The report, “Inclusive Insurance: Closing the Protection Gap for Emerging Customers,” identifies the primary challenges of providing insurance to lower-income populations, as well as the solutions to overcome them.
This is a huge and untapped market for insurers as roughly 3.8 billion people are uninsured or underinsured. Rising incomes in emerging markets, as well as new technologies that reduce risk and distribution costs, are opening up opportunities to serve these markets.
“Even among people with very little disposable income, insurance can be a vital tool to manage financial risks and mitigate the effects of shocks,” Elisabeth Rhyne, managing director of CFI, said. “Rising incomes around the world create new market opportunities, making long-term investment in inclusive insurance both profitable for insurers and meaningful in terms of social benefits.”
These “inclusive insurers” are using new distribution channels and aggregators – from telcos to farmer cooperatives – to connect with low-income customers. They are also implementing new business models and products to provide risk mitigation strategies that low-income customers need. Further, they are deploying technological innovations – or “insurtech” – to service low-income customers.
In addition, these inclusive insurance strategies involve eliminating verification screenings to identify “exclusions,” offering insurance policies without any fine print, triggering payouts based on verifiable events or data instead of claim submissions, and engineering more frequent payouts to consumers.
The report also has examples of life and health insurance products designed to serve low-income customers.
“This report invites us to re-think the concept of insurance and its fundamental role in society,” Conan French, senior advisor for Innovation and Fintech at the Institute of International Finance, said. “It is our hope that this report enables our diverse membership—particularly those financial institutions not yet active in insurance—to leverage their expanding work with underserved customers to help close the insurance gap.”
The new report was conducted with the support of a grant from the MetLife Foundation.