MICROINSURANCE — INVESTIGATING THE OPPORTUNITY

There are economic and social benefits to be had from the growing recognition that there is both a need and a demand for microinsurance products in Asia. With our presence in Thailand, and as part of our preparation for any potential entry into India and China, IAG is well placed to take a lead role.

IAG is investigating the business opportunities and social impacts of the growing demand for microinsurance in developing economies around the world.

Our NZI Thailand operation is taking the lead with research and evaluation being carried out by Dr Apirada Chinprateep and her team reporting to CEO Chris Dooley.

IAG’s Sustainable Business Practices Unit identified a need for IAG to take a lead in microinsurance, and the challenge was taken up by Asia’s Regional Team and our NZI Thailand business.

Dr Chinprateep, a PhD in Applied Economics, has been recruited from the Macroeconomic Office of Thailand’s Office of the National Economic and Social Development Board.

The initiative is clear recognition by IAG that individual and family style businesses have an important place in Asia’s surging economic development.

The Munich Re Foundation 2005 report on 'Making Insurance Work for the Poor', identified that of four billion people in the world who live on less than US$2 a day, fewer than 10 million currently have access to insurance.

The World Bank’s Social Protection Unit, in their study ‘Viewing Microinsurance as a Social Risk Management Instrument’, identified that many of these single person and family ‘businesses’ have identified their vulnerability and are anxious about it.

Insurance needs may be as simple as protecting a sewing machine that is the primary generator of family income or it may involve more substantial assets.

With an emerging presence in the global insurance industry and with a presence in countries like Thailand, and potentially China and India, IAG needs to think ahead to identify the potential business opportunities and prepare to offer appropriate products.

Undoubtedly, as IAG realises its strategic intent to establish an Asian footprint, the case for microinsurance becomes compelling:

• There’s a growing expectation from governments in developing countries for corporations to cater for financially poorer sectors of their community as well as pursuing mainstream business.
• IAG is regularly rated on sustainability measures including the Dow Jones Sustainability Index and results have important global reputation implications.
• There are large communities of the population without access to affordable insurance products.

With these factors in mind, Thailand is an excellent location for IAG to develop its business approach to microinsurance.

It has a population base of over 65 million, social diversity in both city and rural areas, a developing economy with low insurance penetration rates compared with more developed economies, and significant poverty levels.

Such factors combined mean that conventional insurance is often too expensive for many of the Thai working population, almost half of whom work in the agricultural sector, existing on under US$3 a day.

Most importantly, IAG already has a strong business presence in Thailand. The work of Dr Chinprateep’s team will also have relevance to IAG’s business in other regions of Asia.

The initial phase is to build a knowledge base which is not currently available, with the aim of providing a platform from which IAG can take a leadership role in microinsurance.

This knowledge base will also provide the framework for development of appropriate products.

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