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Microinsurance drives innovation in business models
The need to deliver services at ultra low cost in emerging markets is teaching insurance companies to be more efficient
As far back as 2008 Zurich Insurance Group was emphasising that microinsurance could be profitable. Jim Schiro, Zurich’s CEO at the time, said: “Every one of these initiatives in Zurich has a profit-making business plan.”
Microinsurance developed in the late 1990s out of microfinance initiatives and is still often delivered in partnership with microfinance organisations. Occasionally products are subsidised by NGOs or governments, or driven by corporate social responsibility plans, but insurers are still viewing the sector with profits in mind.
Countries such as China, India and Nigeria are places that will soon have large, lucrative insurance markets and microinsurance is seen as a good way to attract lifelong customers.
Michael McCord of the MicroInsurance Centre says that through finding innovative ways to cut costs to produce a low cost product for the developing world, insurers are also finding ways to cut the cost of their products at home. That principle is one of the most appealing aspects of microinsurance for many firms, he adds.
Some of this comes from using technology, such as mobile phones, for product marketing, delivery and payment. Technology also plays a major role in cutting back office costs, says Mr McCord.
Much of the innovation is about stripping away unnecessary product features so that less management is needed. “Product simplicity is key in microinsurance,” he adds.
In business, working under constraints can often force brilliant innovations, whether in product features or business models. Microinsurance is pushing regular insurance to up its game.