In the US, we are still not used to hearing about them, but they sound healthy for many reasons in the rest of the world. But it has a significant impact on industries as microinsurance has solved all risks and coped up with a challenge, and this ability has doubled since 2009. More than billions of low-income Americans cannot facilitate quality insurance services.
Microinsurance is a safety that leverages minimum wealth standard and society’s urbanization that people can connect it directly via their prepaid smartphones.
The ‘low cost’ insurance revolution
Microinsurance is a product focused on protecting social segments with a low-income level or operating in an unstable economy and has not accessed the standard insurance market. According to the BIMA Movile report, the penetration rate of insurance in developing countries is only 2.9% due to obstacles such as lack of education, inaccessible prices for most of the population, and a scarce distribution network.
Small insurances are the most promising solution you can activate through your mobile phone. In 2014, there was a massive penetration in Africa, Asia, Latin America, and the Pacific due to the larger population percentage of 17 million policies. By using mobile insurance, we will see an increase of 263% over the past year.
The key to this new business model is to use mobile phones as electronic purses. It is a feature that is becoming popular in a spectacular way. According to the study carried out by the GSMA association on Mobile Financial Services and experts expect to obtain 16 million customers. It is new in 2015 around the world.
Products of microinsurance
Microinsurance was born with life products. Although they have been extended to other sectors, giving rise to health microinsurance, accidents, and micro pensions, among other products.
They also have specific coverage, such as crop damage or food vouchers. You can sign a contract of it collectively to include an entire community.
Advantages of microinsurance
The emergence of microinsurance in the panorama entails a series of desirable advantages for the governments of developing countries, their population, and non-governmental organizations. Among other functions, micro-insurance:
They allow access to essential services for these communities, such as healthcare or agricultural aid programs.
- They increase productivity among insured persons since it has been proven that they are more willing to invest if they feel supported. It is, in turn, translates into economic growth, improvement of living conditions, and social inclusion.
- Also, insurers can multiply their customers exponentially without investing a large amount of money in distribution networks, benefiting from mobile services and informal networks.
And since the sums insured are small, people who make payment claims are usually fast.
Current challenges
Microinsurance also poses a series of challenges to the insurance sector since management controls are very weak and often occur. Many countries lack a legal framework to regulate this new type of insurance. Consumer protection strategies are usually scarce, so many doubts and complications accompany their implementation.
If you want micro insurance success, you must have a delicate balance. Under specific situations, such insurance can give you a profit. Products bundled with other services let you consider group insurance schemes that are generally viable.
Enhance such usage and reward client loyalty such as fertilizer, loans, smartphone minutes, etc.
Microinsurance awareness is at a high peak in some states such as the Philippines, South Africa, and India. This way, other established countries stay meager in this regard to microinsurance. Adapting modernized methods and systems designed for typical customers to the needs of the minimum income market can be difficult. Accelerate the insurance market’s development to keep it robust to alleviate poverty and stimulate business development.
Practitioners often cannot understand the lessons and experiences of mature marketers soon. As a result, market development is timeless; that’s why practitioners commit the same mistake. Many states cannot accommodate modern products or optional distribution platforms.
It is pretty tricky for low-income persons to break out of the poverty cycle as they do not have a proper plan to manage risks. Sustainable development will grow essentially when low-income people have access to efficient insurance.
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