We use the word “inclusiveinsurance” to refer to a variety of techniques to provide adequate and cheap insurance products to the unserved, underserved, vulnerable, or low-income communities in emerging economies. Microinsurance for persons with very little disposable cash to innovative products and services for a developing middle class around the world that isn’t addressed by traditional insurance. This research urges us to reconsider the concept of insurance and its basic role in society, based on insights from written submissions and in-depth interviews with 30 persons from 22 institutions.
What is insurance inclusion?
Financial inclusion refers to the process by which a society gains access to various financial services (credit, savings, insurance, payment, and pension services), as well as financial education systems, in order to improve its material well-being.
What is VAS insurance?
These bundled services, also known as value added services, are complementary to the product offers and are usually included as part of the package. Home help services, medical advice for health insurance, and other services are provided with home insurance packages.
What is the meaning of micro insurance?
- Microinsurance is a type of insurance with minimal costs and coverage limits. “Micro” refers to the small financial transaction that each insurance policy generates under this definition. “General micro insurance product” means any term insurance contract with or without return of premium, any endowment insurance contract, or any health insurance contract, with or without an escrow account, as defined in Schedule-I appended to these regulations; and “life microinsurance product” means any term insurance contract with or without return of premium, any endowment insurance contract, or any health insurance contract, with or without an escrow account, as defined in Schedule-I appended to these regulations. Microinsurance is defined by the product attributes, according to the Indian Insurance Regulatory and Development Authority (IRDAI). Their definition for microinsurance agents, individuals appointed by and operating on behalf of an insurer, for the marketing of microinsurance products, adds to this (and only those products).
- Microinsurance is a financial arrangement that protects low-income people from specific risks in exchange for regular premium payments that are proportional to the risk’s likelihood and cost.
- Micro-insurance does not refer to: I the size of the risk-carrier (some are small and even informal, while others are very large companies); (ii) the scope of the risk (the risks themselves are by no means “micro” to the households that experience them); (iii) the delivery channel: it can be delivered through a variety of channels, including small community-based schemes, credit unions, or other types of microfinance institutions, according to the author of this definition.
- Community health funds, collective health organizations, rural health insurance, revolving medication funds, and community involvement in user-fee management are all examples of community-based finance methods.
- The majority of community funding schemes arose in the face of severe economic restrictions, political instability, and poor governance. The active participation of the community in tax collecting, pooling, resource allocation, and, in many cases, service provision is a common trait of all.
- The use of insurance as an economic instrument at the “micro” (i.e., less than national) level of society is known as microinsurance. This definition combines the aforementioned techniques into a single conceptual framework. It was first published in 1999, predating the other three techniques, and is credited with being the first time the term “microinsurance” was used. Microinsurance decisions are taken within each unit, according to this definition (rather than far away, at the level of governments, companies, NGOs that offer support in operations, etc.).
Microinsurance, like insurance, operates on the notion of risk pooling, despite of its small unit size and operations at the level of particular communities. Microinsurance connects several tiny units into bigger structures, forming networks that improve both insurance functions (by expanding risk pools) and governance support systems (i.e. training, data banks, research facilities, access to reinsurance etc.). This mechanism is envisioned as a self-contained entity, free of external financial lifelines, with the primary goal of pooling the risks and resources of entire groups in order to provide financial protection to all members against the financial repercussions of mutually defined hazards.
As a result, the final definition incorporates the key aspects of the preceding three:
- The network of microinsurance units’ primary function is to improve risk management for members of the total pool of microinsurance units beyond what each can do as a stand-alone entity.
What is a value added service in insurance?
Value-Added Services (VAS) are services that are given in conjunction with the sale of insurance and go beyond just providing insurance. These services could include risk management or claims management.
What is AD & O policy?
Directors & Officers (D&O) Liability insurance is designed to protect corporate directors and officers from personal damages if they are sued by the firm’s workers, vendors, customers, or other third parties. Defense fees, settlements, and other expenditures linked with wrongful act charges and lawsuits can be covered by D&O insurance. Directors and Officers insurance is a crucial part of a risk management strategy for your company, and it may help you attract and keep skilled executives and board members.
What is the meaning of financial inclusion?
Individuals and enterprises with financial inclusion have access to useful and cheap financial products and services that fulfill their requirements, such as transactions, payments, savings, credit, and insurance, supplied responsibly and sustainably. Access to a transaction account, which allows people to keep money and send and receive money, is a first step toward broader financial inclusion…
What can an insurance service provider do to enhance value for the customer in value pricing?
