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Insurance for the Poor?

First Thoughts About Microinsurance Business Ethics

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Abstract

Microinsurance is the provision of insurance services to the poor, usually in developing countries. One of the key criteria of poverty is vulnerability even to minor events. In such cases, even micro coverage can make a major difference, yet still be funded by an affordable contribution by the insured. Like any kind of insurance, microinsurance can cover different risks to life, health, farming, property among other things. Our paper sketches how one could address and develop microinsurance business ethics. First, we introduce microinsurance to the business ethics community and business ethics to the microinsurance community. Our draft of microinsurance ethics is then developed from two angles: as a holistic understanding of ideals and possible ethical conflicts in key stakeholder relationships and by distinguishing eight challenges when targeting the poor and when marketing microinsurance. As an open ending, the article suggests a three-stage action research design focusing on how microinsurance could (and should) internalize ethics, respecting rather than neglecting national- and local-cultural conditions.

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Notes

  1. Note for readers with less business ethics literacy: For short introductory presentations on business ethics, see e.g., http://plato.stanford.edu/entries/ethics-business/ or at introductory chapters in leading introductory textbooks, such as http://www.oup.com/uk/orc/bin/9780199564330/craneandmatten3e_ch01.pdf.

  2. We are fully aware that such a bridge-building approach risks criticism from both target groups, for repeating terms and approaches which are well-known to the respective communities.

  3. Note for readers with less insurance literacy: See in addition to SwissRe (2010), e.g., http://www.britannica.com/EBchecked/topic/289537/insurance or even http://en.wikipedia.org/wiki/Insurance.

  4. Put really simply, one can say that morality refers to empirical phenomena, to the values and attitudes held by individuals and groups at a given time and place, in interaction with individual and collective moral behavior, while ethics is about morality—i.e., examines, questions, discusses, and justifies (empirical) morality in the above sense. Morality varies across cultures and individuals, while ethics usually presents itself as universally applicable and universally relevant. As a point of departure for further reading see e.g., http://plato.stanford.edu/entries/ethics-business/.

  5. While there is not much disagreement about such practical synergies, the theoretical relationship between descriptive and normative ethics is highly controversial. The question is if they should be treated as “parallel” (i.e., as clearly different) or as “symbiotic” (as mixable in practice), or if one should aim for an “integration” (i.e., even in theory—cf. Weaver and Treviño’s arguments in favor of such integration, (1994), and Donaldson’s arguments against, (1994), which we wold tend to follow. These two contributions are published in the same special issue of the Business Ethics Quarterly about empirical versus normative business ethics. Cf. in addition also Werhane’s (1994) paper, ibid.

  6. In the first case of cultural relativism, one accepts a norm that each culture with its morality is entitled to be understood on its own terms without being evaluated as inferior or superior. Ethical relativism would be a norm that prohibits any moral criticism of certain behaviors or practices or cultures by norms anchored outside the relevant cultural contexts. Cultural relativism encourages rather than disturbs descriptive ethical studies of morality, while ethical relativism discourages non-immanent normative ethical criticism, and risks in the best case uncritical description and understanding, and in the worst case opportunism and loss of integrity (cf. Brinkmann, 2002, esp. pp. 9–12, with further references).

  7. Examples of such criteria in the moralities of everyday life, business life, and religious life are “the golden rule,” “the end justifies the means,” “the ten commandments,” or “follow your gut feeling.”

  8. By the way, as all recommendations they are at least slightly normative.

  9. Cf. the “describe-interprete-evaluate” principle, procedure or exercises in intercultural communication, see e.g., http://www.intercultural.org/die.php.

  10. See e.g., Arnaud (2010), which could serve as a first point of departure for studying the ethical climate of microinsurance.

  11. Note for risk research newcomers: See e.g., IRGC (2008, esp. pp. 14–19) (http://www.irgc.org/IMG/pdf/An_introduction_to_the_IRGC_Risk_Governance_Framework.pdf) or Renn (2008), for further readings about risk perception, evaluation, communication.

  12. Note for non-business ethicists: For a presentation of the most well-known normative business ethical theories (or moral philosophies) in a systematic and very simplified fashion see introductory textbooks such as Crane and Matten (2010, 3rd ed, see especially the text table on p. 129).

