Microinsurance for the masses
I believe insurance have two perspectives: insurance as a business and insurance as a promise. Being a business, insurance companies need to focus on marketability, profitability, sustainability, and other factors which increase shareholder value.
On the other hand, insurance is also a promise of future security. As provider of this security, an insurance company stays true to its purpose by prioritizing accessibility and affordability to reach the mass market which needs it most. This seems incongruent as these two frameworks set the backdrop for the classic struggle that insurers face.
That said, I believe that in recent years, the insurance industry has taken great strides towards achieving a harmonious balance between these contrasting ideals; in short, to do well while doing good. The opportunity presents itself through micro-insurance.
I believe, a genuinely successful micro-insurance product is meaningful, affordable, sustainable and accessible.
Microinsurance needs to be meaningful. The advent of smaller-scale financial products means that micro-insurance is likely not far behind. I am however compelled to ask the difficult question to each insurance company hopping on the micro-insurance bandwagon. Is the product an offer of security and protection that is ultimately meaningful to its target market? Will it make a relevant difference in their lives? A total premium payment of P10 that only provides a 100 peso coverage is nothing more than a waste of their time and effort.
Microinsurance has to be affordable. The target market being the lowest of income classes, pricing has to be cheap in absolute terms. Premium payments and other charges should be determined based on a daily wage earner’s disposable income (i.e., the amount in excess of what is imperative for his family’s subsistence).
Microinsurance can be sustainable. Micro-insurance need not be a charity case for insurance companies. While the bottom line in pesos and cents may not be as impressive, there is a viable business case (and this I can personally attest to) that allows insurance companies to profitably offer micro-insurance without having to subsidize the segment.
Insurance companies needs to take a broader perspective and factor in the incremental business that micro-insurance can provide in optimizing market sales and service. Apart from a valuable opportunity to enhance corporate image, brand and reputation, an insurance company can leverage on micro-insurance’s broad market base by generating additional market and clientele information for cross-selling or up-selling (even economic or commercial research) purposes.
Market or client profiles and other demographics constitute vital commercial data which the organization can deploy towards the sale and marketing of its products or services, as well as its partner-brands.
Microinsurance has to be aAccessible to its target clientele. Accessibility will allow micro-insurance to generate the momentum and volume it needs to expand as the next big market. A daily wage earner interested in procuring insurance coverage should be able to do so in a practical, convenient and efficient manner, without having to go through needless bureaucratic exercises which he would have neither time nor inclination for.
To address this, I strongly advocate exploring the many avenues offered by modern technology. To cite an example, anyone with access to a mobile phone (even our house helper has one) can purchase insurance coverage by merely sending an SMS or text message to a prescribed number.
I believe the insurance industry is in an optimal position to take on what looms high as the next frontier: micro-insurance. As we rise to this challenge, however, I urge organizations to examine whether they have properly factored in the four critical features to nurture a micro-insurance market to have a genuine impact to those who need it most.
In the end, this is a win-win strategy for the company as well as to the people… to do well while doing good.
Melvin J. Esteban is a Registered Financial Planner of RFP Philippines. Learn more about personal financial planning at the 74th RFP program this January 2019. To inquire, e-mail info@rfp.ph or text <name><e-mail><RFP> to 0917-9689774.
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