Despite the fact that pricing has become a more important aspect in obtaining competitive advantage in the global insurance sector, many organizations are still attempting to strike the correct pricing balance. Simply put, insurers require a system that can both recruit and keep profitable existing business. However, the schemes must be sufficiently resilient to withstand severe cost constraints.
Why are so many insurers having difficulty setting prices? The reasons differ from country to country. They aren’t mutually exclusive, either.
The issue for some organizations is that, despite price rises, their systems and procedures have not advanced to the point where they can implement their desired pricing strategy. Overcapacity in their marketplaces is forcing prices down for others. Customers are becoming more discerning and price sensitive, which is especially true in mature markets. Furthermore, the introduction of direct players and price aggregators has resulted in increased transparency, allowing clients to select the most cost-effective option. This transparency has aided the commoditization of the automobile insurance sector in particular. Many of the above variables are having an impact on some businesses at the same time.
Fortunately, insurers may take meaningful steps to improve their pricing strategy and price realization. These measures are referred to as the “six steps to pricing power in insurance.”
Building a Sturdy Pricing Process
The following six imperatives, in our opinion, can help insurers improve their pricing capabilities:
Improve the pricing management of your portfolio. In terms of optimizing retention of the most profitable clients and boosting the profitability of low-value clients, far too few insurers have attained their full potential. Only by establishing progressively detailed segmentation and acquiring a deeper grasp of one’s own client base can one attain this goal. The capacity to derive deep client understanding from extensive data collection is crucial, especially when it comes to identifying opportunities for cross-selling and adding higher-margin auxiliary coverage to primary plans.
Make new-business pricing more precise. Many insurers are tempted to entice customers with steep discounts up front in the hopes of a price increase at renewal time. However, this method is proving to be ineffectual. Insurers must use data from not only their own client portfolios but also a thorough assessment of industrywide buying behavior to optimize new business pricing and strengthen risk management. Insurers should also use more realistic assumptions in their client lifetime-value predictions to prevent being caught off guard when consumers decide not to renew their plans.
Reduce the price difference between the list and street pricing. When it comes to price discounts, salespeople have a limited degree of flexibility. Discount budgets, on the other hand, are frequently abused, resulting in a distorted total price structure and unproductive portfolios. In a firm where agents and brokers are involved, minimizing disparities in desired price, rating structure, and actual price is critical. Furthermore, the allocation of discount budgets must be managed and tied to the overall performance of the agents. Agents who abuse their discount budgets should be disciplined in the future by having their pricing discretion limited.
Align distribution ambitions with the company’s overall objectives and pricing strategy. The distribution networks of insurers are often compensated solely on the basis of top-line performance. In some circumstances, commissions for new business are higher than for renewals. As a result of such incentive structures, there may be a lack of attention on retention and sales that have limited long-term economic potential.
We’ve found that aligning distribution incentives with corporate goals is critical to success in our client work. Insurers must establish incentives based on both the bottom line (loss ratio) and the top line. Insurers should also provide brokers with tools like greater deductibles, free supplementary coverage, and vouchers for future renewals as alternatives to monetary discounts, as well as access to top-notch customer-relationship-management systems that can help them keep their best customers. Agents should also be updated on how to keep consumers and deliver the greatest possible sales experience on a frequent basis.
Pricing should include customer and competitor information. Many insurers are skilled at establishing cost-based pricing systems based on claims history. Few, however, are adept at incorporating customer price sensitivity as well as current market prices (their competitors’) into their own pricing. Although some insurers may claim that their market’s regulations prohibit demand-based pricing or that their agents oppose it, we’ve seen companies find creative methods to work within legal frameworks, resulting in returns of up to 5% of gross written premiums. (For more information, see the exhibit “Insurers Must Consider Both Customer and Competitor Factors in Pricing Strategies.”) )
What are examples of micro insurance?
A micro-insurance plan is a contributory scheme that employs the insurance mechanism, among other things. It’s intended to satisfy the most pressing social protection needs of persons who aren’t covered by traditional social security systems, such as informal sector employees and their families. Membership is voluntary, and members provide at least a portion of the necessary payments to cover the benefits.
