Microfinance Focus, September 2, 2011: According to a study commissioned by the Microinsurance Network entitled ‘Commercial Insurers in Microinsurance’, an increasing number of commercial insurance companies are entering the microinsurance market and the number is likely to increase in the future.

The study found that of the 55 insurance companies contacted, at least 33 were involved in microinsurance activities, covering more than 27 million low-income people in 2010, which represents about 20% of the currently served low-income market.

Access to new markets, guided by financial profit expectations, and/or by corporate social responsibility and brand concerns, are the major reasons for respondents to offer microinsurance products. In some countries they have been encouraged by regulatory bodies to serve the low-income market.

India, China and Indonesia are the major markets for the commercial insurers followed by Brazil and South Africa. For development and distribution of microinsurance products, insurance companies usually collaborate with local microfinance institutions, banks and non-governmental organisations, insurance agents and brokers.

Life, endowment products, accident and credit insurance are the most common products and represent in total 66% of all products reported by the respondents.

For commercial insurers, the main difference between microinsurance and their regular insurance products is the lower premium/benefit ration and the trend towards implementing less exclusion.

Despite of few challenges of entering this new market, the majority of the survey respondents expect the microinsurance business to grow by more than 100% within the next 3 years.

Factors like improved learning and prolonged experience, rise in insurance awareness and more and more governments recognising the important social role insurance plays will fuel the sector’s growth.

Majority of the respondents invested less than USD 1,000,000 but plan to increase investments within the next couple of years.

The vision is that costs will go down and product design will be improved. Therefore, survey participants tend to commit more resources to this new sector and very much perceive microinsurance as not only a social service but also a profitable business.