October 14, 2006 3:19 PM
On Microinsurance
The Noble-prize-winning not-for-profit microfinancing is getting a lot of traction now, but will microinsurance be equally successful if AIG and Allianz are building the business for profit?
From WSJ:
In its simplest form, microinsurance is like life and disability coverage for low-income people in emerging markets. It is also typically paired with the kind of microfinance loans pioneered by Mr. Yunus. If a fledgling entrepreneur gets a loan and is disabled or dies -- or the sewing machine or motorcycle the borrower bought with the loan is lost or broken -- the insurer makes good on the debt.
In Uganda, AIG charges around $12 to $15 to cover loans that average $400. For AIG, which reported $10.48 billion in profit last year, the business is tiny. But it has the potential to become sizeable. AIG projects annual revenue from writing microinsurance policies could reach $100 million in seven to 10 years. The company says it has more than 1.5 million microinsurance policies in force, in countries that also include India, El Salvador and Guatemala.
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