The MicroEnsure Business Model

THREE TASKS FOR MICROINSURANCE

MicroEnsure believes there are three tasks that need to be performed if insurance is to be successfully extended to the poor.

THE FIRST TASK is that somebody has to carry the risk; we believe that insurers and reinsurers are best placed for this task, and when they are unavailable in a particular geography or product line, then special vehicles such as Protected Cells are required.

THE SECOND TASK is the front office activity, or selling to the end user. Whilst MFIs have significantly played this role so far, we are increasingly seeing a role for humanitarian organizations in the provision of the sales platform. We are also interested in the possibility of individual sales made through partnerships with retail organizations such as mobile phone companies at airtime kiosks.

THE THIRD TASK is that of the back office; keeping track of the insured's details, collecting and accounting for premiums, and administration of claims all require a sophisticated MIS system. In our model, this back office processor also provides training to the front office staff, marketing materials to the end user, and product development assistance to the risk carrier.

We have found that this model maximizes the potential for growth because of the remuneration model. As an intermediary we only get paid if the product sells and remains competitive; we do not receive consultancy fees, just commissions after the sale, which tends to align everybody's interests towards growth.

By using the model of risk carrier, front and back office, we can imagine many new models for the delivery of insurance and we believe it is critical to move beyond the partner-agent or mutual models as the exclusive models in microinsurance,

As well as the 'broker' model above, we are increasingly finding that with existing conventional insurance policies, expense ratios tend to be an extremely high percentage of the premium, so the MicroEnsure is providing insurance companies with back office processing and functionality far more cheaply - the 'BPO' model. Here, our role is to provide the back office IT systems to handle data processing for coverage, premiums, and claims, whilst still providing the product design, training, and client education that are all enablers in the market place.