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Insuring low income people
22 Jul 2020 (95 views)

Hi Kin Lian,
I have a query which I believe you will be the right person to help share your thoughts on. In my opinion, the current insurance industry product premium's are priced at a high fee. From the standpoint of the common good, I see that many others either undersubscribe or do not purchase insurance. This means that people from lower income families who needs the protection ultimately may not purchase it.
With your decades of experience in this industry, do you think that there is a blue ocean strategy here whereby the price premiums can be dropped to include a larger crowd? Pardon me if my question seems uninformed or layman. I am trying to understand if there is a business potential which in kind can do good for the fellow man.

REPLY
There is a fixed administrative cost in handling a personal insurance. To provide insurance to low income people, the fixed cost can represent a significant proportion of the premium.
For example, if the cost of insurance is $100 a year and the fixed cost is $200, the cost to the low income person can be quite high.
For a high income person person where the premium is, say $500, the fixed cost of $200 represents a small percentage of the total cost.
The cost of insuring low income person can be reduced if they join a group insurance scheme. A better approach is for the state to provide the insurance.
The administrative and marketing cost can be reduced if the group or state sponsored insurance is compulsory.
Voluntary private insurance is not the solution for low income people.


Insuring low income people
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Hi Kin Lian,
I have a query which I believe you will be the right person to help share your thoughts on. In my opinion, the current insurance industry product premium's are priced at a high fee. From the standpoint of the common good, I see that many others either undersubscribe or do not purchase insurance. This means that people from lower income families who needs the protection ultimately may not purchase it.
With your decades of experience in this industry, do you think that there is a blue ocean strategy here whereby the price premiums can be dropped to include a larger crowd? Pardon me if my question seems uninformed or layman. I am trying to understand if there is a business potential which in kind can do good for the fellow man.

REPLY
There is a fixed administrative cost in handling a personal insurance. To provide insurance to low income people, the fixed cost can represent a significant proportion of the premium.
For example, if the cost of insurance is $100 a year and the fixed cost is $200, the cost to the low income person can be quite high.
For a high income person person where the premium is, say $500, the fixed cost of $200 represents a small percentage of the total cost.
The cost of insuring low income person can be reduced if they join a group insurance scheme. A better approach is for the state to provide the insurance.
The administrative and marketing cost can be reduced if the group or state sponsored insurance is compulsory.
Voluntary private insurance is not the solution for low income people.