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Product Design and Insurance Risk Management

Topic :

This note states that in a low income market, insurers should ascertain the need and demand for insurance, determine the risks to be insured, and devise insurance risk management processes to ensure the product’s viability.

The note provides the following tips to microinsurance providers:

  • Product design should include: defining the target group; identifying insurable risks; determining key product features; establishing payment capabilities.
  • Affordability and product design preferences should be investigated together to provide real value to clients.
  • When determining eligibility, it is essential to consider: whether a product is designed for groups or individuals; whether it should be mandatory or voluntary; the approach that must be to adopted for covering high-risk persons.
  • Payment options could be short-term, long-term or renewable. Insurers prefer short-term policies while customers would prefer long-term commitment from the insurer.
  • Microinsurance benefits should be simple and the client should be able to claim the benefit easily.
  • Coverage can be in the form of basket coverage or family coverage.
  • Long-term clients who have not claimed any benefits could get value in terms of premium-back features, paid-up insurance, savings features, etc.
  • Insurers should avoid elective participation, diverse target populations and numerous product choices.
  • The amount of claims that must be processed should be controlled.

The note concludes by discussing the advantages of waiting periods and benefit schedules in avoiding the exclusion of high-risk clients.

  • Resource type
  • Author CGAP
  • Year of Publication2007
  • Region
  • LanguageEnglish
  • Number of pages2 pp.

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