Leading insurance companies are defining new revenue pathways while contributing to communities in the process. This is defined as inclusive insurance, a concept that plays a key role in the development of the insurance industry.
Take the two major global airlines, Generali and Allianz, as an example: Generali created human safety netsupporting families living in disadvantaged circumstances. Allianz has launched an insurance product specifically for immigrants living in Europe. These insurance companies understand that inclusivity at all levels is a priority. this World Bank Group considers financial inclusionis the umbrella term for financial services under which inclusive insurance falls, a key enabler of reducing extreme poverty and promoting shared prosperity. Women, minorities, and people from low-income communities are Statistically underserved or excluded populations in the insurance market. This is important to remember as underserved customers feel the pressure of the current macroeconomic environment. The growing need to provide insurance at affordable prices points to growing opportunities for insurance companies with adequate products and services. If we view this statement as an insurance company, our mission is clear: Financial inclusion allows us to better protect the individuals and communities we serve while delivering higher premium growth to the industry. Inclusive insurance is an opportunity for revenue growth; more than just a corporate social responsibility initiative.
Two key ways Inclusive Insurance provides new revenue streams for insurance companies
Inclusive insurance in the retail insurance market provides a route to protection for those who have been marginalized and an opportunity for insurance companies to expand and capture this market. The two key points of impact are as follows:
1. Attract new customers to traditional products
When insurance companies expand coverage, they open their doors to new customers. First, insurance companies can provide consumers with new, accessible points of connection. Previously uninsured consumers in this segment said they didn’t know where to start. It is understood that because they differ from the typical insurance consumer historically, these consumers may simply believe they are ineligible for coverage without further understanding of how eligibility is determined. It’s important to remember that emerging consumers in this context differ from other segments in that they may not have access to family, colleagues, or communities to educate and introduce them to the financial protection market. Fortunately, with the surge in access to online, social and app-based engagement, there have never been more options for trying to reach underserved or excluded communities. Insurers that leverage these channels and connect with consumers through an omnichannel approach to influence behavior are well positioned to successfully capture available market share. It’s the conversion power driven by easy-to-engage education that creates market winners for both operators and consumers.
Insurers also have an opportunity to change consumers’ perceptions of inadequate service from their insurance providers. Among a sample of middle- and upper-income U.S. consumers with home or auto insurance, 55% would recommend their insurance provider to others. In comparison, only 46% of low-income consumers (scoring between 9 and 10 on a 10-point scale).
2. Create new products that meet new customer needs
A. Expand customer base
In addition to attracting new customers with traditional/existing products as described above, companies can also expand their customer base by creating new products/services that meet the needs of underserved or excluded consumer markets (e.g., low-cost products or products with short-term coverage).
For example, Allianz Emerging Consumer Business Designed to provide insurance to the poorest segments of the economy. They operate the scheme throughout their business, including in Europe, offering various insurance products for European immigrants (also covering family members abroad), life insurance (term, credit, savings-related life) as well as personal loans and car insurance for unemployed people who need a vehicle to travel to France for work.
Making insurance more accessible seems like a clear win and an intuitive part of any growth strategy. However, historically this focus and level of inclusion has not existed.
B. New Products and Distribution
Create popular innovative new products and creative distribution powered by data and analytics: Inclusive insurance offers exciting opportunities for distribution and product innovation. Insurers can evolve their current product portfolios to expand coverage into this underserved market through creative distribution that aligns with, rather than conflicts with, their current distribution landscape, and insurers can create new or improved products with different coverages that truly fit the segment’s needs.
Take the home insurance market, for example. The national average price for home insurance is $1,854 ($300,000 for home insurance), which is nearly 18% more expensive than the top five cheapest home insurance companies. On average, Homeowners in low-income areas pay $117 more for home insurance Higher than residents of wealthier areas, this trend is even more pronounced in the largest cities in 34 US states. Although these consumers paid more, they underinsured their needs and overinsured parts of their policies that they were less likely to use (e.g., flood coverage in non-flooded areas).
The “surcharge” paid by low-income homeowners is equivalent to about 1 percent of the average income in the lowest-income neighborhoods in large cities. In some states, that number can be as high as 11%.
European market opportunities
In one 2021 example, the philanthropic arm of a European insurance company partnered with Accenture to create a business case for developing an inclusive insurance solution that would address the “protection gap” (the difference between economic loss and insured loss) that hinders young families and immigrants trying to build economic resilience. Accenture conducted inside-out and outside-in analysis to help the foundation understand the market opportunity, investment potential, and social and financial impact of inclusive insurance. Through new insurance products and changes in premiums, Europe has identified a market opportunity of approximately €250 billion. It is calculated that Europe will compete for between 188 billion and 385 billion euros in premiums by 2025 as ESG trends disrupt markets. Within this larger market opportunity, clients are beginning to explore inclusive insurance opportunities worth between €4 billion and €14 billion.
in conclusion:
There is no doubt that financial inclusion is a prominent topic of discussion among consumers, governments and regulators. this G20 Expressed commitment to financial inclusion and promoting a diverse leadership team in the insurance industry that represents all interest groups. By adopting inclusive insurance, companies can not only establish themselves as industry innovators but also future-proof their businesses inclusive regulation Ensure they take all necessary steps to innovate for historically excluded consumer groups as a necessity for business growth. Inclusive insurance provides a clear opportunity for insurers to generate revenue and embody the industry’s core values to support and protect individuals, businesses and society, while increasing economic opportunities in the industry. If you’d like to learn more about how insurance companies can continue to understand the people behind their policies, build relevance and grow, read our Insurance Consumer Research. If you would like to discuss in more detail please contact Heather Sullivan or Nina Muñoz.
