Responsible Finance Forum

Social Performance Indicators for Microinsurance

01 November 2012
Source:  BRS

This note presents the social performance indicators for microinsurance, which are designed by and developed for microinsurance practitioners to monitor, improve and champion social performance.

Why is social performance important?

Microinsurance targets vulnerable and financially excluded people who are exposed to relatively high levels of risk, such as illness, death, natural disaster, crime or crop failure. If well designed and delivered, microinsurance can provide a formal and dependable coping mechanism and reduce a household’s vulnerability to risk. Measuring social performance and using it as a management tool can subsequently help achieve these goals.

Social performance also contributes to the fair treatment of clients, which complements public regulation and supervision. As effective supervisory measures ensuring client protection are often not in place in the markets where microinsurance is developing, it often rests on the shoulders of the microinsurers to take a proactive role and monitor social performance at the product level and avoid harmful practices.

Social and financial performance

The financial and the social performance of products often go hand-in-hand. The positive correlation has been demonstrated in the microfinance sector where social performance champions have found that deliberate management of social performance can bring significant financial benefits. For example, adjusting the products according to client feedback will benefit the clients and probably also result in more clients renewing. Institutions that promote the participation and trust of their clients are expected to encounter fewer problems with information asymmetry.

Five of the ten social performance indicators are also used to track the financial performance of microinsurance providers, illustrating that they can be interpreted from both perspectives and confirming the importance of the double bottom approach.