Mutual benefit organizations, non-governmental organizations, microfinance institutions, and commercial insurers can all run microinsurance schemes. All functions are administered by one company in some circumstances; in others, they are shared by two or more companies, as in partner-agent agreements. These units normally operate on a local level and are based on a person’s location, occupation, ethnicity, or gender. Typically, these organizations are already structured, for example, to provide microcredit; microinsurance is just an extension of their existing activity. They may also receive financial assistance from the government, international aid agencies (particularly seed money), and, in some situations, state-owned insurance firms. Members’ participation (for example, establishing priority needs, determining insurance premiums, managing and supervising the scheme, and so on) may vary depending on the scheme’s structure.
Life microinsurance (including retirement savings plans), health microinsurance (hospitalization, primary health care, maternity, etc. ), disability microinsurance, property microinsurance (assets, livestock, housing), and crop microinsurance are the most common microinsurance products (uncontrollable adverse events).
Many microinsurance programs have only been around for a few decades and are still in their infancy. Bangladesh, Benin, Burkina Faso, Côte d’Ivoire, Ghana, Guinea, Mali, Morocco, Nigeria, Philippines, Senegal, United Republic of Tanzania, Togo, Tunisia, and various Latin American countries are among the countries in which they operate. The Self-Employed Women’s Association (SEWA) in India has devised a program that protects over 32,000 women who work in the informal economy.
Microinsurance schemes have a number of advantages, including the ability of microinsurance organizations to mobilize additional resources and establish a legitimate demand for services, as well as the ability to better focus public subsidies to low-income groups. Microinsurance plans, on the other hand, are not intended to become the primary pillar of a country’s social security system, and numerous obstacles remain. Some are related to external restrictions and delivery difficulties, while others are related to existing product flaws, people’s perceptions of insurance in general, and ultimately, insurance regulations or their absence. Establishing the conditions under which microinsurance companies can better organize themselves and how their activities might be reproduced on a larger scale is critical.
What are micro insurance products?
Because of the strong demand and total potential profitability of the products, microinsurance has become an appealing area for many insurance providers in recent years. As a result of the rush to market, more stakeholders are launching new microinsurance products.
Micro insurers confront another form of difficulty linked to policy costs, in addition to increased competition.
The microinsurance business strategy is centered on low-premium plans, as previously stated. The policy expenses are not proportionate to the policy value or type due to this pricing limitation. To put it another way, micro insurers must offer low-premium insurance while accounting for the significant costs of underwriting and distribution.
Microinsurance providers are gradually increasing the use of digital technologies and platforms in their procedures to address this issue. Microinsurers are also reaping the benefits of MNO agreements, which allow them to streamline product delivery while reaching out to new clients in remote areas. In Ghana, for example, Tigo began selling consumers a life insurance plan that is included in their monthly cell phone subscriptions. The product was created in collaboration with Bima, a Swedish mobile insurance firm, Vanguard Life Assurance, a local insurer, and MicroEnsure, a specialty insurance company. Customers can get free life insurance for themselves and one family member under the basic insurance system. Customers’ insurance coverage is also determined by how much airtime they consume in a given month. Customers who want to upgrade their coverage can do so by paying an additional monthly premium, which provides them with additional life insurance for themselves and their families.
Partnerships with mobile money operators have also developed as a new approach for microinsurance firms to digitalize elements in the insurance value chain, such as premium collection and claim payments. Safaricom’s microinsurance business, as well as their leading mobile money system M-Pesa, is a good illustration of this. UAP Insurance, Britak, MicroEnsure, and GA Insurance are among the micro-insurers with which Safaricom has formed relationships. Weather index insurance for maize and wheat farmers, as well as personal accident, life, disability, and health insurance products, are among the microinsurance products available. Microinsurance carriers can use M-mobile PESA’s money transfer service to accept premium payments directly from policyholders through these partnerships. FrontlineSMS and PaymentView, two integrated open-source software tools, are also used to manage, monitor, and alter policies.
Microinsurance providers appear to regard technology-based integrations in the microinsurance experience as a real potential to expand their business and reach more clients. According to a Cenfri survey, Ghana, Kenya, Nigeria, Rwanda, South Africa, Tanzania, and Uganda each have 277 unique internet platforms. And insurance products are already available on 20 of these platforms.
Finally, there is no doubt that microinsurance is a promising market with rapid expansion in both operations and innovation processes. While cost restrictions continue to be a major barrier for micro insurers, recent initiatives illustrate how stakeholders are working to expand micro-scope insurance’s and viability as a separate and profitable sub-sector.