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08 Jan 18 08:58

The smallholder farmer in Kenya, the street vendor in Mexico or the motorcycle taxi-driver in Indonesia – all of them have something in common. They are economically active, and strive to climb the socioeconomic ladder by expanding their businesses. Whether it's investing in a new field; opening a first restaurant; or adding another motorcycle to start a fleet, emerging consumers need access to financial services. This means loans to finance business growth, an account to transfer and receive money, and insurance to protect the livelihoods and assets they have built so far.

For a long time this Emerging Consumer segment was ignored by the financial sector, which traditionally targeted the small but wealthy middle and upper classes in emerging economies. But in the second half of the 20th century, international organisations and NGOs made the first step to target the other 80% of the population. While the original purpose was poverty alleviation, it also paved the way for new mass-consumer markets financed by microcredit. Since then, the microfinance movement has matured and found its way into mainstream banking.


Microinsurance, however, remained a wallflower. Only in the early 2000s it was recognized by the development community as a tool to protect the poorest of the poor. At this level, microinsurance has rarely been a stand-alone, economically sustainability endeavor. NGOs and International Organisations provide financial support to microinsurance schemes, and governments have often been called on to extend social protection schemes to the poorest in society. As a result, we need to debate whether microinsurance is actually a macro tool that requires state intervention.

Furthermore, it is worth asking whether this type of approach has missed the important number of emerging consumers who remain below the radar of both the insurance industry and the international development community. When it comes to rethinking microinsurance for emerging consumers, we face a different set of challenges than if we regard it as a tool for poverty alleviation. In addition, by shifting the focus to financially enabled individuals, insurance becomes a purchase decision rather than a state benefit. Ultimately, this is what will transform financial inclusion into a sustainable proposition able to reach scale.

In this space, the main challenges that providers need to address for their new emerging consumer base can be summarized under the three A's: Awareness, Access, and Affordability.

#1 Awareness
Many of the emerging consumers are first time insurance buyers. They also have specific needs and different consumptions patters. To attract this group of customers, the insurance industry will have to raise more awareness around the benefits of insurance and build trust by consistently demonstrating its value, for instance by paying and not by avoiding claims.

#2 Access
The traditional distribution models do not work and are too expensive. The mobile industry, for example, has a high penetration amongst emerging consumers and an obvious choice would be to leverage mobile technology for insurance distribution. There are several InsurTech companies out there who make use of mobile technology to reach the emerging consumers, such as MicroEnsure, BIMA, Democrance and Inclusivity.

#3 Affordability
Last but not least, the emerging consumer is used to consumption patterns that respond to the daily cash-flows that define the informal sector. For instance, an annual insurance premium contract is therefore not optimal for this customer group. Short duration insurance policies, eg monthly or even daily, must become an option.


Emerging consumer business is low-premium-high-volume business and requires a fundamentally different approach to the insurance value chain. 

As with all consumer-driven business, the consumer needs to be at the centre of our thinking. However, with insurance we face the issue that our industry is also challenged by our own legacy of outdated IT-systems, high unit cost of production, impede product innovation and a focus on push sales rather than engaging the customer on a journey.

While the discourse is shifting the focus from "Microinsurance" to the "Emerging Consumer", it is quite interesting that the principles of reaching the emerging consumer have been picked up by the InsurTech community in the US and elsewhere. In fact, Millennials have a similar set of expectations of insurance products as Emerging Consumers: the use of digital, engaging in client journeys, simple products without fine print, short duration policies or pay-as-you-go.

I find it a great eye-opener that emerging consumers in growth markets and the next generation consumers in the developed world have so much in common. Now it is up to the insurance industry to rise to the challenge of developing new risk pools that can close a significant insurance protection gap in both worlds!

I'm very proud and excited to play a part in this journey that will not just help transform the insurance sector, but more importantly, help lay the foundations to a more prosperous, sustainable and equitable world.

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Gilles Renouil - 7 Feb 2018, 11:27 a.m.

