Inclusive Insurance: Closing the Protection Gap for Emerging Customers

17 January, 2018

Original source: CFI

This report illuminates the market opportunities and challenges associated with expanding coverage to underserved customer segments and the efforts insurers and banks around the world are making to help them manage and mitigate financial risk. Based on insights from written submissions and in-depth interviews with 30 people across 22 institutions, this report invites us to re-think the concept of insurance and its fundamental role in society.

We  use  the  term  “inclusive  insurance”  to  encompass  many  different approaches  to  reaching  the  unserved,  underserved,  vulnerable,  or  low-income populations in emerging markets with appropriate and affordable insurance products. These range from microinsurance for people with very little  disposable  income  to  new  products  and  services  for  an  emerging  middle  class  around  the  globe  who  have  not  been  served  by  traditional  insurance.

Major Findings

In  the  broadest  terms,  the  challenges  of  providing  insurance  to  lower-income  population segments are similar to those of providing mainstream insurance: identifying, understanding, and connecting with customers; providing relevant products; and carrying out the administrative work of collecting premiums and paying claims. For customers at the base of the economic pyramid, the small incomes from which premiums must come require insurers to solve these challenges in highly cost-efficient ways. Adding to the intensive cost pressure, several factors amplify the challenge of connecting with these customers: their remote locations, lower education levels, and lack of experience with formal institutions.

Strategies for effectively serving this target market include:

  • Simplifying products so they are easy to understand, easy to enroll in, and easy to claim against. For institutions, such simple products engender trust and are lower cost to provide.
  • Finding new distribution channels and aggregators-from telcos to farmer cooperatives to banks—to identify and connect with low-income customers.
  • Leveraging digital channels and new “insurtech” (insurance technology) innovations to connect with, and serve, low-income customers.
  • Implementing new business models and products to provide and administer the risk mitigation solutions at scale that meet low-income customers’ needs.

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