When it comes to microinsurance, an effective operating model is critical. It needs to enable the insurer to overcome challenges through development and marketing of a successful microinsurance product. Here are four key areas where the effectiveness of the operating model will be put to the test:
Products must appeal to customers with limited experience with insurance and limited affordability, so insurers need to ensure that they gain a deep grassroots understanding of their customer base. This knowledge, merged with experience with more traditional products, can generate new products that are simple, cheap and easy to buy.
Marketing and distribution
Marketing and distribution is more about bundling sales with a partner’s products, such as short-term credit, than it is about direct sales. To ensure maximum understanding, keep the product, terms and documentation as simple as possible. It can be advantageous to share a distribution network to take advantage of localized infrastructure, centralizes processing and technology support.
Claims and administration
As with traditional insurance, claim settlement is a critical part of the equation. We recommend leveraging the professionalism and trust the local partner to achieve consistency between the sales message and the claims outcome. Outsourcing back- and front-office distribution is one way to better manage costs and service levels.
Risk and regulation
It can be difficult to accurately evaluate the risk involved, given the novelty of microinsurance, lack of data and insurers’ lack of familiarity with potential customers. Insurers can collaborate with partners to learn more about a community’s risk, pool risk across markets and regions, offering short-term products to limit exposure and use analytics to make the most of what data is available.
Overall, the quirks of microinsurance mean that the insurer’s chosen operating model will probably look very different from anything else in the business.
This is the fourth in a five-part series on microinsurance. Read the earlier posts:
To learn more, download Succeeding at Microinsurance through Differentiation, Innovation and Partnership (pdf; opens in a new window).