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Microinsurance: The New Microcredit

A core value in my consulting work with corporations is that CSR will only be effective and sustainable if it is aligned with the company’s business mission. So it’s exciting to see an innovative iteration of that principle where a company develops a new investment vehicle that could potentially drive entrepreneurship and facilitate wealth accumulation in developing countries.

A core value in my consulting work with corporations is that CSR will only be effective and sustainable if it is aligned with the company’s business mission. So it’s exciting to see an innovative iteration of that principle where a company develops a new investment vehicle that could potentially drive entrepreneurship and facilitate wealth accumulation in developing countries.

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“If we stop thinking of the poor as victims or as a burden and start recognizing them as resilient and creative entrepreneurs and value-conscious consumers, a whole new world of opportunity will open up. Four billion poor can be the engine of the next round of global trade and prosperity.” C.K. Prahalad, The Fortune at the Bottom of the Pyramid. When I learned about microinsurance, I immediately thought of Prahalad’s 2006 book, and how his prophesies and prescriptions are coming to pass.

Andrew Kuper, President and Founder of LeapFrog Investments figured out how to make money for his investors, while providing microinsurance to low-income people in developing countries. The launch of Kuper’s investment fund was announced at the Clinton Global Initiative (CGI) in 2008. By CGI 2009, President Clinton hailed Kuper as the global leader in microinsurance. President Clinton also compared Kuper to Muhammad Yunus, who was part of Kuper’s inspiration when he met Yunus via Ashoka.

In a private interview, Kuper explained to me the origins of the vision for LeapFrog. His idea took shape while he was working with social entrepreneurs at Ashoka. Kuper, and the team of investment and insurance professionals who soon joined him, saw that among the world’s poorest people, it took only one adverse event to devastate a family that had been working hard for years. They envisioned microinsurance as a way to end the cycle of poverty–to provide the safety net that families needed. Kuper also saw that if people had insurance, they would be more likely to invest in expanding their crops, establishing businesses, or sending their children to school, without fear of losing their little and only cash if something were to happen.

While Kuper had a social purpose in mind, he also believed that the solution was to create an investment vehicle–a for-profit, commercial enterprise–to help the microinsurance business to take off. So he created LeapFrog to bring capital and expertise to microinsurance operations to enable portfolio companies to scale dramatically. Through these investments, LeapFrog’s fund would help millions of people to access quality insurance, the safety net Kuper and his team envisioned. Microinsurance would cover healthcare, life, property, livestock, agriculture, and catastrophe.

LeapFrog’s plan to transform the industry was evidence-based. “The Landscape of Microinsurance in the World’s 100 Poorest Countries,” April 2007, reported that “microinsurance–insurance for the poor–which has the potential to significantly aid millions of poor people, has received limited attention.” Further, the report concluded that so few lives were covered by microinsurance, that “the potential market is…up to 30 times larger for all products.”  Two of the authors of the report–Jim Roth and Dominic Liber, were so convinced of its findings that they joined and co-built LeapFrog.

Providing a new asset class for investors, LeapFrog has already raised $47 million towards its goal of $100 million. Public and private investors include SCOR, European Investment Bank, Omidyar Network, FMO, Triodos-Doen, Hivos-Triodos Fund, ACCION International, Calvert Large Cap Growth Fund, and wealth manager Felipe Medina.

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The evidence supporting investments in microinsurance continues to mount. “The potential market for insurance in developing countries is estimated to be between 1.5 and 3 billion policies.” This is according to last month’s report by Lloyd’s Microinsurance Centre (MIC). The study estimates that microinsurance presently only covers around 5% of the potential market.

A brand new development in the LeapFrog story, announced just today, is that LeapFrog has invested six million dollars in AllLife, an innovative African HIV and diabetes insurer.  AllLife covers 10,000 policyholders and dependents, and intends to use LeapFrog’s capital to reach 250,000 such financially excluded people.

Microinsurance is a story worth following.

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About the author

Korngold provides strategy consulting to global corporations on sustainability, facilitating corporate-nonprofit partnerships, and training and placing hundreds of business executives on NGO/nonprofit boards for 20+ years. She provides strategy and board governance consulting to NGO/nonprofit boards, foundations, and educational and healthcare institutions. Korngold's latest book is "A Better World, Inc.: How Companies Profit by Solving Global Problems…Where Governments Cannot," published by Palgrave Macmillan for release on 1/7/14

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