How Is Microinsurance Delivered? (Microinsurance Note #2)

This is the second in a series of short notes exploring microinsurance. The note explores:

• The efficiency of managing microinsurance products,
• The means of getting the product to the policy holder.

The note states that:

• It is critical for microinsurance products to have low premiums that cover costs.
• Technology solutions, and mandatory, group based insurance are two methods that help reduce costs.
• An important delivery channel for microinsurance is partnerships between insurers and microfinance institutions.
• Insurance companies are developing efficient delivery channels by working with a variety of intermediaries.
• Characteristics of a good microinsurance intermediary include:
  • Regular servicing of transactions with low-income people,
  • Having a large number of clients that are potential policy-holders
  • Enjoying a relationship of trust with both customers and the insurer.

The note explores other delivery channels that could move microinsurance to the low-income markets. These include:

• Direct ownership and delivery by community-based organizations,
• Retail chains that focus on the low-income market,
• Computer-kiosks in rural areas,
• Remittances.

The note concludes by stating that:

• Microinsurance is growing rapidly and insurers are finding creative delivery channels,
• This trend is likely to continue, driven by the growing recognition of the potential of low-income markets, coupled with the need to keep administrative costs down.