8th June 2012
This week, Tina Rosenberg of The New York Times profiled AllLife, a company established to insure HIV-positive people, citing customer David Patient as a case study-his policy, purchased six years ago to provide for his partner upon his death, will allow his partner to receive a half-million rand. All patients receive antiretroviral treatment for free, and AllLife requires customers to make regular medical visits, receive essential periodic tests and follow treatment protocols.
The company cannot ensure that the treatments will succeed, but an arguably more incredible effect has occurred-the patients, on average, see their health improve once they know they've been insured. AllLife Managing Director Ross Beerman told Rosenberg that clients average a 15 percent improvement in their CD4 count – an immune system marker – six months after buying insurance, regardless of whether they are taking antiretrovirals.
"We're saying you don't have a terminal illness," Beerman told Rosenberg. "You have a chronic, manageable disease. You're going to live a long time. And we'll help you."
Microinsurance, which refers to services offered to clients with minimal income and no access to mainstream insurance services, may have a strong role to play in the future of investing. AllLife aims to grow its customer base from approximately 10,000 policies to 60,000 by the end of 2016. And LeapFrog Investments President and Founder Andrew Kuper told Rosenberg that insurance, beyond acting as a safety net, can also be a springboard for opportunities such as sending girls to school and taking more risks on crop planting. The 8th International Microinsurance Conference will take place in Dar es Salaam, Tanzania from 6-8 November this year, and plans to discuss issues regarding the use of technology to address scale and efficiency and economic analysis of microinsurance markets, amongst other issues.
AllLife's clients pay between two and five times what H.I.V.-negative people pay for life insurance, with David Patient paying approximately $225 a month for his $62,500 policy. Indeed, the inability of many to pay for insurance even on a minimal level is a continuous problem. But Beerman clarified that about 1,000 of AllLife's customers have incomes of less than $200 per month, and 60 percent of their clients are women. Today, half a billion people own microinsurance-a 6.5 increase in the last five years.
Microinsurance has the potential to impact more than stigmas surrounding AIDS. Last year, Annie Kelly reported the importance of microinsurance as a safety net for natural disasters in Latin America. The Colombian offices of insurance companies such as ESA had reported selling more than 60,000 mostly health related microinsurance policies a month for around $1 a month.
La Positiva, a Peruvian insurance company, reportedly targeted over one-third of Peru's 9 million rural population by offering micro-life insurance at a marginal cost of the income generated by annual familial harvest. Brazil and Mexico were also identified as markets for strong microinsurance growth.
Despite this progress, there are still challenges to be had. Richard Leftley, chief executive of MicroEnsure, told Kelly that the company conducts most of its business in Africa through mobile company partnerships, after attempts to court potential clients via in-person salesmanship proved unsuccessful.
"Trying to explain to someone with no prior experience of insurance that if you pay even just a little bit every month then someone will pay you back if your crops failed or your child is hospitalised is often met with a perfectly understandable 'yeah right' response," Leftley explained.
And whilst the potential for microinsurance is promising, its audience is currently limited. Of the 2.4 billion strong international population that lived on $2 per day or less in 2010, a mere 80 million had access to microinsurance. As of last year, the 150 million microinsurance policy customers represented a minimal 5% of a potential market that is 3 billion strong.
In his follow-up to Rosenberg's piece, Felix Salmon said that rather than focusing on selling a product with potentially no return, companies like AllLife should sell their willingness to help AIDS patients manage their illness rather than succumbing to it. A marketing tactic focused on investing in the well-being of customers, he says, is far more valuable than the product itself-and those customers, as well as the larger potential market, will notice.
Most [South Africans] them won't sign up," Salmon argued, "- but all of them will get the message. And when for-profit companies have a strong incentive to propagate this kind of message, that has to be a good thing, whether the insurers end up succeeding or not."
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