Microinsurances – Small policies with a big impact
ERGO develops insurance policies tailored to the financial situation and personal circumstances of people in developing and emerging countries. One pilot project, for example, enables the rural populace in southern India to insure their cattle.
ERGO wants to offer people in developing and emerging countries insurance products which are tailored to their needs and which they can afford. In » public-private partnerships, the primary insurer cooperates closely with non-governmental organisations (NGOs) and microfinancing institutions to develop products ranging from health, personal accident and property policies to covers providing protection against the loss of working animals. Farmers can also insure themselves against damage and losses, particularly crop losses.
Investing in a growing market
ERGO sees its commitment in the field both as part of its corporate responsibility, and as an investment in a growing market. “The primary insurer is focusing its attention primarily on the future market in Asia”, says Andreas Kleiner, Board member responsible for business in Asia. For instance, the Indian property-insurance joint venture HDFC ERGO has set up a separate unit, the Rural & Agricultural Business Group, to handle microinsurance solutions.
“Microinsurance will strongly gain in significance in emerging countries over the next few years. International demand is estimated at €1.5bn to €3bn, and insurance companies expect a growth rate of 100% in the next four to five years.”
Andreas Matthias Kleiner, member of the ERGO Board of Management responsible for Asia and Turkey
Helping people who have lost all their possessions
In the rural regions of southern India, ERGO uses HDFC ERGO General Insurance as a marketing channel for a variety of » microinsurance products: life, health, personal accident, travel, motor, householders' and company covers as well as a special animal and machine policy. The last of these is intended to help people who, as a result of an earthquake, for example, have lost their homes, working animals and/or tools. In order to be easily and quickly accessible for such people, HDFC ERGO has set up sales rooms in fifty rural supermarkets in the province of Uttar Pradesh.
Cooperating to achieve optimal health protection
In order to ensure the best health insurance possible, HDFC ERGO has entered into another partnership with the international healthcare company Biocon and 15 microfinance institutions in the southern Indian state of Karnataka. Working together, they can offer local people low-cost health insurance. In this cooperation, the microfinance institutions act as intermediaries, brokering the insurance to their clients, while HDFC ERGO carries the risk and covers the costs of surgical interventions and hospitalisation. Biocon provides outpatient care and health advice.
Concluding contracts via cell phone
The project in Karnataka has already got off to a very successful start, as 100,000 people have insured themselves, and it is expected that this figure will rise to about one million in the next three years. Plans even foresee the option of concluding a policy via cell phone and GPRS data transmission as of the first quarter of 2012. This service would be helpful especially for all those living in remote rural areas who would have access to insurance protection for the first time.
Weather insurance
The strongest and most promising area of microinsurance growth in India for HDFC ERGO is "weather insurances", i.e. microinsurance products that provide protection against weather extremes such as extended periods of high temperatures, drought or heavy rainfall. As soon as specified parameters (for example, a specified temperature or quantity of rain) are reached, the policy pays the previously agreed amounts, regardless of how extensive the loss actually is. The benefits agreed are modelled to correspond to the losses actually to be expected ‒ based on data collected by the Indian Meteorological Department (IMD). Parametric triggers of this type are used especially to avoid having to assess the actual extent of loss, which would often not be cost effective given the low sums insured and, in the case of microinsurance products, entails the danger that loss assessment would prove to be more costly than the losses themselves.
HDFC ERGO is the first private insurer to be allocated four Indian states (Rajasthan, Madhya Pradesh, Karnataka and Tamil Nadu) in a project run by the Indian government.
Munich Re also offers microinsurance products in its reinsurance and Munich Health fields of business.
