In this article we explore the outlook and importance of inclusive insurance, from emerging trends and the impact of digitalisation, to what the Microinsurance Network (MiN) is doing to engage insurers to make insurance truly global and inclusive for all.
To date, 80% of the global population sits on the poverty line, with salaries bringing in as little as USD 2 per day, rising to USD 20 per day for the emerging middle class. For those living on these tight boundaries, even the slightest variation to income can have a devastating impact. Crop failures, illness, changing market prices, natural disasters, theft, and the impacts of climate change can all negatively affect income, and for those living on this tightrope, even the slightest change can push them into poverty overnight.
Insurance offers financial security, but it was the COVID-19 pandemic that really shone a light on the worldwide disparities in financial security and the role that insurance plays in rebuilding both livelihoods and economies. As countries closed their borders, the economic shock was felt throughout the world but buoyed by insurance, developed nations were able to adapt and bounce back, whilst those in developing countries were largely left with little to no financial support or emergency backstop at all.
Insurers and MFIs began to see an even greater and more urgent need for inclusive insurance in these uncertain times, and the race to reach even the most hard-to-reach communities became an even greater focus. Digitalisation played an instrumental role, not only in improving communication channels, but also improving the efficiency of insurance product roll-outs too.
For insurers already operating – or looking to operate – in these often underrepresented and overlooked communities, providing the right insurance products requires true tailor-made solutions and deep knowledge and understanding of the consumer. Even in its most basic form, microinsurance is a far cry from traditional insurance; from recognising the different approach to microfinance lending, to providing products that work in unison with the often-blurred lines between households and businesses - there is no one-size-fits-all approach.
There is also the matter of caution and uncertainty felt by consumers who are new to purchasing insurance. Building trust between insurer and customer is therefore key, and this can only be achieved by acquiring the aforementioned understanding of the needs of low-income families and businesses, and therefore delivering solutions that add true value to them.
The microinsurance outlook
This is where the MiN comes into play. With over 70 member organisations and some 500 experts comprising the Network, the MiN’s convening power enables the identifying of emerging trends and best practices from around the world, knowledge sharing and dissemination within the community of members, but also with the wider ecosystem, helping insurers looking to enter untapped markets and bring cover to those who need it most.
One such emerging trend in microinsurance is digitalisation. Acting as a key mechanism for harnessing greater understanding, reducing costs and improving customer service, the uptake of technology is proving vital in delivering microinsurance products effectively. From reducing administration costs, speeding up processes and improving client servicing – such as offering enrolment and telemedicine services – to implementing technology that allows insurers to provide weather data and even sowing and harvest windows for farmers, there are certainly encouraging signs.
These new technologies, many of which are provided by insurtechs, offer solutions to several barriers faced by insurers when navigating the challenge of reaching remote communities.
Many of these initial challenges were identified in the MiN’s Landscape of Microinsurance Study series. To date, the reports have revealed the growing scale of digital platforms, the role mobile phones play in collecting premiums and paying claims, to the more recent discoveries on shifting consumer behaviour.
The most recent reports have also identified the growing demand for affordable health insurance and the significance of women clients. The increasing use and understanding around index-based agricultural insurance have also been explored, including how it can improve farmers adaptation to and mitigation of risks, as well as building of trust through automatic claims payments.
Tracking trends in distribution channels used is also a part of the research. Mobile network operators (MNOs) and organisations, such as religious groups and community-based organisations, cooperatives and trade unions, are increasingly in use as the ‘link’ between insurer and potential policyholders, although traditional distribution channels such as agents and brokers are still predominant. This only reinforces that while technology comes with some undeniable advantages, the human touch is also important in providing consumer education and building trust.
By collating coverage data, identifying emerging trends and best practices through shared experiences of successes and failures, the MiN is helping to drive the inclusive insurance market forward.
Building the safety net
For traditional insurers, engaging with, and helping deliver inclusive insurance is not only a corporate responsibility, but it is a way of aligning with the UN’s Sustainable Development Goals (SDGs) too. By providing a financial safety net, insurance can help protect the vulnerable from poverty and hunger, improve health and gender equality, encourage economic growth and help build resilience to climate change. To achieve these goals, however, insurers need to deliver products that are affordable, relevant, easy-to-access and sustainable. This means engaging with the inclusive insurance ecosystem.
This unique ecosystem is made up of various stakeholders, including those providing products and services, and those influencing their uptake. From technical service providers, research and academic institutions, InsurTech innovators, think-tanks, specialised product designers, training providers, and investors, between them they are working together to influence policymakers and regulations, help shape technical services, provide investment and capacity, and develop products and business models that ensure the microinsurance market work is effective at delivering meaningful change.
As an enabler of knowledge sharing, the MiN is comprised of all of these stakeholder groups and is driving the inclusive insurance sector forward. With such a wide avenue of opportunities available, there has never been a better time than now to push for wider industry engagement.
The MiN aims to build on the successes of members, whilst highlighting the collective responsibility of the insurance industry as a whole to protect the most vulnerable and play a part in closing the protection gap, through the development of effective risk management solutions, or investments, to name but the obvious. Exploring how insurers can integrate financial inclusion efforts into their Environmental, Social, and Governance (ESG) reporting, as well as looking at ways they can embed sustainability into their ESG strategies are a means to achieving this.
There is a thirst for inclusive insurance, and as more people grasp the role that insurance plays in concretely building resilience for those that need it most, the more we can work towards providing solutions that cater to this deep blue ocean of opportunity and make insurance truly inclusive for all.