There’s a (micro) storm brewing for the insurance industry, but it promises to make some seriously big waves.
The modern insurance landscape is difficult enough to navigate for wealthy individuals and businesses, let alone more vulnerable clients who are on shaky financial ground. And the unsteady nature of the insurance industry for these at-risk individuals and businesses isn’t just bad news for the client — it’s bad news for agents as well.
In order to stay relevant in an increasingly interconnected and fast-paced marketplace, it’s essential for insurance companies to embrace new trends — one of which is the burgeoning field of microinsurance, which allows for the protection of low-income individuals and firms against “specific risks in exchange for a regular payment of premiums whose amount is proportional to the likelihood and cost of the relevant risk,” according to the Microinsurance Network, a nonprofit firm.
To remain competitive, agents need to better understand how microinsurance fits into new consumer preferences, the rise of on-demand services, and the need to protect those whose economic futures are in peril due to climate change.
Consumer Preferences Are Evolving
We live in a world where speed and flexibility are highly valued: consumers increasingly opt for ridesharing services instead of owning their own vehicle, choose Airbnb instead of a hotel, and want to see fast, tangible returns on their investments. Prospective clients — whether they’re individuals, firms, or national governments — are seeking more manageable, short-term solutions to their problems, and are increasingly uneasy about becoming entrenched in long-term agreements that may not be in sync with their social and economic priorities ten years down the road.
While much of the financial sector has at least begun to adjust their models to match this highspeed marketplace, the insurance sector continues to lag.
So what can be done? Insurance companies need to start offering more easily accessible, short-term insurance packages that are available online at the click of a button, and developing apps that allow users to implement insurance plans that fit their needs without tying them down long into the future.
Handpicked Insurance & Climate Change
Out-of-touch and dated insurance models are detrimental to both the insurance agency and the client — both of which require increased speed and agility when it comes to implementing insurance plans in the modern world. Microinsurance policies allow a client to handpick a short-term package that matches their needs at the moment, which translates to lower premiums for the client and less long-term risk for the agency. This selectivity also allows agencies to handcraft their policies for specific demographics, geographic regions, and business sectors — meaning that firms are less likely to incur substantial losses down the road as a result of inadequate and antiquated data.
Microinsurance can also be used as a weapon against the economic ramifications of climate change in countless vulnerable territories. Areas devastated by large storms often require large injections of cash in order to aid in healthcare, infrastructure, and food delivery, and when the devastated community in question is located in a low-income area, investments need to be made quickly, efficiently, and simply. Microinsurance policies allow agencies to provide swift financial aid without worrying about the long-term risks of a plan that will have practically no relevance after the immediate needs of the afflicted territory are met.
Working With Changing Demand
Although microinsurance indeed has a bright future, agencies have thus far faced challenges in implementing these policies — mainly due to the difficulty of describing the benefits of microinsurance to those who need it most. Insurance agents therefore need to reassess the way they pitch their products, emphasizing the simplicity and long-term benefits of investing in microinsurance policies. Agents may also need to make their case directly to the governments of at-risk nations, since these governments are often only willing to tap into preexisting cash holdings in a time of crisis, and are skeptical of accepting outside investments.
If implemented properly, microinsurance may prove incredibly beneficial to both agents and at-risk clients alike.