Microinsurance Business Processes: A handbook to reach those who need it most

Why this handbook?

Setting up a microinsurance scheme is a complex task. Insurers wanting to reach low income people or entire communities in the informal sector need to gain a good understanding of clients’ needs, overcome issues of trust, find ways to access data and calculate risks, simplify procedures, diversify products and make them more easily accessible, educate clients about insurance, enable clients to submit claims easily and appropriately, and ensure claims are being paid on time, to name a few.

It is perhaps not surprising that till recently there was little public information available on the business processes of microinsurance. Based on his 35 years of experience, in international development, in academia and in the field, David M. Dror, Chairman and Managing Director of the Micro Insurance Academy (MIA), Delhi, says, “Within the private sector, business processes are like the crown jewels: They are for safe-keeping, not for sharing.”
It is for this reason that Dror decided, together with his colleague Dr Swapna Jambhekar, Training Specialist at MIA, to describe in detail the model and business processes prototyped and field-tested by MIA in its 8 years’ implementation experience across India and abroad, in the Microinsurance Business Processes Handbook.  “The book shows the need for a coherent set of business processes in microinsurance and is intended for anyone wishing to target the people at the base of the pyramid” explains Dror.
Underlying principles
The handbook is based on the premise that informal risk coping mechanisms already exist within the communities and formal insurance should build on what is already there, and reduce the burden of hardship financing. This, according to the authors, has to be the starting point to determine what the clients’ needs are and what the clients are willing to pay for.
Insurance should be honest, viable, transparent, and a profitable business for both insured and insurer” says Dror, “and it is on these principles that we have written the handbook. The publication covers all key aspects that one needs to consider when wanting to develop an effective and viable microinsurance product, from calculating premiums, to designing and building consensus on a benefits package, managing records, and checking and settling claims. The guidelines in the book are aimed at creating a sense of ownership by the customers over the process, empowering them to choose what risks they would like to seek coverage for”.
Many insurers feel that the problem with targeting informal sector poor is that there is no data to estimate risk.  “Not true” says Dror. “Calculating risk is a matter of setting up the right processes to collect the data needed, and this can be done relatively inexpensively as outlined in the handbook”.
With regards to people’s awareness and understanding of insurance, Dror and Jambhekar argue that low income people do have an understanding of insurance, but that given their low income, they need to evaluate every expenditure much more carefully than a high earner. The handbook provides guidance on how to ensure that an insurance product really meets the customers’ needs and matches what they are willing to pay for.

The handbook is available for viewing as a flip book in the public domain, and can be bought (at a discount of 30% till May 15, 2016) from MIA at this link. The handbook is also available on www.amazon.in. To find out more about the MIA methodology and programmes view these two short videos at the following links (link 1link 2)

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