  13. Not surprisingly, there are many ethics consultancy lists to choose from. There are rather simple and easy to remember ones such as Blanchard and Peale’s (1988): “Is it legal, is it fair, can I defend it?,” or Rion’s (1990) “Why is this bothering me?—Who else matters?—Is it my problem?—What is the ethical concern?—What do others think?—Am I being true to myself?,” or Kvalnes and Øverenget’s (2010) “navigation wheel” with 6 similar questions related to legality, morality and ethics, identity, reputation, and business criteria. And there are more complex ones such as the 8-question list of van Luijk (1994), the 8-step list of Laczniak and Murphy (1985), the 12-question list of Nash (1989) or the 5-step and 14 question-list by the Markkula-center (2007). In practice, it does not matter so much which checklists one chooses or develops, as long as one regards them as scaffolds which help with starting one’s work but which can be taken down once the building is sufficiently stable.

  14. For a more detailed discussion on the impact of microinsurance, see Radermacher (2012).

  15. In an insurance context, one could balance marketing with providing adequate products and processes, advertising and sales, underwriting, adjusting, and claim handling.

  16. If one likes such alliteration, one can consider using even more P’s, such as people, process, and physical evidence.

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Acknowledgments

The authors gratefully acknowledge the critical comments of two anonymous reviewers and the constructive input obtained during the authors’ workshop in Munich in February 2011, as well as the useful comments and language editing by Brian Cooper and Aaron Doyle.

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Authors and Affiliations

  1. Micro Insurance Academy, Bonn, Germany

    Ralf Radermacher

  2. Micro Insurance Academy, New Delhi, India

    Ralf Radermacher

  3. BI Norwegian Business School, Oslo, Norway

    Johannes Brinkmann

Authors
  1. Ralf Radermacher
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  2. Johannes Brinkmann
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Corresponding author

Correspondence to Ralf Radermacher.

Appendix

Appendix

The following checklist repeats and summarizes most practical points made in the paper and could be used in the suggested pilot studies and the stage 3-seminar discussion, for inspiration and for further simplification and modification.

A preliminary checklist for microinsurance business ethics

  1. 1.

    What are the alternative possible risk management techniques (whether currently used or not) and how does microinsurance as a risk management technique compare with the other alternatives?

  2. 2.

    Is it possible to construct risk pools including not just the poor, and if yes, what are relevant insurance business arguments and business ethical arguments, both for and against?

  3. 3.

    What are the primary needs of the potential clients, on their own terms, and are the possible microinsurance benefits relevant and sufficient to them?

  4. 4.

    Is insurance as a technology and is insurance marketing sufficiently easy to understand for the given target populations, even if they are illiterate; if not, which advocates or go-betweens could one consider using to communicate about insurance in clearer ways?

  5. 5.

    Are the target groups’ expectations sufficiently clear and realistic? Who can and who should take responsibility for any misunderstandings?

  6. 6.

    Does trust and do trusted go-betweens compensate for lack of detailed understanding and control? How could one make sure that such trust is not abused?

  7. 7.

    Are the enrolment and underwriting processes transparent?

  8. 8.

    Are there any sufficient routines for ensuring non-discrimination against more vulnerable groups, and are such routines known to the parties who need to know of them? Is there any practice of positive discrimination toward such groups (and is such discrimination known and accepted)?

  9. 9.

    Is it sufficiently easy for the poor to make fair claims, without being barred by unrealistic procedures?

  10. 10.

    Is the speed of the claim decision and payment process sufficient?

  11. 11.

    Can clients access all relevant and up-to-date information locally?

  12. 12.

    Can a complaint mechanism be accessed and used at little or no cost to the insured (and how can one both encourage legitimate complaints and discourage illegitimate ones)?

  13. 13.

    What parts of a given microinsurance arrangement as a whole are most vulnerable to risks of abuse, fraud and corruption, on the insurer, sales and intermediary sides, and on the insurance customer side? Is there a tendency toward mutual blaming and shaming between the parties as we know it from conventional insurance?

  14. 14.

    Does the claim process design achieve fraud risk reduction fairly well without crowding out eligible and legitimate claims due to complicated procedures?

  15. 15.

    Is the insurance scheme sustainable in a longer term perspective, i.e., does it represent a good balance between low but realistic administrative costs, fair insurance product pricing for value for clients in terms of risk coverage and a fair profit (if the insurance provider works on a for-profit basis)?

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Radermacher, R., Brinkmann, J. Insurance for the Poor?. J Bus Ethics 103 (Suppl 1), 63–76 (2011). https://doi.org/10.1007/s10551-012-1223-8

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