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Microinsurance as a Disruptive Force

Juan Mazzini
Insurance Experts' Forum, December 2, 2013

Some of you may be familiar with Michael Raynor’s work around disruption. In his latest book he refers to being deliberately disruptive and how most companies that disrupt powerful incumbents start out focused primarily and often exclusively on connecting with a specific segment of the market, one that is poorly served — or not served at all.

The microinsurance market is, with no doubt, an excellent source of innovation for insurers. It matches perfectly with the underlying conditions required for disruption to occur. Microinsurance is a foothold to an underserved, untapped, and fragmented market with a high cost to serve under the present business model.

Innovative approaches to serve this market, including the required technologies, could afterwards be used with success upmarket, where insurers could benefit from agility, scalability, low operating costs, and the lessons learned by servicing a market with totally different dynamics. Innovation around product, pricing, packaging, distribution, processes, and technology, just to mention a few aspects, will be required skills.

A good example is Bradesco Seguros in Brazil. Bradesco offers Accidental Death through a product named “Primeira Proteção Bradesco” which sold 1.3 million policies within the first year with monthly premium of US$3.50, single benefit of RS.20,000.00 and 1 monthly sweepstake of RS.20,000 (US$ 10,800). In fact, sweepstakes are an important marketing tool; apparently the most important motive for customers in buying the insurance product. 

Distribution is done through Banco Bradesco’s own network of +3,500 branches, +25,000 banking correspondents (supermarkets, pharmacies, grocery stores, etc.) and mobile (sms). For those cities and villages close to the Amazon River, accessible only by boat and out of Banco Bradesco’s traditional network, it required technological support and some inventive: Banco Bradesco introduced a boat containing a bank branch.

Technology, such as web/mobile on.iBusiness and traditional POS, is used by agents and correspondents to manage the complete end-to-end process. Focus in simplicity and speed using an accelerated enrollment process by capturing customer data from the CPF or Social Security number.

Banco Bradesco has years of experience financially serving the segment market aimed by microinsurance and they are taking advantage of this, though they encountered some more challenges you can read about, along with more real cases and in depth discussion around Microinsurance, in our recent report “Microinsurance in Latin America: Disruption in Practice” at http://www.celent.com/reports/microinsurance-latin-america-disruption-practice

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