Issue Digest-Microinsurance

KPMG INTERNATIONAL 

KPMG INTERNATIONAL 

Issues Monitor 

Issue Digest 

Sharing knowledge on topical issues in the 

International Development Services Industry 

Microinsurance 

Month 2011, Volume XXXX 

January kpmg.com 2013 

FOR INTERNAL USE ONLY

2 | Issue Digest: January 2013 

Executive 

summary 

01 Microinsurance 

Microinsurance provides protection 

and risk mitigation; is also a market 

with vast potential 

02 Increasing 

03 

04 

05 

Products 

focus on innovating 

products that combine consumer 

needs with affordable premiums 

Distribution 

Insurers investing to find the right 

mix of distribution channels that are 

effective and efficient 

Regulations 

Countries around the globe rapidly 

adopting separate regulations for 

microinsurance 

Outlook 

Good practices emerging, expected 

to stimulate further growth 

• Microinsurance refers to insurance products designed for 

people living on low incomes. 

• Estimated potential market of about four billion customers 

and US$40 billion in premium income per year. 

• Credit life is the dominant microinsurance product; 

however, health and agriculture insurance are also slowly 

gaining prominence. 

• Designing need-based products that are affordable and 

create shared value for insurers and society remain key 

areas of concern. 

• Microfinance institutions (MFIs) and cooperatives are the 

most-preferred distribution channels; however, the role and 

significance of different channels differ across regions and 

product segments. 

• Governments are trying to step up efforts to provide risk 

protection to a wider segment of the population by adopting 

favorable regulations as well as requiring insurers to create 

insurance awareness among the low-income group. 

• The microinsurance industry is expected to witness 

significant growth led by increasing insurance awareness 

through low cost innovative products and distribution 

channels being gradually introduced by the insurers. 

Government participation through NGOs, public private 

partnerships (PPP) and Community-based Organizations 

(CBOs) are also likely to help in the enhancement of 

microinsurance and the upliftment of the poor. 

© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG 

International. KPMG International provides no client services. All rights reserved.

01 

What is 

microinsurance? 

Microinsurance refers to insurance products that are designed to provide risk 

cover for the low-income population. These products have lower premiums and 

coverage limits as compared to the traditional insurance products. Microinsurance 

is a form of microfinance, akin to microcredit which provides small loans to people 

on low-incomes. For example, in India SKS finance distributes small loans that 

begin at about US$44-260 to poor women for starting and expanding simple 

businesses. Microinsurance is not only providing risk covers to low-income 

households but is also seen as a risk management option. Also, the corporate 

social responsibility drive towards developing microinsurance solutions in 

1, 2, 3 

emerging markets is rapidly gaining significance. 

World population by income 

Extremely Poor 

1.25/day 

1.4 billion people 

US$7 billon market 

poorest 

1.4bn 

richest 

Social 

protection 

2.6bn 

Low income 

Microinsurance 

Classic 

insurance 

2.3bn 

Source: World Bank, Allianz Group 2012, Swiss Re Sigma Report 2010 

Middle & high income 

1. Swiss Re Sigma Report: Microinsurance – risk protection for 4 billion people, 2010 

2. Microinsurance Innovation Facility 

3. 7th International Microinsurance Conference 2011 

2.6 billion people 

US$33 billon market 


International. KPMG International provides no client services. All rights reserved. 

$4/day 

Microinsurance statistics 

Number of people covered by 

microinsurance (in millions) 

2011 500 

2009 

2007 

78 

135 

0 100 200 300 400 500 

Source: Protecting the poor, ILO, 2012, 7th 

International Microinsurance Conference, 2011 

Microinsurance premium potential 

US$0.8-1.2 billion 

2010 

Potential 

market 

US$40 billion 

per year 

It is estimated that the current penetration of 

microinsurance is close to 2–3 percent of the 

potential market 

Source: Swiss Re Sigma Report 2010 

People covered by geographies 

(in millions) 

Asia 

50 

44 

400 

Latin America 

Africa 

Source: Protecting the poor, ILO, 2012, 7th 

International Microinsurance Conference, 2011


2. Microinsurance Innovation Facility 

3. 7th International Microinsurance Conference 2011 

4. Commercial insurers in microinsurance – Micro insurance network, 2011 

5. Protecting the working Poor, ILO, 2012 

6. Microinsurance at Allianz Group, September 2012 

Microinsurance has seen significant growth in Asia Pacific, particularly in markets such 

as India and China. Asia is seen as a region with a vast potential for microinsurance 

as it is home to about 70 percent of the world’s low-income population. Largely, 

Bangladesh, the Philippines and Indonesia are witnessing rapid growth in 

microinsurance. While Africa remains an undertapped market for microinsurance, 

insurers are increasingly making an effort to cover the African population by 

introducing need-based and easy-to-understand products. In Latin America, Brazil was 

one of the first markets to introduce microinsurance with Mexico, Peru and Colombia 

following suit. In Central and Eastern Europe, growth in microinsurance has not been 

2, 3, 4, 5, 6 

as swift as compared to Asian and Latin American regions. 

