Teaching elephants to dance: challenges facing commercial insurers entering low-income markets
Commercial insurance companies have a lot of expertise, but it can be difficult to adapt established systems and processes designed for traditional clients, to meet the requirements of the low-income market.
For example, a South African insurer intended to recruit a three-person team to run a microinsurance field office at salaries that were less than half the lowest amount established within the insurer’s existing compensation system. When it was discovered that this lower limit in the compensation system was fixed, and that to change this limit would mean reviewing the insurer’s entire compensation system, the hiring plan for the microinsurance team got blocked. Instead, staff was hired and employed through an external agency. This led to the unintended effect of these staff having less affiliation and loyalty to the insurer, and increased costs.
Insurers need to recognize that traditional business systems or practices (such as hiring and compensation), not just products, require restructuring when serving the microinsurance market.
To learn more about how commercial insurers can adapt to the microinsurance market, see Chapter 19, “Teaching elephants to dance: The experiences of commercial insurers in low-income markets” by Janice Angove, Martin Herrndorf and Brandon Mathews in Protecting the Poor: A Microinsurance Compendium, Volume II.