How low can we go? A discussion note on whether life microinsurance schemes offer value at low claims ratios

FinMark Trust commissioned Bowman Consulting to consider a method of measuring the value of life microinsurance with a view to answer the question of whether microinsurance products that have low claims ratios necessarily mean that their consumers are receiving poor value. It also considers whether there is a level of claims ratio below which consumers should not consider microinsurance as a viable risk coping mechanism because the value it offers is too low. To simplify the analysis, the report takes a narrow view when answering these questions by focusing only on cases where microinsurance can be compared with an alternatve mechanism, such as microloans used for risk coping. 

Microinsurance is seen as a mechanism through which low-income consumers can manage their risks, reduce their vulnerability and improve their welfare. The guaranteed benefit provided by insurance also allows for the development of critical services, which may otherwise not have been available to the community. For example, health service developments where service providers become willing to invest in improving facilities once insurance makes it possible for a larger proportion of the population to access the services. While this is theoretically the case, there are many challenges resulting in questions on whether microinsurance can deliver on this value proposition in practice. While extending coverage by insurance products was the initial focus of microinsurance stakeholders, much emphasis is now being placed on ensuring that clients are aware of their cover and are able to use it in times of need. The value experience depends on factors relating to both the client side (awareness, literacy, etc.) and the provider side (product design, sales process, disclosure, the availability of adjacent benefits such as credit, etc.).

 

Please click here to download the full report (PDF, 0.91MB)

 

This discussion note is a working draft and should be read in that context. It is being distributed in this form to elicit comment with the purpose of generating further debate on the subject of improving value of microinsurance schemes for clients. All comments are welcome and should be directed to the author ( This email address is being protected from spambots. You need JavaScript enabled to view it. )

Additional Info

  • Institution: FinMark Trust
  • Date Published: 2014
  • Document Type: Discussion paper
  • Author/s: Nigel Bowman

Search news, publications and events

 

How low can we go? A discussion note on whether life microinsurance schemes offer value at low claims ratios

FinMark Trust commissioned Bowman Consulting to consider a method of measuring the value of life microinsurance with a view to answer the question of whether microinsurance products that have low claims ratios necessarily mean that their consumers are receiving poor value. It also considers whether there is a level of claims ratio below which consumers should not consider microinsurance as a viable risk coping mechanism because the value it offers is too low. To simplify the analysis, the report takes a narrow view when answering these questions by focusing only on cases where microinsurance can be compared with an alternatve mechanism, such as microloans used for risk coping. 

Microinsurance is seen as a mechanism through which low-income consumers can manage their risks, reduce their vulnerability and improve their welfare. The guaranteed benefit provided by insurance also allows for the development of critical services, which may otherwise not have been available to the community. For example, health service developments where service providers become willing to invest in improving facilities once insurance makes it possible for a larger proportion of the population to access the services. While this is theoretically the case, there are many challenges resulting in questions on whether microinsurance can deliver on this value proposition in practice. While extending coverage by insurance products was the initial focus of microinsurance stakeholders, much emphasis is now being placed on ensuring that clients are aware of their cover and are able to use it in times of need. The value experience depends on factors relating to both the client side (awareness, literacy, etc.) and the provider side (product design, sales process, disclosure, the availability of adjacent benefits such as credit, etc.).

 

Please click here to download the full report (PDF, 0.91MB)

 

This discussion note is a working draft and should be read in that context. It is being distributed in this form to elicit comment with the purpose of generating further debate on the subject of improving value of microinsurance schemes for clients. All comments are welcome and should be directed to the author ( This email address is being protected from spambots. You need JavaScript enabled to view it. )

Additional Info

  • Institution: FinMark Trust
  • Date Published: 2014
  • Document Type: Discussion paper
  • Author/s: Nigel Bowman

Search news, publications and events