While the need for permanent insurance cover (e.g. whole life insurance and health insurance) will always remain, people will continue to need special-purpose insurance in life.
By Tushar Chatterjee
Many have a misconception that microinsurance is only for the poor. Any insurance cover which is small-sized as compared to a long-term insurance can qualify as microinsurance. This is also known as bite-sized insurance these days. Microinsurance can cover some special risks which exist for a few months only and then disappear. It can be for longer terms also.
While the need for permanent insurance cover (e.g. whole life insurance and health insurance) will always remain, people will continue to need special-purpose insurance in life. The regular life and health insurance policies do not cover all such risks. If a person is seriously injured in an adventure sport, his life insurance or health insurance policy may not give him much. There are a lot of exclusions. A person is given permanent disability benefit only if he is “so injured that he loses all ability to earn any reasonable income in life”. Health insurance policies help only when there is a serious disease requiring surgery and long-time hospitalisation treatment. Microinsurance can step in when conventional policies refuse to grant anything useful to the customers.
Insurance in this country is mostly sold through agents and web aggregators now. In fact, commission is what brings most of the intermediaries into the business of selling insurance. The products that offer higher commissions are sold better. Under such circumstances, it is evident that the conventional intermediaries will not take interest in selling bite-size insurance products. So, these products have to be sold online. InsurTech firms are in a better position to identify risks that can be managed through microinsurance products. They can develop products faster and engage with the customers much better than tied agents, brokers and web aggregators.
Microinsurance for millennials
For the millennials, risks are built into their lifestyle. They go trekking in inhospitable terrains and even go mountaineering, risking lives or limbs. Exposures to such risks are for a few days or at best a month. All such risks can and should be insured. Insurers need only to analyse historical data and then price such products carefully and keep on modifying premiums with changes in ground realities. Millennials are fast emerging as a potentially very profitable segment for insurers. However, all insurers sell “one size fits all” type policies which do not really appeal to the millennials. Millennials buy such products at a later stage of their lives (when they are no more typical millennials).
High profile cricketers, pugilists and grapplers bring laurels to the country. They run the risk of getting injured for a few months after fiercely competitive tournaments. Many such injuries can be career threatening as well. These are real life risks and insurance covers can be made available at a moderate premium.
Millennials these days go to far-off cities to earn well. Sometimes, they have to work for late hours. These people can be soft targets of hooligans and women run bigger risks for obvious reasons. All such risks are insurable and products have to be developed by insurers, with the help of InsurTechs who can analyse data at granular levels.
We need millennials to take business risks so that the country prospers. However, a business can fail for reasons not controllable by the millennials. Certain unforeseen legal complications can crop up and they may have to spend a lot of litigation fees. In most insurance policies, the risk of terrorism is not covered. Insurers need to understand the current and emerging risks of the millennials and then develop suitable microinsurance solutions.
The writer is an insurance industry analyst