FrontlineSMS:Credit on the Role of Mobile in Microinsurance

Re-posted from FrontlineSMS:Credit’s blog.

The expansion of microinsurance has been slow, tethered to distribution channels that allow insurance providers to achieve a feasible scale: microfinance organizations, for example, or retail shops. As such, microinsurance policies have been designed with viability and ease of distribution in mind; client-centric design is a luxury that most providers haven’t yet been able to breach. Instead, simplicity is the rule—a fair and necessary condition in the provision of financial services, but a recent conversation with the head of MicroEnsure’s Kenya office shed light on the potential for mobile payments to set microinsurance free, both in terms of distribution and product design.

According to a report by the ILO’s Microinsurance Innovation Facility, market potential exceeds 700 million people in Africa alone (excluding the poorest who can’t afford such a product), whereas current coverage stands at a paltry 15 million. Partly, this is because three quarters of microinsurance policies are bundled with microfinance loans, by far the simplest distribution model.