Low-income earners need insurance in India: Northern Arc

Finding access to enough insurance, and the right insurance, is a difficult task for India’s emerging poor. A study by LeapFrog and Northern Arc shows the size of this market.

Significant gaps in insurance access, as well as perceptions of insurance, impeded take-up of cover, found a study by LeapFrog Labs and IFMR (now Northern Arc Capital) assessing the unmet insurance needs of more than 15 million credit clients in the IFMR network. 

The results came from interviews with nearly 1200 existing clients in India, 80 per cent of whom were low-income earners, in a cross-sectional study conducted in 2014 with Microsave.

A potential $US120 million market

The most important results of the study found respondents were most concerned about income earners, had minimal insurance but high take up of mobile phones and bank accounts.

  • Protecting the primary earner 
    There’s high demand to cover primary breadwinners with life insurance, accident cover and hospitalisation cover. This indicates the biggest family need, informing early product strategies.
  • A potential $US120 million untapped market exists  
    While most customers have credit life insurance due to existing relationships with lenders, 77 per cent report no additional risk protection such as life, health and asset cover. This untapped market, even at a premium cost of only $US1 per month, represents a potential $US120 million market in IFMR’s network alone.
  • Mobile phones have blue-sky potential for payments and education  
    About 94 per cent of respondents had a mobile phone and 78 per cent a formal bank account. Allowing customers to purchase insurance via mobile would likely be easier for them. Mobile phones can also increase insurance awareness, build trust and provide ongoing education and tailored services. 
  • A hidden market exists, with spend beyond insurance significant 
    Respondents spent an estimated $US2.7 billion over the past five years on healthcare, and $US11.7 billion on asset purchases. This shows the massive commercial size of the emerging consumer market. 

IFMR has used the findings from this study to help its network of finance originators manage risk better, both for themselves and their end-clients. This includes new product research and workshops to find ways to protect low-income households from the aftermath of natural catastrophes including floods and droughts. 

IFMR and the Asian Development Bank organised a joint workshop on this topic, convening originators, data scientists, climatologists, insurers, reinsurers, social-impact investors and regulators. They agreed to create protection for catastrophic risk and to unite for shared initiatives and solutions. 

Ellise Barnier

This case study was first published on October 12th, 2016

LeapFrog Investments