Microinsurance products* 

14% 

12% 

14% 

8% 

Life endownment 

Credit 

Health 

Accident & disability 

Property 

Others*** 

Distribution channels** 

MFIs/Banks 

NGOs 

CBOs 

Agents and Brokers 

Retailers 

Others**** 


International. KPMG International provides no client services. All rights reserved. 

23% 

29% 

* , ** The figures correspond to a survey conducted by Microinsurance Network in 2011. The study 

sample is composed of: 20 insurance companies, two insurance and reinsurance brokers, and two 

reinsurance companies. 

*** “Others” include legal expenses, index and casualty products. “Index” insurance pays when certain 

parametric triggers are met, for example crop index insurance might make payments based on 

rainfall data or when temperature drops below freezing. The challenge is establishing parametric 

triggers which minimize basis risk. 

**** “Others” include, local offices of development agencies, direct distribution by the insurance 

company itself, associations, utility companies and self-help groups, CBOs, government, 

employers, churches, and cooperatives. 

8% 

29% 

9% 

9% 

25% 

20%

02 

Products and 

innovations 

Insurers are driving innovation and introducing microinsurance products that 

are simple to understand as well as low in premiums. Despite new product 

developments, life insurance still remains the most prevalent microinsurance 

product, mainly driven by microfinance institutions as it provides life insurance 

protection to borrowers, often grouped with microcredit. Credit life protection 

facilitates micro-lending, providing a direct benefit to the lender (enabling the loan 

to be repaid in the event of death) but only limited direct benefit to the insured 

(enabling them to access microfinance); therefore, industry practitioners are 

increasing focus on products that offer comprehensive risk coverage. 6 

Agriculture and health microinsurance products are gaining popularity; however, 

they remain complex in terms of underwriting. These products typically require 

a catalyst such as subsidized premiums either in part or full. A public private 

partnership could be the key to implement such complex products. Governments 

and insurers need to increase insurance awareness among the low-income 

population so that simple products with no hidden terms can be introduced to 

provide protection to the low-income population rather than to large institutions. 

Insurance and product awareness, transaction costs, availability of easy-tounderstand 

products, infrastructure and need-based products that are affordable 

and create shared value are some challenges that the insurers face while 

designing products for the low-income group. 7 

Agriculture and health microinsurance 

products are gaining popularity; 

however, they remain complex in terms 

of underwriting. 

6. Micro-Insurance: A Largely Untapped Market, November 2011 

7. Protecting the working Poor, ILO, 2012 

Case studies—product 

innovation 

Aon Bolivia recently launched a new 

retirement product targeting the working 

class population, which requires regular 

payments for 100 months and thereafter 

entitles policyholders to receive double 

the monthly payment for the next 

70 months. 

In India, ICICI Prudential Life has 

partnered with a tea producer to offer 

unit-linked endowment products to 

company workers at tea plantations. The 

product comes with premium guarantees 

and flexible liquidity options. 

In 2009, PICC of China introduced a pilot 

microinsurance program insuring internal 

migrants against accidents and disease. 

All the above are examples of innovation 

primarily due to need-based products 

designed after studying the requirements 

of specific groups. 

Sources: Company websites, FactSet, Swiss Re 

Sigma Report: Microinsurance – risk protection 

for 4 billion people, 2010 




03 

Distribution 

strategies 

Case studies—distribution 

innovation 

HDFC ERGO’s rainfall index insurance 

product in India covers the diminished 

agricultural output/ yield resulting from a 

shortfall in the anticipated normal rainfall. 

It uses technology-enabled distribution 

and along with a messaging service for 

policy and claims data updates. 

Codenso, the largest power distribution 

company in Colombia, leverages its client 

base to target microinsurance products 

in partnership with Seguros Mapfre. 

Max New York Life insurance in India 

uses handheld terminals, mobile phones 

and portals to manage flexible payments 

that are small and irregular. 

Hollard in South Africa teamed up with 

PEP stores to distribute funeral insurance 

products. The monthly premiums can be 

paid at the store. 

In Ghana, MicroEnsure’s mobile 

insurance product called Mi-Life – 

distributed by MTN (Metropolitan 

Telecommunications Network) – allows 

premium payments to be deducted from 

the “m-wallet” monthly. Customers 

receive an SMS notifying them that the 

premium has been deducted and their 

insurance cover renewed. 

