Creating Innovative Insurance Products for Emerging Markets

Dinesh lives in Sri Lanka. He is 45 years old with a wife and four kids. He is the sole earner and works as a rickshaw driver. His wage barely covers his family’s expenses and certainly doesn’t allow him the luxury of saving for a rainy day. He is constantly worried about the risks his job presents for his family – accidents occur in his line of business and the consequences could be tragic. If the worst were to transpire, he has a large network of family and friends to rely on but the extent of help is not predictable, or indeed, guaranteed. So, what can Dinesh do to help ensure that his family can weather the worst, were it to occur?


In most developed countries, we recognise that Dinesh’s problem is one that life insurance policies help to solve. However, in many developing countries, the available suite of insurance products fails to meet the needs of millions of people like Dinesh.

Insurance has sometimes been described as a luxury that only the wealthy can afford. Statistics support this claim as global insurance penetration is 7% of global GDP but it is only 2% in developing countries.

Call centre agent in Senegal
Call centre agent in Senegal

In a similar way to people in developed countries, the poor also worry about coping with unexpected income shocks due to deaths in the family, healthcare expenses and accidents. There is clearly a need for insurance in emerging markets, so why is penetration so low?

A popular misconception is that insurance products are priced too high and that people in emerging markets do not understand the value of insurance. However, even if the price of traditional products was lower and there was a greater expenditure on marketing, it is unlikely that the take-up would skyrocket. Traditional insurance products offered in emerging markets are typically not appropriate or attractive for the low-income population. Insurance products need to be tailored to suit the characteristics, needs and behaviour of the low-income segment.

Last year, CGAP conducted a thorough review of 30 qualitative and quantitative studies on microinsurance. Evidence suggests that there are four key reasons for low insurance take-up:

  1. Trust;
  2. Liquidity constraints;
  3. Customer value proposition; and
  4. Behavioural factors.
Agent in Ghana

Trust: Trust goes beyond the insurance company’s brand and reputation. The customer also needs to trust the product. This can be done by making the product more tangible. For example, more communication; frequently promoting claims payouts; and having value-added benefits. Another way to build trust is through interaction with trusted sales agents and the provision of financial training.

Liquidity constraints: While the absolute price point is a decision-making factor in the purchase of insurance, it is not the only reason for low demand. Often, low-income people can afford to purchase insurance but do not have the funds to do so at the point-of-sale and cannot commit to predetermined payment schedules. Therefore, insurance products need to be flexible to accommodate the fluctuating income stream of individuals in emerging markets.

Customer value proposition: Service quality is highly valued as poor service can increase the implicit cost of purchasing the product. For example, a challenging enrolment process and claims filing process would require a lot of time from customers; time which could otherwise be spent in income-generating activities. Therefore, simplicity of the product; responsiveness of customer care; and the ease of registration and claims procedures have a large impact on sales.

Behavioural factors: While people may have the intention of purchasing insurance, this does not always translate into action. People procrastinate about paying for insurance and renewing their policies. Therefore, ease of adoption and retention is key. Reducing barriers to purchasing insurance will help to stimulate demand. For example, having the ability to purchase insurance at a nearby location; eliminating the need for documentation; and removing the requirement to actively line up and pay for premiums, making renewals automatic unless customers opt-out.

Agent in Sri Lanka
Agent in Sri Lanka


Using the lessons from the CGAP paper, traditional insurance products can be redesigned to meet the needs of mass market consumers in developing countries. However, for these products to exist in the market, they need to be profitable to incentivise insurance companies to develop them.

To date, a big barrier in the creation of financially sustainable products has been developing a cost- effective and efficient distribution channel. Fortunately, this barrier has decreased as the infrastructure for telecommunications has evolved in developing countries. Mobile phones have emerged as a powerful channel for distributing insurance products in a cost-effective way. In 2012, data from GSMA indicated that SIM penetration was at 87% for Asia Pacific, 73% for Africa, and over 100% for the other regions of the world. Given that mobile phones are prevalent in emerging markets, in both urban and rural areas, it is one of the most effective channels to deliver insurance products to the mass market.



Agent registering insurance product Bangladesh
Agent registering insurance product Bangladesh

Bima is an award-winning global microinsurance provider and is one of the pioneers of selling insurance through mobile phones to the mass market in developing countries. It was launched four years ago but has grown rapidly to have 10 million registered customers and a footprint across 13 markets in Africa, Asia and Latin America. Bima’s insurance products are carefully tailored to the needs of emerging market customers and are distributed in a cost- effective way to ensure that the products are, not only financially sustainable, but also profitable.

Bima’s products include life, health and personal accident cover. These products are affordably priced and range from as little as $0.23 to $2.00 per month.

Bima’s rapid growth trajectory is due, in large part, to its success in tackling CGAP’s four key reasons for low insurance up-take.

Trust: Bima has over 2,500 sales agents that are dedicated to selling Bima’s microinsurance products. These agents come from the local community and spend time ensuring that customers understand the product prior to purchase. Customers receive regular SMSs updating them on their payment and cover, and they can contact an attentive customer care hotline if they have any issues.

Liquidity constraints: Customers pay for their insurance products using the prepaid airtime credit on their mobile phone. Inbuilt flexibility around premium payments makes it easy for Bima’s customers to manage their cashflows.

Customer value proposition: Bima provides quality customer service. Registering for the insurance product is almost effortless and when a customer needs to make a claim they are guided through the entire process. Even illiterate customers can confidently purchase Bima’s products knowing that the agents will help them through any paperwork that is required.

Behavioural factors: Customers do not need to change their behaviour to purchase this product. Once they have registered for insurance, their premium payments occur automatically as they top up and use their phone. Customers are kept informed of their successful payments and their level of cover through regular SMSs.


Agents in Ghana
Agents in Ghana

Although Bima is rolling out mobile microinsurance rapidly across many markets, regulatory challenges often exist when implementing this business model. In some countries, regulations prevent the use of electronic signatures, which means insurance policies cannot be sold over the phone and registrations cannot occur without collecting and processing a cumbersome amount of paperwork. In other countries, the use of airtime to pay for non- telecommunication products is prohibited, which eliminates an efficient means of premium collection.

On a positive note, several developing countries are evolving their regulatory framework to include microinsurance and they are acknowledging non-traditional distribution channels. Developments such as these are promising if we are to make insurance products more accessible to the mass market and for our rickshaw driver friend, Dinesh.

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