The second day of Women’s World Banking’s Making Finance Work for Women Summit this past November saw practitioners sharing their experiences in breakout sessions on various financial products for the low-income market. The panel on microinsurance focused on the importance of, and various approaches to, providing insurance products to low-income women and featured Muna Sukhtian of Jordan’s Microfund for Women (MFW), Sammar Essmat from the International Finance Corporation (IFC) and Teresa Prada González from Fundación delamujer in Colombia, moderated by our own Microinsurance Director, Gilles Renouil.
The IFC recently published the “She for Shield” report, which estimated the market potential for insurance for women will reach $1.7 trillion by 2030. Emerging markets are poised to contribute 50% of this total and witness a six- to nine-time growth in their existing client base. The women’s microinsurance market thus holds huge untapped potential for insurers and financial institutions. In addition to the business opportunity, providing microinsurance to women can also positively impact entire households and communities. Research has shown that women are more concerned about their families and extended communities than men, so access to an insurance policy is likely to benefit not only the client herself, but also those around her. This builds a very compelling case for financial service providers – including insurers, financial institutions and development organizations – to invest in microinsurance for women.
Catering to women’s unique risks mitigation needs
After starting their operations providing credit to women clients, many of whom are entrepreneurs, both Fundación delamujer and MFW soon realized the need to also offer microinsurance. For small business owners, lost revenue during emergencies such as hospitalization can cause a significant dent in their otherwise steady cash flows. Fundación delamujer recognized that to improve their families’ well-being, women clients wanted tools to help them build greater financial security. After the initial success of its pilot life insurance product, Fundación delamujer developed a suite of four insurance offerings designed to protect against life and health risks for clients and their families. Women clients also need financial support during pregnancy and childbirth. With technical support from Women’s World Banking, MFW designed and launched a simple health insurance product to address these unique risk mitigation needs. The “Caregiver” product has been running successfully for five years, and MFW has now extended the benefits to include clients’ family members as well.
MFW’s insurance offering was driven primarily by a relentless focus on client needs. The organization’s leaders refused to offer an insurance product that would not be meaningful for clients. Insurance is a very complex product, further complicated by the fact that clients often do not fully understand the concept of insurance and insurance companies do not understand the needs of the low-income women’s segment. Women do not just need financial compensation, but also want a sense of protection. They want the right advice leading to peace of mind. Women-focused insurance products therefore have to be simple and the communication of benefits clear, since, as Muna noted, a product “won’t scale up if no one is using it.” Both MFW and Fundación delamujer also highlighted the importance of building a “culture of insurance” within the organization, sensitizing staff to client needs and empowering them to educate clients and provide claims process support.
The microinsurance sustainability formula: scale and competitive pricing
Fundación delamujer and MFW took two distinct approaches to scale up their insurance activities. While MFW provides health insurance to clients as a mandatory service linked to loans, Fundación delamujer has kept insurance voluntary, as regulations in Colombia prohibit the bundling of insurance with credit. Despite this restriction, Fundación delamujer has been able to offer competitively priced products that clients value: more than 90% of the institution’s 352,000 clients have at least one microinsurance product. The strategy that helped Fundación delamujer achieve this impressive growth has three key elements: 1) focus on client education and client-friendly claims processes; 2) training and incentives to the staff to create a “culture of insurance;” and 3) competitive insurer selection process for each product, leveraging the institution’s huge client base as a strength in negotiations. “We create competition among insurers to offer us the best price. We have a big client base and that is a lucrative opportunity for them,” explained Teresa.
MFW, on the other hand, has found that a key factor for success is finding the right insurance partner. This can be a challenge since, more often than not, insurers do not have a deep understanding of the organization’s core clientele: low-income women. The sole incentive for insurance companies to stay in the business is making profit in the long term—thus, having a large client base helps in bargaining. However, it is equally important for the microfinance institution to ensure pricing is competitive enough to keep the product affordable for clients. While designing the product, Women’s World Banking and MFW negotiated very hard with insurers to bring the price down. “Don’t be afraid to ask questions to insurers,” advised Muna. “We used to be told that this is actuarial pricing, but we didn’t hesitate in verifying the assumptions on our own.” Muna also emphasized the importance of building higher efficiency within the organization itself: “By reducing our own operational expenses, we were able to bring down the interest rates so there was enough margin for the clients to pay insurance premiums without extra cost.”
Microinsurance for women: a huge opportunity for insurers
Highlighting the enormous untapped potential of microinsurance for women, Sammar urged insurance companies to address the challenges prevalent on the supply side. “There is very limited understanding of this client segment and insurers should be proactive, do market research and collect data” she said. Women have unique needs, and insurers require a much deeper understanding of their risk profile and life-stage events. Insurance providers should also focus on developing simple products and innovative distribution approaches for this market segment. There remains a significant opportunity for insurers to improve public perception about insurance and build trust among clients. While these may seem like daunting tasks, Sammar put it best: “We should not look at microinsurance as a challenge, but as an opportunity.” We at Women’s World Banking could not agree more!
Can’t get enough on microinsurance? Check out the full video of the panel here.