Mass Insurance: Next in Line for Product Innovation?

Abstract

Insurance companies looking to expand have been drawn to the low penetration rates and rising disposable incomes in emerging markets. So far, however, these companies have typically targeted the formal employment sector, as most of its members are concentrated in urban areas and are accessible through employers. But the informal sector - characterized by non-contractual employment and a lack of social security - holds out great promise for insurers aiming for the next level of penetration in emerging markets (Gumber 2002). While the rich represent a ready market and the poorest are targeted through microinsurance products, we suspect the market at the heart of the informal sector’s income pyramid - the middle class - remains largely uncovered by insurance.The middle class of the informal sector offers a growing consumer population with robust purchasing power. Tapping into this expanding market would enable economies of scale, making operations cost effective and profitable. Of course, insurance companies will need to develop products that address the heterogeneity of the middle class. Only companies able to market their products to the masses will capture emerging markets.