Inclusive insurance opportunity | Insurance Blog
Leading insurers are defining new ways to make money while giving back to communities in the process. This is defined as inclusive insurance, a concept that plays an important role in the development of the insurance industry.
Take two of the world’s largest network companies, Generali and Allianz: Generali created the Human Safety Net, to support families living in vulnerable situations. Allianz has created insurance offerings that cater to immigrants living in Europe. These insurers understand that coverage at all levels is very important. The World Bank Group considers financial inclusion, the umbrella term for financial services under which inclusive insurance resides, as key to reducing extreme poverty and promoting shared prosperity. Women, minority groups, and those in low-income communities are populations that are underserved or excluded from the insurance market. This is important to remember as underserved customers feel the pressure of the current macroeconomic environment. The demand for coverage at affordable rates is increasing, which suggests a growing opportunity for insurers with adequate products and services. If we look at this statement as insurance companies, our mandate is clear: financial inclusion enables us to better protect the individuals and communities we serve while providing increased premium growth for the sector. Bundled insurance is an opportunity for income growth; not just a CSR campaign.
Two important methods involving insurance provide a new source of income for insurers
Inclusive insurance in the retail insurance market creates a way to protect those who were otherwise discriminated against, and an opportunity for insurance companies to expand and capture that market. Two key points of impact are as follows:
1. Attract new customers to traditional products
When insurers expand their circle of protection, they open the door to new customers. First, insurers can provide new, accessible points of contact for consumers. Consumers who were previously uninsured in this category indicated that they did not know where to start in the insurance process. It has been learned that because they are not like the typical insurance buyer historically, these consumers may automatically assume that they are not eligible for insurance without additional information on how to determine eligibility. It is important to remember that in this context, new buyers differ from other sectors in that they may not have been able to reach family, colleagues or communities to educate them and inform them about the financial protection market. Fortunately, with the explosion of outreach through online, social and app-based engagement, there have never been so many options for trying to reach underserved or excluded communities. Insurers who use these channels and connect with consumers to influence behavior in an omni-channel manner are positioning themselves for success in capturing available market share. It is the transformative power driven by easy-to-engage education that creates market winners for carriers and consumers.
Insurance providers have an opportunity to change the perception that their underperforming consumers have about their insurance providers. Fifty-five percent of the average US sample of middle- and upper-income consumers with home or auto insurance would recommend their insurance provider to others. This compares to only 46% of low-income consumers (scores 9 and 10 on a 10-point scale).
2. Create new products that meet the needs of new customers
A. Expand the customer base
In addition to attracting new customers to traditional/existing products as shown above, companies can also expand their customer base by creating new products/services that meet the needs of an underserved or underserved consumer market (eg, low-cost products or products with short-term coverage).
For example, Allianz’s Emerging Consumers Business aims to provide insurance to the poorest segments of the economy. They operate this program in all their territories, including Europe by offering a variety of insurance policies for immigrants from Europe (also covering family members abroad), life insurance (term, credit, life linked to savings), and personal loans and car insurance for unemployed people who need a car to go to work in France.
Making insurance more affordable may seem like an obvious win, and it’s an intuitive part of any growth strategy. However, historically this observation and level of inclusion has never existed.
B. New products and distribution
Create demand, innovative new products and intelligent distribution powered by data and analytics: Integrated insurance offers an exciting opportunity for innovation across distribution and product. Insurers can modify the current portfolio of products to expand coverage in this underserved market through creative distribution that can work in concert, not conflict, with their current distribution model and insurers can create new or modified products with different coverage that are truly tailored to the needs of the segments.
Take the home insurance market, for example. The national average for homeowners insurance is found to be $1,854 (for a $300,000 home payment) which is about 18% more expensive than the top five cheapest home insurance companies. On average, homeowners in low-income areas pay $117 more for home insurance than residents in wealthier counties, a trend that is most pronounced in the largest cities in 34 US states. Despite these consumers paying more, they are underinsured for their needs and overinsured for the portion of the policy they are most likely to use (eg, flood coverage in a non-flood area).
The ‘charge’ paid by low-income homeowners is equal to about 1% of the median income in all major cities for low-income neighborhoods. This figure can reach 11% in some states.
European Market Opportunity
In one example in 2021, the European insurer’s philanthropic arm worked with Accenture to create a business case for developing inclusive insurance solutions that could address the ‘protection gap’—the difference between economic and insured losses—that hinders young families and migrants trying to build economic resilience. Accenture conducted internal and external analysis to help the foundation understand the market opportunity, investment opportunities and social financial impact of inclusive insurance. An estimated €250 billion market opportunity in Europe has been revealed through new insurance products and changes in premiums. It is estimated that between €188bn – €385bn of insurance premiums will be contested in Europe by 2025 due to ESG trends disrupting the market. Within this large market opportunity, the client began to explore inclusive insurance opportunities valued between €4bn – €14bn.
Conclusion:
There is no doubt that financial inclusion is a prominent topic of discussion among consumers, governments and regulators. The G20 has expressed its commitment to financial inclusion and the development of diverse leadership groups in insurance representing all interest groups. By adopting inclusive insurance, companies are not only establishing themselves as industry innovators, but they are future-proofing their business to manage coverage by ensuring that they do everything necessary to establish closed consumer segments as a business liability for growth. Inclusive insurance presents a clear opportunity for insurers to monetize and consolidate the industry’s core values to support and protect individuals, businesses, and communities while increasing the industry’s economic opportunity. If you would like to learn more about how insurers can continue to identify policyholders, build compliance and grow, please read our Insurers course. If you would like to discuss further, please contact Heather Sullivan or Nina Munoz.
