Product Design and Insurance Risk Management
This note provides guidance to microinsurers with insurance services targeted at the low-income market. Insurers need to establish the need and demand for insurance, determine risks that can be insured and devise insurance risk management processes for ensuring the products viability. Insurers in the low-income market need to be aware that small premiums and benefits will restrict the scope of marketing, underwriting, claims management and product complexity. The note offers guidance on the following areas:
- Product design, including defining the target group, identifying insurable risks, determining key product features, and establishing payment capabilities;
- Determining eligibility, based on the product design, with an approach to cover high-risk persons;
- Payment options, which could be short-term, long-term or renewable;
- Microinsurance benefits, which should be simple and easy;
- Benefits to long-term clients who have not claimed any benefits, in terms of premium-back features, paid-up insurance, savings features etc.
Insurers should avoid elective participation, diverse target populations and numerous product choices. The amount of claims that must be processed should be controlled. Finally, the note discusses advantages of waiting periods and benefit schedules in avoiding the exclusion of high-risk clients.
