The potential of microinsurance: targeting middle income populations in emerging markets.
Throughout the world's emerging markets, insurers increasingly are inclined to include microinsurance Microinsurance: The term is increasingly used to denote insurance for poor persons in low-income countries who are not covered by existing social or commercial insurance schemes. in their long-term strategies. Microinsurance has challenges--ranging from adverse selection to lack of profitability-- that are enough to discourage inclusion of this business in short-term planning. However, increasing global interest in high-growth markets necessitates global insurers to understand this business model. Therefore, this report provides an overview of this type of business, describes the typical participants and discusses its potential.
There is no standard, accepted definition of microinsurance; as such, this report will generalize generalize /gen·er·al·ize/ (-iz)
1. to spread throughout the body, as when local disease becomes systemic.
2. to form a general principle; to reason inductively. it as insurance that is accessed by the lower economic echelons of a population. Microinsurance serves to improve coverage of basic human necessities in terms of business lines such as health, life, funeral, property and agriculture. Such micro policies transfer risk from low-income individuals--who do not have access to traditional insurance--to a group. Typical characteristics of microinsurance are:
* Low-cost transactions;
* Simple risk coverage;
* Low net-worth clients; and
* Community involvement.
The characteristics of low-cost transactions, simple risk coverage, and low net-worth clients are similar to those once found in home-service or industrial-life policies around the turn of the 20th century in the United Kingdom and United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . These policies were more prevalent prevalent
widespread occurrence. after the industrial revolutions and evolved into more traditional lines that contributed to a virtuous cycle of protection, savings and increased wealth. Present-day emerging market economics that are cultivating microinsurance would like to see a similar evolution.
Analytical Contact Andrea Keenan, Oldwick +1 (908) 439-2200 Ext. 5084 Andrea.Keenan@ambest.com
Editorial Management Carol Demyanovich, Oldwick +1 (908) 439-2200 Ext. 5836 CaroI.Demyanovich@ambest.com