The generally accepted definition of Micro Insurance is the protection of low-income people (those living on between approximately $1 and $4 per day) against specific perils in exchange for regular premium payment proportionate to the likelihood and cost of the risks involved.
This definition seems to focus on one Target Market - the low income peoples of the world. This target market does not typically buy insurance and are generally ignored by main-stream insurance companies.
Here at Microinsurance we do not really like this definition, why pick on a population with a particular insurance sector?
We prefer a wider more inclusive definition of Micro Insurance, one that allows products to be developed, sold globally, works in the new Sharing Economy Insurance and includes solutions for many of the issues surrounding selling, distributing and managing micro insurance policies and schemes. Products that cover all populations based on their specific needs.
The problem with the accepted definition for Micro Insurance is that it is exactly the same as one might apply for regular insurance except it’s aimed at low income people. I.e. Insurance is the protection of people/businesses against specific perils in exchange for regular premium payment proportionate to the likelihood and cost of the risks involved
I guess the general insurance industry could not bring itself to call it Low Income Insurance, like they do for High Net worth Insurance so the term MicroInsurance was adopted.
Anyway we are getting away from the point.
Micro Insurance has many challenges and these challenges are not just issues surrounding products for low income families. Just like the definition for Micro Insurance is the same for any insurance, so are the challenges for any insurance product when faced with high volume sales and policies, new Business Insurance models like the sharing economy and platform businesses.
Today’s insurance industry is not very well geared up to deal with high volume sales and claims. The nearest you get to high volume is car insurance and in terms of micro insurance, these volumes are very small.
Here at MicroInsurance we see that the investment of resources needed to solve the challenges of micro insurance can be used globally for insurance policies that are simply small, micro. That can be used by everyone. Policies that match user and policy.
Typically insurance policies are complex and expensive. Insurance companies must like these as they sell millions of $$ of them each year.
We look at insurance the other way. We think of making insurance simple, event driven and the policy value small. Covering events that might last for a journey, a purchase, a short period, a job etc, hopefully you get the point – rather than buying for a year or month etc, cover the event instead.
Simple. Tech Based. High Volume. Embedded. Transactional.
Insurance policies are generally complicated - many insurance TV adverts point this out, focusing on saving money, making the process simple but hiding the complexity since people tend not to read 'small print'. The industry has this issue in its DNA. They are contractual documents after all.
Micro insurance policies do not need to be complicated, times needs to be invested to simplify the whole process ensuring that policies are fully incorporated through the process - marketing, quoting, buying, renewal and on through to a claim.
Tech Based Leverage in the tech in your phone or on your PC to good effect. Linking the process such that the customer journey is well thought through and connected, end to end, right though the customer journey and the life of the policy. Processes are built with APIs and integration at the core of the tech to allow
Insurance companies generally do not like high volumes of anything - especially claims. They simply are not geared up to deal with high volumes of customer contact for sales, queries, claims and complaints. They typically pass these tasks to others - Sales via aggregators or agents and brokers - Claims are passed to Third Party Administrators, specialist claims companies - Complaints are pushed overseas to keep costs down. Insurers and brokers split the process across many companies and struggle to have a complete view of the customer apart from financial performance and product based metrics.
To manage high volume required by Micro Insurance means owning and investing in the process and managing the transaction end to end. Entering data once and then straight through processing along the entire journey. This has the advantage that lots of data is collected and allows for better data usage and management which leads to improved process, more customer engagement and pricing.
Rather than buying policies for Cars, Gadgets, Home etc more and more insurance will be embedded in the process and by your use the benefits of the insurance will be passed on to you. Home security and Home help devices could come with home insurance, electric cycles would be insured against damage and theft, App that allow you to use the cycles could have insurance added per KM and variable depending on if you are in the local park or on a busy road. IoT devices for crops could come with insurance that monitors the crop and the rate varied depending upon the actions of the farmer and the weather.
Transactional Insurance does not have to be on an annual basis. The current process is to some extent driven by the inability for insurers to manage volume and customer engagement, it’s cheaper and easier to manage once per year rather than 12 times a year or on each usage – say 1,000 times a year. Imagine if car insurance was all usage based? This would be fair; the way insurance is managed would be very different. This is the world of transactional insurance – insurance when you want it and no more. High volume, small value insurance policies based on the transaction. Managing the policy life cycle, monitoring and claims fully automatically and on a transactional basis. Micro Insurance based on activities and usage. The distribution model and commissions for brokers, agents and partners all built into the process and a transparent claims process that has clear triggers for payment. Examples of this are parametric insurance for travel, hurricane and agriculture.