5
THE CHALLENGE OF PENETRATING EMERGING MARKETS
–– Prevalence of informal or self-employment. Policyholders not in formal work are harder to reach using the usual aggregators – such as employers. –– Many un-banked policyholders. Customers without access to banking can lack an effective means of paying premiums or receiving settlements. –– Lack of historical data. Limited data on events such as weather or flooding can make it difficult for insurers to price risks. Poor quality or absent customer data complicates the picture still further and without information on asset ownership, claims behavior or health history, traditional risk profiling is not possible. –– Lack of local knowledge. The challenges above may be presented in varying combinations in different locations, contributing to a lack of market understanding by would-be insurers, which can lead to ill-suited and ultimately unsustainable products. Despite the undoubted scale of the challenges, creative thinking and novel approaches are creating new and viable opportunities with the potential to unlock emerging markets and foster greater resilience. So called inclusive insurance is in the ascendency.
It will take concerted efforts - by non- governmental organisations, the insurance industry and private sector actors working on insurance inclusion - to begin to solve the challenge of building resilience among those who currently lack insurance. In emerging markets, improving access to insurance is far from straightforward, not least because of: –– A lack of infrastructure in remote and rural areas. This can make it difficult and costly to distribute insurance benefits, and provide customer support. –– Low education levels, lack of financial literacy and lack of knowledge about insurance.Asthesayinggoes:“Insurance is sold not bought”; explaining the value of insurance to first-time and returning customers can be challenging. –– Low levels of disposable income. Even modest premiums may represent a significant proportion of a household’s expenditure. –– Individuals may have little or no formal documentation. This can cause administrative issues regarding fraud prevention at the underwriting and claims stages.
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