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Microinsurance and Claims: An Offer of Proof

A claim represents an opportunity for an insurance company to keep its promise. In developed markets, a claimant’s experience can mean the difference between retaining and losing a customer. In the developing market, the stakes are even higher. For a newly implemented microinsurance program, a misstep during the claim handling process can cause the market to doubt the entire program.

Insurance is a new concept in many emerging markets, and carriers interested in implementing local microinsurance schemes need to provide plenty of education about the benefits. Even then, the challenge remains that insurers have to sell an intangible asset. In a market with low wages and low personal net worth, there’s plenty of reason for skepticism.

When planning a microinsurance program, insurers must focus on the claim experience. Claim handling provides the opportunity to prove that the program works. One good experience can help convert skeptics and fuel near-term growth. If a claimant feels he or she didn’t benefit completely, though, the damage can pervade the entire program.

To ensure a successful claim experience, a microinsurance provider must:

  • have clear processes for submitting, handling, and settling claims
  • set standards for clear and consistent communication throughout the claim life cycle
  • develop a centralized system for aggregating local industrywide claims for benchmarking
  • implement claim triaging processes to support fast-tracking (where relevant) and investigation of suspicious activity to protect other insureds

By developing a consistent and reliable process for handling claims, insurers do more than gain the credibility that supports future market growth. They also benefit from the accumulation of data to use for improved pricing, refined reserving practices, and assessment of risk concentration. Future possibilities also include risk modeling, risk transfer, and development of new products.

For microinsurance to succeed, the claim experience has to be predictable and reliable. Anything short of that could cause an entire program to collapse. The claim experience is the proof that local markets — and a global industry — need. By getting it right, an insurer provides the foundation necessary to support a viable program and promote future growth in shareholder value.

Joe Louwagie

Joe Louwagie is assistant vice president, Property Claim Services (PCS). PCS is a Verisk Analytics (Nasdaq:VRSK) business.

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