Microinsurance offers protection specifically for low-income people in developing countries and emerging markets. With 3.7 billion of the world’s population on an income of less than USD$4 per day*, there is a clear opportunity for insurers to provide protection to those who are least able to cope when crises occur.
IAG has been providing protection to customers in developing countries via microinsurance, which IAG defines as a policy with an annual cost of no more than USD$10 (NZD$13.50), for several years.
In Vietnam, IAG’s AAA Assurance recently launched a suite of four microinsurance products covering personal accident, surgery and hospital cash, motorbike loss and theft and home fire protection.
The products are tailored for rural customers and are available through a local banking partner.
There are very few insurance products in Vietnam tailored for customers in rural areas, who account for almost 70% of the population**.
Low-income, rural populations in developing countries tend to live in an environment of elevated risk. Flooding, loss of property from theft or fire, agricultural losses and health concerns all have the potential to cause significant financial hardship to household income over time.
Being low-income, these communities are often more vulnerable to these risks than the rest of the population, and are the least able to cope when a crisis does occur.
One of the best ways to mitigate these risks and smooth out fluctuations in income and expenditure is through an insurance policy. However, affordability is key.
IAG’s microinsurance serves as a proof point of how combining industry best practice with local knowledge can provide tangible support to these communities through relevant, meaningful and affordable products.
What is microinsurance?
The concept of microinsurance will be familiar to holders of general insurance in New Zealand; insurers provide their customers with financial security and peace of mind against specific perils in exchange for regular premium payments.
Microinsurance differs from classic insurance by offering a stripped-down product tailored to the specific needs of low-income communities. Through covering only the basic risks most important in these communities, microinsurance can be much more affordable than classic insurance.
* source: 2011 data, World Bank Povcal Net
** source: 2013-14 data, World Bank