What is micro insurance & how is it shaping insurance penetration

Traditional insurance isn’t well designed for customer with lower incomes in emerging markets. It’s famously quite expensive and complicated. It’s littered with terms and conditions and can be really difficult to access. For example the reliance on bank-only deduction methods doesn’t cater to populations who don’t have bank access. Microinsurance works around these roadblocks. Benefit values are lower, payments are broken down into smaller increments and customers are still partially covered even if they can’t meet a full month’s premium. Pricing is consistent across age, gender and health status. The process is simple and non-exclusionary. The same rules apply for individual and group policies. It’s a good system.?

It might sound small but microinsurance is anything but niche. Out of a global population of 7.8bn, a relatively small 1.8bn are considered ‘rich’ and have ready access to support networks and safety nets such as insurance. The remaining 6bn are part of an emerging market. That’s where microinsurance is focused. It’s estimated that around 290 million people are covered by at least one policy around the world.?

How is it distributed??

There’s a lot of demand for microinsurance in areas where financial stability and literacy are low. Where labour markets are informal and the gig economy is packed. Where income is precarious and getting ill means working through it. No sick pay.?

Embedded insurance and microinsurance go hand in hand. Partnering with mobile network operators has allowed companies such as? Bima to reach a much wider network of customers.??

And the human touch still has its place in some markets. Especially when you’re trying to explain fairly complicated products to sceptical customers. In Africa, awareness of insurance offerings is sorely lacking. Speaking to someone on the phone can be a better remedy than trying to reach them through digital channels.?

The future of microinsurance?

Microinsurance has a few hurdles to overcome. Financial illiteracy is probably the biggest. There’s a lack of understanding across the board in areas where microinsurance would have the most impact. Finding a common language is key to growing your customer base. What images and messages will strike a chord with potential customers around the world? Identify them and use them.?

There’s also a big opportunity for innovation in this space. Sometimes markets that have been slow to move historically adopt new innovations very quickly. There’s a vacuum to fill, after all. Making processes more intuitive could lead to a real uptake in some geographies.?

The biggest hope is that one day we’ll live in a world without the need for microinsurance. A resilient world with a decent level of social protection everywhere. In the meantime, it’s a really useful service that helps a lot of people in need.?

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