Leading insurers are defining new revenue paths while contributing to communities in the process. This is defined as inclusive insurance, a concept that is playing a key role in the insurance industry’s evolution.
Take two of the major global carriers, Generali and Allianz: Generali has created The Human Safety Net, to support families living in vulnerable circumstances. Allianz has created insurance offerings that cater towards migrants living in Europe. These insurers understand that inclusion at all levels is an urgent priority. The World Bank Group considers financial inclusion, the umbrella financial services term under which inclusive insurance sits, a key enabler to reduce extreme poverty and boost shared prosperity. Women, minority groups, and those in low-income communities are the statistically underserved or excluded population in the insurance market. This is important to bear in mind as underserved customers feel the pressures of the current macroeconomic environment. The need for coverage at affordable prices is growing, suggesting a rising opportunity for insurers with adequate products and services. If we consider this statement as insurers, our mandate is clear: being financially inclusive enables us to better protect the individuals and communities we serve while providing increased premium growth for the sector. Inclusive insurance is a revenue growth opportunity; not a CSR-only initiative.
Two key ways inclusive insurance provides a new source of revenue to insurers
Inclusive insurance in the retail insurance market creates a pathway to protection for those who have otherwise been marginalized, and an opportunity for insurers to expand and capture that market. The two key points of impact are as follows:
1. Attract new customers to traditional products
When insurers expand their circle of protection, they open the door to new customers. First, insurers can provide new, accessible points of connection for consumers. Previously uninsured consumers in this segment have indicated they do not know where to start in the insurance process. It has been learned that because they don’t resemble the historically typical insurance consumer, these consumers may simply assume that they do not qualify to be insured with no further knowledge on how to determine eligibility. It’s important to remember that in this context, emerging consumers differ to other segments in that they may not have had access to family, colleagues or communities to educate them on and introduce them to the financial protection market. Luckily, with the explosion of access via online, social and app-based engagement, there have never been so many options to attempt to reach underserved or excluded communities. Insurers who are taking advantage of these channels and connecting to consumers to influence behavior via an omni-channel approach are positioning themselves for success in capturing available market share. It is the power of conversion driven by easy-to-engage education that is creating market winners for carriers and consumers.
Insurers have an opportunity to also change the perception that their underserved consumers have of their insurance providers. Fifty-five percent of a US sample average of middle and high income consumers owning a home or auto insurance would recommend their insurance providers to others. This compares to only 46% of low-income consumers (score 9 and 10 on a 10-scale range).
2. Create new products that meet the needs of new customers
A. Expand customer base
In addition to attracting new customers to traditional/existing products as illustrated above, companies can also expand their customer base by creating new products/services that meet the needs of the underserved or excluded consumer market (e.g., low-cost products or products with shorter-term coverage).
For example, Allianz’s Emerging Consumers Business aims to provide insurance to the poorest segments of the economy. They operate this program across their entire footprint, including Europe by offering various insurance products for migrants in Europe (also covering family members abroad), life insurance (term, credit, savings-linked life), and personal loans and auto-insurance for the unemployed who require a vehicle to travel to access work in France.
Making insurance more accessible may seem like an obvious win, and an intuitive part of any growth strategy. However, historically this attention to and level of inclusion has not existed.
B. New products and distribution
Create sought-after, innovative new products and creative distribution powered by data and analytics: Inclusive insurance offers an exciting opportunity for innovation across distribution and product. Insurers can evolve the current portfolio of products to extend coverage to this underserved market through creative distribution that can serve in concert, not conflict, with their current distribution landscape and insurers can create new or evolved products with different coverages that are truly tailored to the needs of the segments.
Take the home insurance market, for example. The national average for homeowners’ insurance is found to be $1,854 (for dwelling coverage of $300,000) which is almost 18% more expensive than the top five cheapest home insurance companies. On average, homeowners in low-income areas pay $117 more for home insurance than residents in wealthier districts, a trend that is more pronounced in the largest cities in 34 U.S. states. Despite these consumers paying more, they are under-insured for their needs and over-insured for the portion of the policy that they are largely unlikely to use (e.g., flood coverage in a non-flood zone).
The ‘surcharge’ low-income homeowners pay equates to about 1% of the median income average across the largest cities’ lowest-earning neighborhoods. This figure can reach as high as 11% in some states.
The European Market Opportunity
In one example from 2021, the philanthropic branch of a European Insurer worked with Accenture to create a business case for developing inclusive insurance solutions that would solve for the ‘protection gap’—the difference between economic and insured losses—which hinders young families and migrants trying to build economic resilience. Accenture conducted inside-out and outside-in analysis to help the foundation understand the market opportunity, potential for investment and the social and financial impact of inclusive insurance. An approximate €250 billion market opportunity in Europe was uncovered through new insurance products and changes to premiums. It was calculated that between €188bn – €385bn of insurance premiums would be competed for in Europe through 2025 due to ESG trends disrupting the market. Within this larger market opportunity, the client began to explore inclusive insurance opportunities specifically valued at between €4bn – €14bn.
Conclusion:
There is no doubt that financial inclusion is a prominent topic of discussion among consumers, governments and regulators. The G20 has voiced its commitment to financial inclusion and advancing diverse leadership teams in insurance that represent all interest groups. By embracing inclusive insurance, companies not only establish themselves as industry innovators, but future-proof their business for the regulation of inclusion by ensuring they are doing everything necessary to innovate for historically excluded consumer segments as a business imperative for growth. Inclusive insurance presents a clear opportunity for insurers to generate revenue and to embody the core values of the industry to support and protect individuals, businesses, and societies while increasing the sector’s economic opportunity. If you’d like to learn more about how insurers can continue to see the people behind the policies, build relevance and grow, please read our Insurance Consumer study. If you’d like to discuss in more detail, please reach out to Heather Sullivan or Nina Munoz.
