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Microinsurance is Exciting, by Claude Penland, Actuary
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Microinsurance is Exciting, by Claude Penland, Actuary

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Microinsurance is generally designed for low-income businesses and individuals who aren’t typically covered by traditional insurance. It is usually sold at low premiums and low coverage limits / caps.

Microinsurance is generally designed for low-income businesses and individuals who aren’t typically covered by traditional insurance. It is usually sold at low premiums and low coverage limits / caps.

Published in: Economy & Finance, Business

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  • 1. Microinsurance is Exciting By Claude Penland, Associate of the Casualty Actuarial Society www.InsTrends.com
  • 2. What?
    • Microinsurance is generally designed for low-income businesses and individuals who aren’t typically covered by traditional insurance.
    • It is usually sold at low premiums and low coverage limits / caps.
  • 3. Who?
    • Some insurance analysts have said that microinsurance is an untapped market for emerging economies, especially in India, Bangladesh, China, the Philippines and many parts of Africa.
    • Latin America should also see growth.
    • In fact, microinsurance has a possible customer base of around 4 billion people.
  • 4. When?
    • Interestingly, 200-300 years ago, sickness benefit societies, friendly societies and fraternal insurance plans were implemented in the United States and in Europe.
    • These plans were essentially microinsurance, too.
  • 5. Why?
    • Swiss Re reports that the microinsurance market has an eventual potential annual premium of up to $40 billion.
    • Credit life is presently a leading microinsurance product.
    • Going forward, some expect other insurance products that are found to be necessary in the developed world – for example, health and property insurance – to develop a microinsurance following as well.
  • 6. How?
    • Barriers to microinsurance growth include inadequate local regulation.
    • Actuaries can find it difficult to price products with a lack of appropriate actuarial risk and exposure data.
    • Insurance product distribution, claims handling and underdeveloped microfinance sectors are also high hurdles to jump.
    • And, finally, cultural acceptance and education can be significant barriers.
  • 7. Wrap Up
    • Some insurers and governments are considering private-public partnerships to help develop the microinsurance sector.
    • Reinsurance broker Guy Carpenter has even recommended microinsurance to reinsurers as a growing market where they could devote some excess capital.
    • It is indeed an exciting time to consider the microinsurance market.
    • Thank you!