Financial protection is a powerful tool to allow the broader population in emerging & frontier markets to
- improve their economic conditions
- achieve financial inclusion
- attain social mobility, financial security, stability and wellbeing for themselves, their families and their communities.
Low-income people, many of them small & micro-entrepreneurs in the informal sector
- make up the «majority» of a country,
- form the backbone of its labor market, and
- constitute a vital sector for poverty alleviation, the emergence of consumers, middle classes and SMEs.
While the low-income population, situated between the poor and the middle classes, escapes immediate poverty, it remains highly exposed and in a precarious economic position. Cases of death of the breadwinner, illness in the family or damage to property (e.g. workshops) can make them recoil into destitution. Therefore, financial protection schemes such as life, health or property insurance are most valuable to this population group, which in international development are called ‘the vulnerable’.
In Latin America, as an example, those classed as low-income represent roughly 40% of the total population (World Bank, 2012) and generally live on between USD 4 and USD 10 per day.
The low-income population, which is the breeding ground for the middle classes, represent a very interesting growth market for local and global business, the latter often confronted with saturated markets in developed countries. Since they generate income, they are so-called ‘emerging consumers’ who form the basis of the mass-market. They have the financial means and are willing to pay for products & services, incl. insurance protection, as long as it is low-cost.
While catering towards this large target group represents both a very promising growth market for business incl. the financial industry, and an opportunity to demonstrate social responsibility, the low-income population remains to this day largely excluded from or under-served by the financial and insurance industries (yet no longer from the consumer-goods sector). As a consequence – and on occasion due to poor experience – low-income people often distrust financial institutions, in particular, insurance and therefore, require not only risk-protection solutions that are fully tailored to their needs, but also trust-building approaches in communication, training, speed in claim payments and excellence in customer service.