July 25, 2012
In 2011, a local stakeholder group consulted with donors, including the Asian Development Bank and AusAID Fiji, to discuss the best way to introduce sustainable insurance services to low-income communities in Fiji. The group recommended that insurance providers should consider partnering with organizations with excellent outreach into low-income communities. In Fiji, this included religious and community-based organizations.
It is recognized internationally that partnering with local organizations provides an effective way to expand outreach and achieve scale in microinsurance. Success in microinsurance means more than simply selling smaller insurance policies–it requires understanding the specific characteristics and needs of low-income clients, who often have irregular incomes, live far from any bank and have little experience with financial services (including insurance). Partnerships allow insurers to reach these new markets by leveraging the networks and relationships of organizations better positioned to interact with clients within a specific community. A community-based organization can often handle the client education, policy enrollment, premium collection and claims payment better than an outside organization.
But any insurance scheme—micro or otherwise—must still be managed by organizations that understand how to handle insurance risks and in accordance with local regulations. This requires industry-specific expertise that community-based organizations seldom have. Insurance companies are generally better at executing this, along with other back office operations such as investing premiums and funding claims.
Dividing these tasks between the appropriate partners enables products to be sold more effectively and efficiently, keeping the cost down so that products are affordable yet sustainable.
So far, LICI is enjoying remarkable success in developing custom, low-cost insurance products for their distribution channels. Initial feedback suggests that the people targeted in these rural, “hard to reach” communities can afford insurance, and are very willing to pay for it—contrary to what was previously believed. It is hoped that other insurance providers in the region will follow suit and provide local communities with insurance designed specifically for vulnerable populations.
The products developed to date are simple funeral insurance products that provide the family of a policyholder with much need funds in the unfortunate event of their death. These funds can be used to cover the costs of the funeral, education for the children or help the family re-establish a source of income.
PFIP is a Pacific-wide programme helping to provide sustainable financial services to low income households. It is a joint project of the UN Capital Development Fund (UNCDF) and the United Nations Development Programme (UNDP) and has received additional funding support from the Australian Agency for International Development (AusAID) and the European Union. The programme is based at the UNDP Pacific Centre in Suva Fiji.