Sources: Company websites, FactSet and 

press releases 

8. Succeeding at microinsurance through differentiation innovation and partnership, 2012 

9. The landscape of microinsurance in Latin America and the Caribbean, 2012 

10. 7th International Microinsurance Conference: Making insurance work for the poor, 2011 

Distribution of microinsurance products is dependent on factors such as 

collaboration, relationship and trust with the low-income group as well as holding 

down associated costs. Microfinance institutions and cooperatives are the 

most-preferred distribution channels led by their vast established networks and 

proximity to the target market. Existing microinsurance channels also include 

NGOs, community, retail/ departmental stores, trade unions, utility companies, 

religious faith groups, post offices and commercial banks. 

The selection of the right channel mix primarily depends on the region and product 

segment. In India and the Philippines, MFIs are predominately used to distribute 

microinsurance products, while, in Brazil, utility and telecom companies are 

increasingly used. Distribution through retailers is being increasingly utilized in Latin 

American markets as well as in South Africa. Funeral insurance continues to be 

largely sold by informal burial societies, funeral parlors and cooperative societies. 

However, insurers are continuously innovating and introducing distribution channels 

that are not only cost efficient but also have a wider reach. Technology is being 

extensively used to distribute microinsurance products more efficiently and 

effectively. For example, mobile banking is gaining prominence as it is not only an 

enabler of client communications, but is also helpful in premium and data collection. 

However, the channel has limitations where face-to-face interaction is required. 

Insurers also face challenges in terms of the regulatory norms and licensing 

requirements of informal distribution along with the right balance of value and 

8, 9, 10 

impact on cost and innovation. 

In India and the Philippines, MFIs 

are predominately used to distribute 

microinsurance products, while, in 

Brazil, utility and telecom companies are 

increasingly used. 



04 

Regulations 

Microinsurance regulations are different from the traditional insurance regulatory 

frameworks as most insurance regulators propose lower capital requirements for 

micro insurers. Microinsurance regulations are aimed at ensuring simple, easy to 

understand products and also encourages new and innovative distribution models, 

such as banking correspondents. For example, the South Africa microinsurance 

regulatory framework will permit the licensing of a new category of insurers to 

provide only microinsurance products. Brazil’s regulations propose lower capital 

requirements for micro insurers (20% of the current base capital required), and 

11, 12, 13, 14 

simplified documentation. 

Examples of regulatory initiatives/proposals in microinsurance 

Mexico 

Regulatory approach 

adapted to be better tailored 

to actual market development. 

Second round of regulation 

has seen rapid increase in 

market penetration 

Colombia 

Does not have a dedicated 

microinsurance regulation; 

still incorporates proportionality 

in its regulatory framework 

Peru 

Has separate regulations for 


West Africa 

Microinsurance regulations in 

eight countries for mutual social 

health organizations. 

Brazil 

Separate regulation with provisions including 

specific license for microinsurance providers 

and consumer protection regulations 

Source: Swiss Re, Munich Re conference and KPMG analysis 

India 

Separate regulations for 

microinsurance; mandate on 

rural and social obligations 

as part of licensing conditions 

11. Driving Efficiency & Growth in Microinsurance through regulatory intervention – A Perspective, 2012 

12. 7th International Microinsurance Conference: Making insurance work for the poor, 2011 

13. The Millennium Development Goals Report, UN, 2011 

14. Weathering the storm: The demand for and impact of microinsurance, September 2012 

South Africa 

National treasury framework 

proposed with measures 

such as dedicated 

microinsurance licenses and 

simplified distribution 

Regulatory authorities 

around the globe are 

focusing on raising 

the awareness and 

benefits of insurance 

amongst the poor. 

China 

Microinsurance regulations 

already implemented 

Taiwan 

Proposed draft microinsurance 

regulations for a program 

covering traditional life and 

personal injury insurance 

Philippines 

Separate regulations for 

microinsurance; mandate on 

rural and social obligations 

as part of licensing conditions 




05 

Outlook 

The table below depicts the microinsurance industry and its changing landscape. 

