3. Microinsurance landscape
• Market estimated to be 3bn people by Swiss Re of which
only 3% have access to any insurance products
• Most dominant product is credit life for borrowers of
MFI’s; limited benefit for the poor, it protects the lender
• Strong demand for a “safety net” from the poor
• Increasing interest in the market from insurers
• Issue is how to cost effectively provide access, education
and claims servicing whilst generating profit across the
value chain
5. Microinsurance challenges
• Risk carrier: relatively easy to find willing risk carrier for
life and property, weather index and health are harder.
• Back office: key driver to cost but more importantly a key
driver to level of service and hence “success”
• Front office: we have to “white label” with companies
that have existing client bases. Why will they partner with
us? Are microfinance companies the best fit?
6. 2The economics across the value chain for health insurance INDIA
Typical insurer economics for a MicroEnsure health insurance policy in India (USD) Insurer
TPA
Distribution partner
MicroEnsure provides
MicroEnsure will split MicroEnsure
enrollment admin services MicroEnsure
marketing costs with insurers Impact from
as part of their service fee, does most of
(e.g., printed materials, ads) higher claim ratios
and sometimes supports the product
Working Draft - Last Modified 11/19/2010 5:39:50 PM Printed 11/19/2010 5:39:09 PM
salary of TPA staff design MicroEnsure’s
USD/ 10.0 MicroEnsure: 1 revenues are
policy 8.0
supposed to cover
6.0 cost of developing
MFI: 1 0.4 0.6-0.7 products, supporting
0.6 0.5-0.6
distribution and
14.0 administration
-13.4-13.3
Price to Distribution Risk Claims Marketing Admin fee Other Margin to
1
end fees premium other to TPA overhead insurer
customer paid to acquisition costs
insurer costs
Percent 100 20 80 60 4 6 3-4 6-7
Based on target claim MicroEnsure’s Currently often not Margin to insurer Economics of other
ratio of 60%; however, reduces insurers’ sufficient to cover negative if claim players in the value
claim ratio varies distribution costs costs of servicing ratio too high chain are tight, in
depending on state/ (from 25% to 24%) policies particular for TPAs
partner and stage of and increases their and (depending on
product maturity control over cost claims) for insurers
1 Based on target claim ratio of 60%. Actual claim ratios vary from 25% to 300%
Source: Interviews
McKinsey & Company |
7. Profit drives scale
• MicroEnsure works with a range of “front office” partners
Working Draft - Last Modified 11/19/2010 5:39:50 PM Printed 11/19/2010 5:39:09 PM
• Strong brand, accessible points of sale and ability to
transact cash are all key attributes for a “front office”
• Started by partnering with microfinance lenders
• 67 MFI’s together serving 12m active borrowers
• To date, less than 1m insured with MicroEnsure – why?
• Economics: loan = $10+, insurance = $0.20
• MFI’s happy to introduce credit life to protect themselves
but launching more complex products requires investment
of core personnel who could be used more profitably
elsewhere in the operation
McKinsey & Company |
8. If not MFI’s; then who?
Working Draft - Last Modified 11/19/2010 5:39:50 PM Printed 11/19/2010 5:39:09 PM
• MFI’s provide loans to circa 150m families out of the 3bn
available market; how else can we reach the poor?
• Need partners that are trusted, accessible and can
transact payments for premiums and claims
• We tried using VSLA groups and churches – trusted and
accessible but the cost of implementing a cash
transactional system made them not viable
• We asked our clients who they trusted; the most common
answer was “Coke” and “my mobile company”
McKinsey & Company |
9. Using mobile networks
• Typically start by embedding simple product into the sale
Working Draft - Last Modified 11/19/2010 5:39:50 PM Printed 11/19/2010 5:39:09 PM
of airtime. Increased loyalty pays for the “free” product
• Aim is to get millions of people using insurance for the
first time and for them to see that claims are paid quickly
• Second stage is to offer a “freemium” product; for
example increase your benefit or include your wife for a
small fee
• Third stage is to sell a stand-alone complex product, like
health, with premiums deducted monthly from mobile
wallet
McKinsey & Company |
