Leading insurers are defining new revenue streams while contributing to the community. This is defined as inclusive insurance, a concept that plays a key role in the development of the insurance industry.
Take two of the major global airlines, Generali and Allianz: Generali has created The human safety netto support families who live in precarious conditions. Allianz has created insurance offerings aimed at migrants living in Europe. These insurers know that inclusion at all levels is an urgent priority. The The World Bank Group is considering financial inclusionthe umbrella term for financial services that covers inclusive insurance, an important factor in reducing extreme poverty and increasing shared prosperity. These include women, minority groups and people in low-income communities Statistically underserved or excluded population group in the insurance market. This is important to keep in mind as underserved customers are feeling the pressure of the current macroeconomic environment. The need for insurance coverage at affordable prices is growing, suggesting there are growing opportunities for insurers with appropriate products and services. As insurers consider this statement, our mission is clear: through financial inclusion, we can better protect the individuals and communities we serve while driving higher premium growth for the sector. Inclusive insurance offers an opportunity to increase sales. not a pure CSR initiative.
Inclusive insurance offers insurers a new source of income in two ways
Inclusive insurance in the retail insurance market provides a path to protecting those who have otherwise been marginalized and an opportunity for insurers to expand and capture this market. The two main effects are as follows:
1. Attract new customers for traditional products
When insurers expand their circle of protection, they open the door to new customers. First, insurers can offer consumers new, accessible points of connection. Previously uninsured consumers in this segment have said they don’t know where to start in the insurance process. It turns out that because these consumers do not resemble the historically typical insurance consumer, they may simply assume that they are ineligible for insurance without further knowledge about how to determine eligibility. In this context, it is important to remember that consumers in emerging markets differ from other segments in that they may not have had access to family, colleagues or communities to educate and learn about the financial protection market. Fortunately, with the explosion of access through online, social and app-based engagement, there have never been more opportunities to reach underserved or marginalized communities. Insurers that leverage these channels and engage with consumers to influence behavior through an omni-channel approach are positioning themselves to successfully capture available market share. It is the power of conversion, driven by easy-to-deliver education, that creates market winners for operators and consumers.
Insurers also have an opportunity to change the perception their underserved consumers have of their insurance providers. 55 percent of a U.S. sample of middle- and high-income consumers who have 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 scale of 10).
2. Create new products that meet the needs of new customers
A. Expand the customer base
In addition to attracting new customers for traditional/existing products as outlined above, companies can also expand their customer base by creating new products/services that meet the needs of the underserved or excluded consumer market (e.g. low-cost products or products with shorter-term coverage).
For example, Allianz’s emerging consumer business The aim is to insure the poorest parts of the economy. They operate this program across their entire footprint, including Europe, by offering various insurance products for migrants in Europe (which also cover family members abroad), life insurance (term, credit, savings-linked life), as well as personal loans and car insurance for unemployed people who need a vehicle to work in France.
Making insurance more accessible may seem like an obvious win and an intuitive part of any growth strategy. However, in the past this level of attention and inclusion did not exist.
B. New products and sales
Create in-demand, innovative new products and creative sales based on data and analytics: Inclusive insurance offers an exciting opportunity for innovation across sales and product. Insurers can evolve the current product portfolio to expand coverage to this underserved market through creative distribution that is in harmony with, rather than inconsistent with, their current distribution landscape, and insurers can develop new or evolved products with different coverages that are truly tailored to the needs of the segments.
Take the home insurance market for example. The national average for homeowners insurance is $1,854 (based on $300,000 of homeowners insurance), which is nearly 18% more expensive than the five cheapest home insurance companies. Average, Homeowners in low-income areas pay $117 more for home insurance than residents in wealthier counties, a trend that is more pronounced in the largest cities in 34 U.S. states. Although these consumers pay more, they are underinsured for their needs and overinsured for the portion of the policy that they most likely will not use (e.g., flood protection in a non-flood zone).
The “surcharge” that low-income homeowners pay is about 1% of the median income average in the lowest-income neighborhoods of the largest cities. In some states this value can reach up to 11%.
The European market opportunity
In a 2021 example, the philanthropic division of a European insurer worked with Accenture to develop a business model for developing inclusive insurance solutions that would close the “protection gap” – the difference between economic and insured losses – that prevents young families and migrants from building economic resilience. Accenture conducted inside-out and outside-in analysis to help the foundation understand the market opportunities, investment potential, and social and financial impact of inclusive insurance. A market opportunity worth around 250 billion euros was opened up in Europe through new insurance products and premium changes. It was calculated that €188 billion to €385 billion in insurance premiums would be in competition in Europe by 2025 as ESG trends disrupt the market. As part of this larger market opportunity, the client began exploring comprehensive insurance options valued at between €4 billion and €14 billion.
Diploma:
There is no doubt that financial inclusion is an important topic of discussion among consumers, governments and regulators. The G20 has expressed its commitment to financial inclusion and promoting diverse insurance leadership teams that represent all stakeholders. By introducing comprehensive insurance, companies not only establish themselves as industry innovators, but also future-proof their business Regulation of inclusion by ensuring they do what is necessary to innovate for historically excluded consumer segments that are essential for growth. Inclusive insurance offers a clear opportunity for insurers to generate revenue and embody the industry’s core values to support and protect individuals, businesses and societies, while increasing the industry’s economic opportunities. If you would like to learn more about how insurers can continue to see the people behind the policies, build relevance and grow, please read our Study on insurance consumers. If you would like to talk about this in more detail, please get in touch Heather Sullivan or Nina Munoz.
