Each year, around 100 million people are pushed into poverty due to unforeseen health expenses. By providing financial support to policyholders during periods of illness or injury, insurance can reduce this figure; however, for those in low- and middle-income countries (LMIC), access to financial services is often scarce and unaffordable.
This is where microinsurance can help. Offering policies that are affordable, relevant and valuable, microinsurance is a vital tool that ensures vulnerable people have access to financial support – a safety net that can help them increase their resilience to financial shocks.
A number of factors can hinder microinsurance uptake, however, including a lack of understanding, education, and consumer confidence in insurance – especially when it comes to policyholders placing trust in insurers to pay out in the event of a claim.
So, what can insurers – particularly those offering microinsurance – do to change this perception of the industry, and ultimately help those in LMICs build a level of financial resilience? Making insurance affordable, relevant, accessible and frictionless, while including value-add services (VAS) is certainly a good place to start.
Know your target market
VAS are tools and services offered by an insurer that can help clients mitigate and reduce their risk exposure, effectively helping reduce the frequency and cost of claims for the insurers, while still offering value to the customer. By offering VAS, insurers can make low-proposition products more appealing.
Health insurance, for example, is widely considered a low-proposition product, as policies tend to only cover hospital fees; however, by offering VAS such as outpatient care, with doctor appointments, health education, free consultations, and even discounted medicines through a local pharmacy, what was once a low-proposition product is now perceived as one offering more than just claims-based benefits. It has real, tangible value.
With health risks being the prime risk low-income families face, it is important for insurers to get these offerings right, and as explored in the ILO’s Impact Insurance Working Paper, VAS products need not be expensive to deploy. Time and travel expenses, for example, can be saved by offering online doctor appointments and remote diagnostics – a benefit made possible thanks to the increasing availability of smartphones.
Building trust and partnerships
Alongside VAS, making policies affordable and the sign-up process as frictionless as possible is another key element of increasing insurance uptake. InsurTech Turaco is one such example offering valuable, affordable and accessible policies. To market their insurance services, Turaco seeks out distribution partners who add insurance products to their product offering, enabling the insurance payment to be embedded on existing transactions or done as an ongoing subscription payment. This enables Turaco to leverage the brand trust of their distribution partners while using technology (via API integration) to make the customer journey as seamless as possible.
Turaco focuses its product offering on health and life insurance (including hospital cash and low-cost Health Maintenance Organisation – HMO), and policies cost, on average, around USD 2. Affordability drives uptake, so when customers are subject to injury or illness, they have insurance to cover hospital bills, on-going medical care, and lost income; this gives them the opportunity to recover and return to work without falling into poverty.
Partnerships like that with One Acre Fund (which offers a Hospital Cash product alongside its agricultural input loans), allows premiums to be paid alongside existing One Acre loans. To date, more than 50,000 policies have been issued.
A similar partnership formed with asset finance platform M-KOPA has enabled tens of thousands of M-KOPA customers and sales representatives across Kenya, Uganda and Nigeria to be insured. Policies are simply taken out when purchasing M-KOPA finance plans.
By offering additional insurance products such as this, platform providers can support their end users through more than just their usual product offering; this not only helps boost sales and puts them ahead of the competition, but it enables them to provide their customers with the financial support that will keep them out of poverty.
In essence, it is all about providing customers with the ability to purchase an insurance product that not only gives them value for money, but – as stated by Turaco – frees them from the fear of financial shocks.