Class 26

Question 1

microinsurance

Answer 1

a type of insurance that is characterized by low premiums and low coverage that typically is provided to individuals who cannot afford or qualify for other insurance plans

Question 2

emergence of micro insurance as an economic driver

Answer 2

• potential market of $1.5-3 billion

- is this a social policy or can we actually make $$$ here?

Question 3

challenges in making micro insurance a successful economic driver

Answer 3

• policies with low limits and low premiums
• consumers with minimal insurance (financial products more broadly) experience
• insurers with limited data
• cultural barriers such as ineffective gov. and religious taboos

Question 4

policies with low limits and low premiums

Answer 4

• people buying micro insurance aren’t getting much back

- they’re mainly paying admin costs

Question 5

cultural barriers such as ineffective gov. and religious taboos

Answer 5

• health insurance is in the highest demand, but people can’t always get the medical attention
• gov’s may not make sure contracts are enforced
• “buying insurance means I don’t think God will take care of me”
• Islam-has rules against insurance

Question 6

common micro insurance products

Answer 6

• life
• health
• other property
• other property

Question 7

life insurance

Answer 7

• most common form of micro in developing countries
• includes:
  
  • credit life
  • term-life
  • funeral
  • accident
  • disability

Question 8

health insurance

Answer 8

most demanded by low income groups (critical illness; hospitalization)

Question 9

indexed insurance

Answer 9

• mostly crop insurance

- common in agriculture and catastrophic risks (floods, earthquakes)

Question 10

other property insurance

Answer 10

• demand is lower

- indemnifies beneficiary in case of loss of covered assets due

Question 11

sometimes policies intend to affect behavior

Answer 11

• all life: you have to get treatment for AIDS to get life insurance
• change to one style of farming to get insurance

Question 12

criteria for succesful microinsurance

Answer 12

• trustworthy
• accessible
• affordable
• simple
• flexible

Question 13

future regulations

Answer 13

• ensure solvency

- ensure access to insurance

Question 14

distribution models

Answer 14

• use mobile phones/technology to reduce transactions
• identify/implement unorthodox delivery channels
• improve financial literacy
• insurance being sold in grocery stores or through Apple Pay

Question 15

examples of futuristic microinsurers

Answer 15

• safety net: covers unemployment and disability; promise loss ratio will be at least 70% (lower expenses to do this)
• lemonade: profits made go to charity; after they’ve taken tons of $ out though; supposedly a pure-to-pure insurer-pay for each other’s losses