Micro-Insurance Faces Growth Challenges

The aim of the program is to provide the economic security of insurance to the world's poor. Five years ago, Allianz launched its life micro-insurance program in India through a subsidiary and it has grown to a number of developing nations since.

One of the barriers the programs face is that, due to its low premiums, to be effective it must be sold in high volume because it is a low margin business.

Mr. Anthony explained that to do this, the company is working with groups such as farm cooperatives, dairy boards, NGOs and others to market the products to villages. This has been easier in India, where such organizations exist. Other places, Africa for example, are more fragmented and difficult to reach the scale needed for a successful program, which he said is "central to success."

Within the next few years, after having a well established life insurance model to work from, Mr. Anthony anticipates the property and casualty business will follow.

He cautioned, however, that this line of business, which would be aimed at insurance property and crops, has more complex barriers to overcome.

For example, a fire claim on a home would need documentation and a claims adjuster to inspect and validate the claim. But the low premium does not make it feasible to follow the traditional route of sending a claims adjuster out to the site. There is also the risk management element to be considered and implementation of best practices in order to reduce risk.

Client education would be key for success of the micro-insurance program, to make sure clients keep their policies into the future and make sure that the product they have is what they need.

Building relationships within the local community would also prove to be important to the growth of micro-insurance programs, he continued, noting that building relationships would not only engender trust between the insurer and insured, but also build the company's understanding of the market needs of the poor.

As the company overcomes these barriers, the market is growing rapidly, Mr. Anthony said. He predicted that within a few years there will breakthroughs in managing crop and property insurance.