MicroEnsure, for instance, a specialist provider in which AXA holds a stake, built on this credit life model and now protects micro-borrowers against risks of accidents, hospitalization, and even fire, theft and natural catastrophes. Across the industry, new products flourished, often guided by frameworks such as the ILO’s client value assessment tool (PACE: Product, Access, Cost and Experience) or the Microinsurance Centre’s design principles (SUAVE: simplicity, understandability, accessibility, value and efficiency).
Beyond life and accident policies, which cover critical risks because of the severity of their impact on households, much attention has been given to health, where the frequency of events is significantly higher. The hospital cash product, a cover where the policyholder receives a predefined indemnity in case of hospitalization, independent of the reason for that hospitalisation or the actual costs incurred, is a brainchild of this wave of innovation. While it does not aim to provide comprehensive health cover, is a scalable combination of affordability and simplicity. There are no assessments of pre-existing conditions, waiting periods or co-pays – all features that are hard for first-time insurance buyers to understand.
Agriculture risks have been another avenue for innovation, with crop insurance scaling thanks to public-private partnerships in countries, such as India and Thailand, as well as to the use of satellite data to assess losses and speed up claims payments. In parallel, as livestock continues to support the livelihoods of one billion poor people around the world, new approaches to cattle insurance include the use of connected chips strive to overcome challenges, including fraud, which remain formidable.
Providers also made great strides in extending distribution strategies beyond microfinance institutions. Mobile network operators proved a cost-effective pathway to cover millions of previously uninsured people in Africa and Asia. In Ghana, for example, GSMA research found that 7 out of 10 customers preferred this channel over buying insurance from an insurer. This says a lot, even though experience has shown these tie-ups are not always sustainable, not least because of regulatory challenges impeding the use of airtime to pay for insurance premiums in many countries. MNOs are not the only innovative distribution channel: in South Africa you can buy funeral cover at your local supermarket, while ACRE Africa, and, more recently, Pula Advisors bundle insurance with bags of seeds for Kenyan farmers. The firm relies on mobile technology to geolocalize the insured crop. I even once bought a local newspaper in Mumbai and noticed that subscribing to it would get me a free personal accident policy.
Finally, processes are surely the most underrated innovation. Enrolling for insurance is historically complex, with many questions asked during underwiting, or with health checks. Today, however, API technology and experience now allows us to insure on the sole basis of a name and a phone number, In India, even just a fingerprint can provide the basis of a policy thanks to the India Stack and Aadhaar ecosystem. Claims intimation can be digitalized too, with documents submitted by WhatsApp or other messaging systems, which significantly reduces turnaround time. Pioneer in the Philippines took the decision that only the Head of Microinsurance could take the final decision to reject a claim, ensuring management focus on what is the moment of truth for first-time buyers: when they submit their first claim.
While many schemes failed, they have provided valuable experiences upon which success has been built. The overall picture is positive: ILO research showed that in 2016, 60 of the largest insurers in the world launched programs for low income and emerging segments, compared to only seven in 2005. This number will only grow in line with the demographic shift of billions towards the middle class. In 2025 the number of people in the consuming class, defined as those earning over US $10 (PPP basis) per day, will exceed the number still struggling to meet their most basic needs. I am proud to say that today, AXA is already protecting over 8 million emerging customers.
Now at the end of its adolescent years, the inclusive insurance industry is faced with a dichotomy. The shorter, easier path would be to stick to existing models, where insurance is largely mandatory for the client because it is tied to another good or service such as credit or airtime. This was a necessary first step to understand the market and build volume, but such programs are short-lived. Forcing products on clients does not build their insurance culture nor their will to renew them. The road to sustainability is longer and includes hardships. It is one which requires us to spin the traditional insurance model on its axis.