Dear Mario

Thanks for this great blog and connecting the emerging consumers to millennials! I find it very inspiring. If you allow me to highlight the challenge of the situation, I also sometimes find the mindset of emerging consumers towards insurance very similar to the mindset of non-millennials towards technology.

Many of us are convinced that disrupting technologies in insurance will be able to close the last protection gap for low-income consumers in emerging countries but the real issue is that if you don’t know how insurance works, digital alone is not going to teach you. These consumers need to build trust in the product. For that, they must have an outstanding first insurance experience and they will only value and remember the product if they experience it, on their own or through their happy friends. I have always been struck by our low-income women clients who keep saying “I received the product” when they actually mean “I received a claim payment”.

For a long-time my parents did not use technology beyond television, car and simple land-line. That’s their world. Why should they use a computer or have a smart phone?
When I showed my mum how to use skype, she was amazed. With all her children being far away, this technology had the potential to bring her loved-ones nearer by her. But building trust and confidence was not going to be easy. She started with a tablet, then a smartphone. She asked question after question. What is Wi-Fi? Why is the voice connection better than video? What is a data package? She discovered voice recognition on her own and started using it to write minutes of her meetings. Now even my dad skypes…

Likewise, low-income consumers have other coping mechanisms than insurance such as rotating saving groups, diwans (tribal councils in some cultures), neighbor and family solidarity. Why should they use insurance? They don’t think of insurance because they either don’t know it and if they do, they don’t trust it. If we can give them (and particularly women) a really good experience and learning opportunity they can adopt it and spread the word.
That’s my small contribution on the first A, more to follow…

I really share your excitement and pride in this transformation, but what a challenge! Let us make that happen by bringing generations, technology and human-centered design together.


Tatiana Korableva - 12 Feb 2018, 3:26 p.m.

Dear Mario,

You wrote: "To attract this group of customers, the insurance industry will have to raise more awareness around the benefits of insurance."

I believe that insurance industry is rather avoiding such products. They do not see a financial opportunity. Is microinsurance profitable business?

Mario Wilhelm - 12 Feb 2018, 10:11 p.m.

Dear Gilles,

Thank you very much for sharing your thoughts. I couldn't agree more, technology is an enabler but it will not solve the underlying issue. Insurance is still sold and not bought, although some experts are of the opinion that this statement is antiquated.

The development of insurance markets in Growth Markets is not different from the rise of insurance in Europe or the US. Informal risk coping has always been there and at one point more formal risk pools and mutuals emerged because it allowed to spread risk over a large number of people. Today this connection seems to be lost. The insurance industry faces the huge challenge to win back trust.

I do also believe that insurance stand-alone lacks purpose. Insurance always has to link to real world problems or lifestyles. What seems to be obvious and developed markets - car insurance for the car, house insurance for the house - becomes more tricky in emerging markets. What are the everyday problems people are facing, what is meaningful to them and how can insurance address these challenges?

Along these lines it is apparent that you and the WWB team are doing a fantastic job in creating a client value proposition and customer journey which is meaningfull. Technology is there to improve journey and products, and to reduce cost.

Look forward to your thoughts on the other two As :)



Mario Wilhelm - 12 Feb 2018, 10:33 p.m.

Dear Tatiana,

I agree with you and I hope it came out clearly in my blog. There is no business case for microinsurance in the sense of creating insurance markets with the bottom of the pyramid. It is the task of governments to include this segment of society in social security programs.

Where the insurance industry is clearly missing out on an opportunity is the Emerging Consumer segment. Just because your products and operating models do not work for the Emerging Consumer does not mean that there is no market. There is so much legacy in the insurance value chain - legacy IT, legacy thinking, legacy products and legacy processes. For instance, car insurance has not changed much since it was created almost 100 years ago...but soon it will.

These inefficiencies attract start-ups and that is one reason why we have a lively InsurTech scene. Insurance companies which continue with inefficient business models will disappear.

We can learn a great deal from Emerging Consumer business models. Reverse innovation is real. As mentioned in my blog, these models are now being used to target millenials.



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