A growing number of insurers are tapping into markets in developing countries through microinsurance projects, which provide low-cost insurance to individu- als generally not covered by traditional insurance or government programs.
Microinsurance products tend to be much less costly than traditional products and thus extend protection to a much wider market. The approach is an out- growth of the microfinancing projects developed by Bangladeshi Nobel Prize- winning banker and economist Muhammad Yunus, which helped millions of low-income individuals in Asia and Africa to set up businesses and buy houses. American International Group Inc. (AIG) was one of the first companies to offer microinsurance and began selling policies in Uganda in 1997. Swiss Re, Munich Re, Allianz and Zurich Financial Services have also entered the microinsurance arena. Disasters such as the 2005 tsunami in Indonesia and the 2010 Haiti earth- quake have demonstrated the need for insurance in many regions, prompting insurers to develop new products. While the coverage is often geared to protec- tion from natural disasters, there are also programs covering life/health risks as well.
With limited growth prospects in the insurance markets of developed countries, which are largely saturated, insurers see microinsurance in emerging economies as presenting significant potential for growth and profitability. A 2009 Swiss Re report on world insurance markets found that premium growth in emerging markets far outpaced growth in industrialized countries in 2008. The study identified the following regions as “emerging markets”: Latin America, Central and Eastern Europe, South and East Asia, the Middle East (excluding Israel) and Central Asia, Turkey and Africa.
In 2009 the International Association of Insurance Supervisors, the World Bank, the International Labor Organization and other multilateral groups launched a program to improve access to insurance in emerging and under- served markets called the “Access to Insurance Initiative.” Also in 2009 rep- resentatives from over 60 countries participated in the Fifth International Microinsurance Conference, which was organized by the reinsurer Munich Re and the Microinsurance Network, a joint effort of aid organizations, multilateral agencies, insurers, policymakers and academics.
