even a $5 claim “can be a matter of life and death,” Mr. Kuria said. “So delaying a payment does a high disservice to the development of microinsurance.”

And while insurers are still working on crafting a sustainable micro approach to health insurance, Mr. Kuria noted that the potential value of health insurance to microinsurance buyers “is not micro,” but hugely significant to improving the quality of life.

“The challenge here,” Mr. Kuria cautioned, “is if you come with the same exclusions that are used in conventional health insurance you’re not going to go anywhere.” If you present the buyer with a list of exclusions, he said, “you will be con men.”

The challenge for insurers venturing into microinsurance is to build products that will be simple and sustainable, and will encourage buyers to renew their policies.

And, Mr. Kuria noted, “This is not the kind of market segment that is given to dealing with bureaucracy. They are not patient, so you’ve got to be flexible.”

I’ll post more later from the Berlin gathering, and will cover this year’s IIS seminar in greater depth in an upcoming issue of Industry Focus.

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