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Insurance in emerging markets: Growth drivers and profitability

Sigma 5/2011, Swiss Re, December 2011

Insurance in emerging markets has experienced strong growth over the past decade and the outlook for the next decade remains promising. Nonetheless, given the expectation of persistent low interest rates at least in the near future, achieving profitable growth will become increasingly challenging in emerging markets.

This latest Swiss Re sigma publication focuses on two of the regions that have contributed the most to emerging market premium growth, Emerging Asia and Latin America. Drawing on ten years of experience of rapid insurance development in these markets, the study explores growth drivers and profitability in these two key regions, and provides an outlook on emerging markets.

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Succeeding at microinsurance through differentiation innovation and partnership

Accenture Development Partners, January 2012

The report examines the progress of microinsurance to date and highlights the importance of differentiation, innovation and partnership in its success. Accenture argue that those attempting to enter the market must be prepared to see business through "an entirely new business paradigm", but that the necessary innovation can provide valuable lessons even to traditional carriers.

The report also features Accenture Development Partnership's work with MicroEnsure implementing health microinsurance for lower income communities in Tanzania.

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A Microinsurance Puzzle: How do Demand Factors link to Client Value?

MILK Brief N°7, MicroInsurance Centre, 2012

Why should low-income people buy insurance? The quick answer is because they need it. Studies from across the developing world have confirmed this need for financial risk management tools. However, people who may need insurance do not always want it. If clients have not bought a seemingly valuable insurance product, the considerations outlined in this brief can help to shed light on possible reasons why.

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Perceptions of Microinsurance in Southern Ghana: The Role of Information and Peer Effects

Giesbert; Lena, Susan Steiner, German Institute of Global and Area Studies, December 2011

This paper investigates the understandings and perceptions of microinsurance among low-income people in southern Ghana, using evidence from four focus group discussions. It analyses how the focus group participants think about various types of insurance – among them a micro life insurance product – and how their negative and/or positive evaluations have come about.

The evidence indicates that microinsurance is mostly positively perceived by the participants of the focus group discussions. However, it is also found that many people’s image of insurance is based on incomplete and sometimes erroneous information. In addition, the experiences or opinions of peers turn out to be critical in shaping an individual’s perception of insurance. These two factors potentially have a contagious effect, which can lead to unreasonably positive or overly negative ideas about microinsurance. Such ideas, in turn, can become detrimental to the further distribution of microinsurance.

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MILK publishes two Discussion Notes

The MILK Discussion Notes focus on research MILK is doing and what they hope to learn through this future research. So far MILK has published two discussion notes:

  • MILK Discussion Note N°1: Doing the Math: Can Delayed Payment of Claims Erode the Value of Life Microinsurance?

One of the principal questions MILK seeks to answer is: Does microinsurance help protect people from large shocks (high cost events) in comparison to other alternatives? The problem in the Philippines shines a light on the subtleties at play in this question. If the cost of making a claim (in terms of getting documentation or “bridging” the financing need with other sources of funds) is too high, even potentially valuable products might offer low or no financial value to clients, who may have been better off turning to other financial sources or reducing expenditures significantly following the event. MicroEnsure and MILK propose to "do the math" to determine the effects of slow claims payments.

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  • MILK Discussion Note N°2: Are Existing Health Financing Mechanisms Sufficient for Poor Women in Guatemala?

The MILK Project has reviewed some of the data from the Microinsurance Innovation Facility's market study of BanRural clients in Guatemala in order to develop a better understanding of the health financing alternatives available to poor women in Guatemala and develop a hypothesis of the value that microinsurance might have for poor women. This hypothesis will be tested once Aseguradora Rural launches a new product aimed at covering women’s health needs and marketed to savings clients of BanRural in the last quarter of 2011. The MILK Project will then implement its Client Math methodology to study the direct value that the health microinsurance product has on poor women by comparing the financial costs of gynaecological health for women with the product to those of women without the product. The Client Math study will also seek to understand the role of insurance in increasing access to health care for low income women.

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Microinsurance to the Last, the Least, and the Lost: A case study in rural India

Rajan; Prathima, Celent, December 2011

Until about 2007, microinsurance in India was a state-run initiative with limited scope and coverage. However, as an initiative developed by Financial Inclusion Network and Operations Ltd. (FINO) and ICICI Lombard General Insurance Company, biometric-based smart card insurance was offered to the target group in rural India. This was later adopted by Government of India and was known as "Rashtriya Swasthya Bima Yojna" (RSBY), which means "National Health Insurance Scheme."

The business model was designed with a social objective in mind, but also to be economically viable for all stakeholders in order to ensure sustainability. At present RSBY is one of the largest microinsurance schemes in the world, with nearly 25 million families below the poverty line, across 217 districts, having coverage for more than 700 types of ailments.

Any insurer intending to offer microinsurance but worried about the viability of such offering can benefit from reading this report. The report will take the reader through one of the successful business models adopted in the scheme. Apart from this, the reader can also benefit from understanding the use of technology that can work and serve in the worst of conditions like lack of power/connectivity, illiteracy, etc. that is common in several rural markets worldwide.

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