Strategies for Sustainability
This note summarizes the main strategies to achieve sustainability in microinsurance programs. It states that sustainability is a function of the trade-off between three competing objectives, namely, coverage, costs and affordability.Microinsurance providers have to balance the interests of employees, customers and shareholders. Main strategies to achieve this balance and sustainability are:
- Limiting benefits, by offering basic benefits at the start, capping benefits and focusing on big ticket items;
- Focusing on efficiency and thereby minimizing costs through more efficient and effective products, systems and processes;
- Diversifying income sources by cross-subsidizing premiums, capital funds and Government funds.
The key to sustainable microinsurance is to have good management that can patch together the right combination of strategies for their organizations. Microinsurance managers must have skilled employees, realistic product pricing, a sound business plan, timely and relevant management information. To be sustainable, microinsurance needs to be an independent activity with expertise, effective partnerships and many policyholders.
