Microinsurance is growing quickly. By 2012, 33 of the world’s 50 largest commercial insurance companies were offering microinsurance compared to seven in 2005. Between 2007 and 2012, six times as many people began carrying microinsurance.
In regions where insurance is a new concept however, companies face a number of challenges. These range from convincing customers that the industry is trustworthy, to persuading people who have very little money that a small portion of it would be wisely spent on insurance, through to figuring out innovative methods of delivery and payment.
The growing use of mobile technology has been part of the solution to all of these problems. Known as mobile microinsurance products or MMIs, these products are responsible for significant expansion of the larger microinsurance market and will continue to play an important role in the sector’s future development.
According to a study performed by the Consultative Group to Assist the Poor, between 2006 and 2013, MMI product offerings increased from two to 15. In the past four years, this growth has been particularly significant.
One way that MMIs aid in overcoming resistance to insurance products, is by bundling them with other products such as mobile phone contracts. However, the most significant role for mobile technology is in increasing customer retention and providing ways for customers to easily access payment and other systems and services.
More than 70% of microinsurance products use mobile devices to process some aspect of registration. Mobile devices can also be used to send payment reminders as well as collecting payments via card that are initiated by mobile, mobile money or airtime deductions.
Some companies do not yet have the mechanisms in place for customers to pay directly from their mobile devices, but instead use local representatives who collect payments into an e-wallet and transfer them to the company.
Multi-purpose, mobile technology
Mobile technology has a number of other roles to play in the microinsurance industry as well. Basic policy information and changes in policy can be communicated through SMS, and customers can also use mobile channels for questions about policies.
At present, most products cannot be changed or cancelled using mobile devices. In addition, fewer than half of all products currently appear to allow for customers to register a claim, while less than a quarter have a claims process that can be completed entirely on a mobile device.
However, mobile technology is rapidly evolving which will allow functions such as these to be administered and activated at the touch of a button, so it is not a matter of if, but more a matter of when this will be available to the customer.
Greater economic stability
Microinsurance is expected to continue its rapid growth and to penetrate new markets. MMIs will be significant in harnessing these new products by introducing the concept to customers by way of free add-ons to mobile contracts and as incentives to keep customers loyal to a mobile contract. B2B microinsurance is also expected to show significant growth, with more service providers specialising in this area.
Growth throughout the industry will lead to a more solid infrastructure for mobile microinsurance products and microinsurance in general. This in turn will result in more markets. Most companies have found that government involvement is essential in ensuring that pools of customers are large enough to bear risk. For these Governments, the benefit of microinsurance is a growing middle class and thus allows greater economic stability at all levels.