Distribution Key Highlights Products 

Endowment 

products 

• Low sales 

volume 

• Poor 

persistency 

• Servicing 

challenges 

• NGOs 

2001–03 

Infancy stage 

Credit life and 

retail products 

• Bundling with 

micro credit 

• High-value 

sales to offset 

operational 

expenses 

• Regulatory 

guidelines for 


• Supply chain 

innovations 

• Technology 

innovation to 

improve the policy 

administration and 

claims process 

• MFIs 

• NGOs 

• Regional Rural 

Banks (RRBs) 

• Co-operatives 

• Retail chains 

• IT kiosks 

2004–08 

Startup stage 

Source: ICICI Microinsurance presentation and KPMG analysis 

Credit life, savings linked plan and retail 

products 

• Rural channel 

upscaled 

• Unit Linked 

Insurance Plans 

(ULIPs) savings 

plan launched 

• Technology 

usage for 

increased 

efficiency during 

client interface 

• MFIs 

• NGOs 

• RRBs 

• Co-operatives 

2009–11 

Evolving stage 

• Strong 

technology usage 

• Consumer 

awareness 

• Flexible savings 

and term 

products 

• Collaborating 

with larger banks 

on financial 

inclusion projects 

• Public private 

partnership 

• RRBs 

• Producer 

companies 

• Banks 

• MFIs 

2011 

Growth stage 

Saving and wealth 

accumulation 

products 

• Focused 

approach by 

insurers, largescaleneedbased 

programs 

• Products 

providing 

risk cover 

against health, 

agriculture, 

house and 

education to 

grow 

• Advance 

technology-led 

distribution 

• Governmentsponsored 

programs 

• RRBs 

• Banks 

• MFIs 

• NGOs 

2012 

Way forward 

With the risk management needs of four billion low-income people largely unmet, the potential market for microinsurance 

is vast. In addition, for insurers, the segment is expected to become a meaningful avenue for growth going forward. 

However, the role of the government is very important in this sector as there is a growing need for a supportive regulatory 

framework that facilitates broad-based insurance growth. 



KPMG information 

Further reading 

Microinsurance issue page 

Insurance mega trends 

The Intelligent Insurer 

Global Climate Change and Sustainability 

FS High Growth Markets workstream 

Protecting the seeds of growth – the Rise of 

Microinsurance - article in September 2010 Frontiers in 

Finance 

Click here for more Thought Leadership 

How KPMG firms can help 

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in all areas, enhancing accountability of states towards 

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engaged; global trends and stakeholder demands 

have seen to that. Energy pricing and security, natural 

Issue Digest: January 2013 | 9 

resource pressures, population growth, lifestyle 

changes, and consumer preferences are compelling 

companies to act. Even those who are following the 

global climate change debate from afar understand 

that their key stakeholders are already focused on 

these issues and the need to capitalize on them. As 

a result, there is a new clarion call for executives: 

leverage sustainability as a strategic lens on business 

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outcomes. We put a strong emphasis on monitoring 

and assessing strategic and operational risk. We 

understand the role of innovation in achieving a 

competitive advantage. 

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practical and appropriate advice on how to strenghten 

the controls. 

• Preparation for internal Value-at-Risk (VaR) 

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• Quantitiative validations of both VaR and derivative 

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• Advice on market-to-market and fair value appraisals; 

prepare existing portfolios for hedge effectiveness 

testing to comply with IAS requirements. 




Contact us 

Mary Trussell 

Partner, KPMG in the UK 

T: +44 20 7311 5461 

E: mary.trussell@kpmg.co.uk 

Erik Bleekrode 

Seconded Partner, KPMG in Brazil 

T: +55 11 2183 1775 

E: erikbleekrode@kpmg.com.br 

Serena Brown 

Global Citizenship Senior Manager, 

KPMG International 

T: +44 20 7694 8303 

E: serena.brown@kpmg.co.uk 

Gerdus Dixon 

Partner, KPMG in South Africa 

T: +27 8 2492 8786 

E: gerdus.dixon@kpmg.co.za 

Walkman Lee 

Partner, KPMG in China 

T: +86 10 8508 7043 

E: wakman.lee@kpmg.com 

Shashwat Sharma 

Partner, KPMG in India 

T: +91 22 3090 2547 

E: shashwats@kpmg.com 

Liz White 

Global Executive, Insurance, 

KPMG in the UK 

T: +44 20 7311 5526 

E: liz.white@kpmg.co.uk 

Una O’Sullivan 

Global Knowldge Leader, Financial 

Services, KPMG in the UK 

T: +44 20 7311 1443 

E: una.o’sullivan@kpmg.co.uk 

Rupesh Kumar 

Global Insurance Sector Analyst 

KPMG in India 

T: +91 12 4612 9270 

E: rupeshkumar2@kpmg.com 



Notes 

Issue Digest: January 2013 | 11 



The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual 

or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is 

accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information 

without appropriate professional advice after a thorough examination of the particular situation. 

© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent 

firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to 

obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such 

authority to obligate or bind any member firm. All rights reserved. 

The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International. 

Designed by Evalueserve 

Contact: Vipin Kumar 

Head of Global Sales and Markets Research 

KPMG in India 

Tel.+91 124 612 9321 

Publication name: Issue Digest 

Publication number: 12 – 006 

Publication date: January 2013

Issue Digest-Microinsurance

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