The critical success factors in micro-insurance

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PwC’s Diamond Advisory Services’ Marik Brockman says there are five key factors insurers need to remember when offering micro-insurance: product design, customer awareness, distribution, premium collection and claims servicing.

Marik says in this value chain, each factor has its own objective.

Marik Brockman: If we talk about the high-level value chain where there’s different objectives from each stage. Clearly for product design, it’s all about simplicity. For awareness, it’s about trust building. Distribution, clearly it’s about scalability – leveraging what’s there for now because people have already gotten in there and done the work, so how do you piggy-back on top of that? And then how does that become more and more tailored as the market evolves? For things like policy management and processing, it’s really just about low cost – how do we just make sure the right person paid against the right account and we just track the data. In terms of claims, we’ve talked about mirroring the fact that the policy needs to be simple, the whole claims process needs to be simple and straight-forward and easily verifiable and avoiding a lot of, whereas in this country, there’s a lot of fraud detection and concern about nuances, it’s just “yes” or “no.”

Technology also has a large role in micro-insurance. Marik explains.

Marik Brockman: To that, I can identify a couple of technology applications – some are pretty obvious and some you’ve seen and others I think are just going to take time.

The very first one with product design, the trick is actuarial data. There just is not a wealth of data. It’s new needs, it’s new markets, so the trick is you’re going to have to make some assumptions to get in there and price something that people are going to buy but then just start tracking the data immediately. Companies that want to get in there need to be thinking about “What is it I need to know as soon as possible about this market, this demographic, this product, the rates, so I can quickly start tracking, learning and repricing?” There’s already enough data about what insurance is, let alone how much are you charging me for this thing I don’t even know about. Companies need to be aggressive with their prices and to start, they also need to learn quickly about rate changes. For product design, it’s about simplicity on the objectives. It’s about data on the technology side – quickly tracking and adjusting.

On awareness, we talked about trust, and it’s really about awareness and education. I think we’re going to see more and more – not just laptops, but this could be the iPad. You know, just going out there with a lightweight, simple, easy-to-use means for the community leaders to quickly run people through a presentation and get to a lot of places where there aren’t necessarily classrooms. Can you take a screen with you that tells an easy story or helps remind them what the story is that needs to be told? Just lightweight communication devices helping with awareness, being carried by  someone who is trusted.

Distribution, we talk about point-of-sale being mobile and being out there just tracking that a policy has been sold., getting that information back to the home base quickly.

For policy processing, again I think mobile applications help there, just somebody made a payment, let’s track that, let’s have that linked to the policy quickly. Also, time stamps so we know that there’s no fraud. They’re not coming to re-up their policy at a time when a loss has already been incurred and then we’re going to hear about the claim later.

On the claims side, I think you’ve seen stories about the RFID tags with the cattle with essentially the cattle are inventory, and so it’s pretty clear to know which assets are covered and which are not. In our blog we talked about the biometric card that is basically carrying a lot of important I.D.  and information about the insured, and then being able to use that at the point of claim. That’s big in India in health insurance. They swipe it, they match their thumbprint and then, boom, you’ve got credit here, and we can start to charge your account.

One last one there: using satellite imagery to the degree that there are intricate lines and boundaries where there could be damage to croplands to the extent that that might be weather-based. Can we measure the topography of rainfall, humidity and even the impact on plant life which can be measured. Can we use that to draw the boundaries and quickly – again, in no-nonsense claims, you’re in or you’re outside that line, let’s just make it simple.

So that’s where technology throughout the value chain is making this easier. But notice how innovative some of those are. That can be leveraged across a mass market. That doesn’t just have to be as far as micro-insurance. A lot of that can be reused. It’s just interesting to see how the old capitalistic market just might benefit from some of the service of those who are most in need.

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