Microinsurance, also known as inclusive insurance, is the best tool at the industry’s disposal for closing the protection gap in developing countries, according to a report by global law firm Clyde & Co.
A worldwide shift from low to middle incomes, technological developments and an increasing governmental landscape that recognises the benefits of protecting emergent middle classes are all positive signs for a rapid uptick in inclusive insurance penetration in emerging economies, says the report.
“Introducing so-called inclusive insurance has required a fundamental rethink from insurers on how they ‘go to market’ because they are selling to customers with low or unstable incomes, in economies where formal identification documents may not be available, where the concept of risk transfer is not understood, and where traditional distribution channels don’t exist,” said Nigel Brook, Partner at Clyde & Co.
The report explores international attitudes to inclusive insurance and provides an analysis of the strategies deployed by global and local players in emerging markets. It suggests that insurers need to focus on three critical success factors: building trust, building transaction capability, and demonstrating ongoing value for customers.
“Carriers are showing great creativity in harnessing technology and developing new partnerships, new business models and new products, all of which inevitably raise legal and regulatory considerations,” Brook explained.
When considering the legal and regulatory challenges of operating in this space, Brook added that a positive regulatory approach, information-sharing across jurisdictions and greater encouragement of public-private partnerships could help engender an environment where further progress is made.
“Doing this will allow insurers to harness the power of insurtech to help close the protection gap and build resilience in emerging markets,” he concluded.
