Micro-insurance must evolve to suit individuals needs

The insurance needs of lower income earners on the African continent have largely been neglected due to the difficult economic environment which battered global economies since 2008.

Traditional insurers tend to avoid this market as the risks and costs of operating in these markets are extensive.

Pan-African micro-financier, Blue Financial Services has stepped up its efforts in addressing the micro-insurance needs for lower-income earners. Blue is confident that operating in this challenging market will benefit the company, the clients and the economies of the countries in which they operate.

Greg Niemand, insurance divisional director for Blue says, “Poorer communities in Africa need access to affordable insurance products that are tailored to meet their specific needs. When resources are limited and unexpected losses occur, low income earners will probably not be able to recover from the unforeseen circumstances that resulted in the loss occurring. Since inception, Blue has sold more than 320,000 micro-insurance policies to the African market”

One of the micro-insurance products offered to lower income earners in the 13 African countries that Blue is operational in is the Credit Life Policy which is compulsory for those obtaining a loan from Blue. Niemand continues, “If life protection cover is not added to the loan product and the borrower passes away or is disabled, the responsibility to repay the loan falls on the lenders’ family. If death or disability does occur Credit Life pays the loan and leaves the family in a better financial situation to deal with the death and gain the benefits of the money obtained from the loan.”

Traditional insurers have struggled to make an impact in this diverse market as they often apply traditional insurance rules in unconventional situations. Offering micro-insurance products to lower-income earners presents major challenges to insurance providers, however, Blue has customized its product offerings to overcome these challenges and assist their clients more effectively.

Financial education is definitely one of the pitfalls in granting loans to blue collar workers. For this reason, Blue offers financial education to all clients so that the money borrowed can be used efficiently and effectively to enhance the lifestyle of the individual, the family and the community at large. This consumer education extends to insurance as clients are made aware of the features and benefits of all insurance products purchased.

Another challenge facing the industry is inefficient governmental systems in various African countries. Niemand continues, “In some countries it could take between six and nine months for a death certificate to be issued to prove that the borrower has died. Blue has adapted its claims requirements accordingly and will in certain circumstances only require a letter from a community leader confirming the individual’s death.” This ensures that the family of the deceased are not forced to make payments while Blue waits for the death certificate. In well developed urban areas, the micro-financier will also accept a letter from the hospital as confirmation of death.

Niemand emphasises the importance of finding a balance between affordability and adequately insuring the needs of the individuals being covered. “Every premium is calculated based on an affordability profile. One size does not fit all and it is important to tailor our micro-insurance products to meet individual requirements.”

Niemand concludes, “Blue offers a wide range of products to the African market and I look forward to evolving our micro-insurance offerings to take advantage of the new opportunities that this recovering market has to offer. The economic crises presented us with a unique opportunity to address our risks and till the soil for new markets.”

 

 

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