Most respondents to a recent survey on microinsurance in the Philippines, Indonesia and Sri Lanka, place more importance on “Business (profitability)” as their reason for entering this market, said FALIA (The Foundation for the Advancement of Life & Insurance Around the world). But most also gave some weight to “Branding” or “CSR” (corporate social responsibility) as a reason.
Strategies cited by the respondents to increase profitability are increasing the total amount of premiums and reducing costs. To have a larger number of customers, it is necessary to have a large number of distribution channels and to enhance the purchasing power of customers by raising consumer awareness and/or increasing the value of affordable products. To reduce costs, on the other hand, insurers should utilise the infrastructure of existing distribution channels and/or use mobile technology.
Other main strategies include: “Outsourcing to Partners”, “Limiting to Profitable Products or Premium Collection Methods”, “Long-Term Strategy”, and “Financial & Technical Support from International Aid Organisations”.
Develop trust-based relationships and strategic collaboration with stakeholders
An integrated approach is indispensable in delivering affordable microinsurance products. Therefore, microinsurance providers should share the same vision with all of their stakeholders through close communication to develop trust-based relationships and strategic collaboration. Such a strong bond can deliver great value more effectively with a customer-centric mindset.
Using a microinsurance logo is effective for marketing and raising the awareness of consumers. It gives customers a greater feeling of familiarity with microinsurance.
Most private insurers enter the microinsurance market by selling compulsory products like credit life or term life to obtain the customer base necessary to achieve early break-even. Then, they aim to raise customer awareness and gain trust from partners by paying benefits as soon as possible. This mutual trust becomes a catalyst for the up-sale of voluntary products.
Limiting fraud and adverse selection important
The respondents who have adopted a partner-agents model have a wide range of distribution channels. In this model, insurance providers try to make partnerships with as many channels as possible to increase the number of insured policyholders.
Measures to limit the risk of fraud and adverse selection are important in the microinsurance business. Some insurers try to hire local agents living within the same community as customers to warm against fraud and check one out of 10 claims.
The most important thing is maintaining an appropriate strategy by regularly monitoring day-to-day business. In this ever-changing market environment, close communication with partners and engaging customers are essential methods such as an “experimental lab” to adapt to new realities faster than competitors.
The analysis in this report is based on a survey conducted in 2017 via email and interviews with market sources by meeting in the selected countries. A