Responsible Finance Forum

Inclusive Insurance: Closing the Protection Gap for Emerging Customers

Susy Cheston
Source:  A joint report from the Center for Financial Inclusion at Accion and the Institute of International Finance

Emerging consumers present a promising market for insurance, and creative insurance companies have been developing promising models to reach this market for years. Since the 1990s, the microinsurance movement has demonstrated the benefits of insurance for low-income people, as well as exploring new business models to serve these customers profitably in frontier and emerging markets. Microinsurance pioneers, as well as social insurance programs, targeted customers in the informal economy who were underserved by mainstream commercial insurance. Microinsurance models matched their premiums and benefits to the needs of these groups. Today, inclusive insurance expands this market and product-development work to all those who have not been served by traditional insurance, including the lower middle class, while retaining a particular emphasis on vulnerable and low-income populations. A number of terms related to inclusive insurance are in circulation. Market leaders such as Allianz and AXA refer to emerging consumers or emerging customers. Others refer to mass insurance or popular insurance, a term often used in Latin America. Mexican mobile payments platform focuses not on the market itself but on changes to the claims process and the claims adjuster in order to serve this market, with the term nonadjustable insurance. The International Labour Organization (ILO) has championed what it terms impact insurance. In this paper, we use the term inclusive insurance to encompass all of the above. We define inclusive insurance as access to and use of appropriate and affordable insurance products for the unserved and underserved, with a particular emphasis on vulnerable and low-income populations. Whatever the language or specific target, it is clear that both traditional and new insurers are breaking open new markets through new business models, technologies, product design, and partnerships, all made possible by enabling regulatory environments. This report is based on written submissions and in-depth interviews with thirty insurers and insurance experts who are making inclusive insurance work as a profitable business model. Their optimism about inclusive insurance stems from both the sheer size of the potential market and the fact that rising incomes equip a large segment of the global population with the incomes needed to benefit from insurance services and afford the relevant premiums. Increasingly, realworld experience backs up the notion that inclusive insurance is commercially viable, as Part 3 of this paper discusses. Yet most of our interviewees maintained a high degree of commitment to social impact, recognizing both the social value of insurance and the special attention needed when working with vulnerable groups.