General Insurance Article - An Exciting Time to Consider the Microinsurance Market

Microinsurance is generally designed for low-income businesses and individuals who aren’t typically covered by traditional insurance. It is usually sold at low premiums and low coverage limits / caps.

 Claude PenlandBy Claude Penland, Actuary

 Some insurance analysts have said that microinsurance is an untapped market for emerging economies, especially in India, Bangladesh, China, the Philippines and many parts of Africa. Latin America should also see growth. In fact, microinsurance has a possible customer base of around 4 billion people. Interestingly, 200-300 years ago, sickness benefit societies, friendly societies and fraternal insurance plans were implemented in the United States and in Europe. These plans were essentially microinsurance, too.

 Swiss Re reports that the microinsurance market has an eventual potential annual premium of up to $40 billion.
 Credit life is presently a leading microinsurance product. Going forward, some expect other insurance products that are found to be necessary in the developed world – for example, health and property insurance – to develop a microinsurance following as well.

 Barriers to microinsurance growth include inadequate local regulation. Actuaries can find it difficult to price products with a lack of appropriate actuarial risk and exposure data. Insurance product distribution claims handling and underdeveloped microfinance sectors are also high hurdles to jump. And, finally, cultural acceptance and education can be significant barriers.

 Some insurers and governments are considering private-public partnerships to help develop the microinsurance sector. Reinsurance broker Guy Carpenter has even recommended microinsurance to reinsurers as a growing market where they could devote some excess capital.

 It is indeed an exciting time to consider the microinsurance market.

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