A2ii Newsflash| Request for information on reasons for low claims ratios in microinsurance

Claims ratio or loss ratio (a term used interchangeably by supervisors), is considered a key ratio for insurance supervision globally. Yet, there are moderately low claims ratios particularly for inclusive insurance. Research done by the Microinsurance Network (MiN), revealed that claims ratios in Asia, Africa and Latin America and the Caribbean are relatively low, at a median rate of 23% (see MiN’s Landscape of Microinsurance, 2020). In general, claims ratios will vary according to the product line and a low proportion of premiums paid out in claims, over time, is a good indicator of low value for the consumer. This is particularly important for inclusive insurance consumers who have low disposable incomes.

In some jurisdictions, supervisors have attributed reasons for low claims ratios to issues such as conflict of interest between policyholders and the distribution channel, lack of proper information disclosure, untrained sale force or intermediary agents, among others. 

Against this backdrop, the International Actuarial Association (IAA) and MiN are doing a study to explore the issue of low claims ratio in microinsurance. 

The key questions that the study will explore are:

• If claims ratios are so low, where is the remaining income going? 
• What can or should be done to improve the situation? 

The result will be a joint IAA-MiN paper that will be presented and discussed on various platforms. Through participating in the study, it should help insurance supervisors to gain a better understanding of the value of inclusive insurance products in their jurisdiction and what can potentially be done to improve value.

For this reason, we would like to invite supervisors to share information on: 

• How premiums are split between claims, distribution costs, management costs and profit for microinsurance in your jurisdictions
• Factors contributing to low claims ratios in your jurisdictions 

This data will feed into the IAA-MiN study that seeks to cover 2 to 3 countries in Africa, Asia, Latin America and the Caribbean. 

If you are willing to volunteer to participate in the study, please contact Secretariat@a2ii.org by 30 July 2021.