Request for information on reasons for low claims ratios in inclusive insurance

Claims ratio or loss ratio (a term used interchangeably), is considered a key indicator of customer value globally. Yet, there are moderately low claims ratios for inclusive insurance. Research done by the Microinsurance Network (MiN), revealed that claims ratios in Asia, Africa and Latin America and the Caribbean are relatively low, at a median rate of 23% (see MiN’s 2020 Landscape of Microinsurance). In general, claims ratios will vary according to the product line and a low proportion of premiums paid out in claims, over time, is an indicator of low value for the consumer. This is particularly important for inclusive insurance consumers who have low disposable incomes.

Some reasons provided for low claims ratios relate to issues such as conflict of interest between policyholders and the distribution channel, lack of proper information disclosure, untrained sales force or intermediaries, among others.

Against this backdrop, the International Actuarial Association (IAA) and MiN are undertaking a study to explore the issue of low claims ratio in microinsurance, with a focus on the following key questions:

• If claims ratios are so low, where is the remaining income going?

• What can or should be done to improve the situation?

The result will be a joint IAA-MiN paper that will be presented and discussed on various platforms. It is expected that the study will help participants to gain a better understanding of the value of inclusive insurance products to customers and what can potentially be done to improve the value provided.

For this reason, we would like to invite insurers, distributors of inclusive insurance and supervisors to share information on:

• How premiums are split between claims, distribution costs, management costs and profit for microinsurance in your jurisdictions

• Factors that contribute to low claims ratios

If you are willing to volunteer and contribute to the study, please contact info@microinsurancenetwork.org by 18 August 2021.