Why should insurers care about micro-insurance?
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The benefits of micro-insurance for the insureds can seem fairly obvious: they are managing their risks through low-cost coverage that they may not otherwise be eligible to receive, either due to premium paying capacity or insurability conditions.
But why should insurers and carriers care? Can micro-insurance help the bottom line? PwC’s Diamond Advisory Services’ Marik Brockman says it can.
Marik Brockman: You’ll notice that it’s a lot of the bigger players – Chartis and Allianz and Swiss Re and New York Life and other folks getting into this worldwide, certainly so you’re dealing with some of the larger carriers. But you could say there’s a three-time horizon approach to this.
One is in the near-term, we could call it near- and medium-term. There is the potential for some return, not so much in the absolute near term but even in the medium-term as folks who may be on the verge of lower- to middle-class start to come into the micro-insurance market. Those are folks who in a matter of, let’s say a decade, might be buying more traditional products. So there’s kind of a near- to medium-term.
Then there’s kind of the next wave and I think this is where I think it’s more interesting to the extent that a lot of large multi-national, multi-line carriers really enter markets from the commercial perspective, there’s a shift to really thinking more consumer. This is where you can actually get innovative. So in product design and distribution and marketing and even servicing these policies, scalability is really important. Being able to think of micro-insurance as a way to learn more, big carriers are already realizing that the consumer approach, whether micro-insurance or mass market, there’s a need to get scalable and get innovative. There’s a medium-term benefit to thinking about micro-insurance. It’s when you are truly constrained, that’s the mother of invention right there.
Then I’d say long-term, helping to develop these nations – that’s nation building and it’s kind of more grassroots, local sense as opposed to the big commercial multi-nationals coming in and having to develop huge products in order to get the country rolling. So there’s a longer-term emerging markets trend here in terms of getting the whole planet up to speed and developed.
