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Insurance

Nippon Life offers insurance to low-income Asians at 40 cents a month

Japanese provider looks to tap $90bn-plus sector with microinsurance

A street vendor on the streets of Jakarta. Nippon Life will first sell its microinsurance in Indonesia before expanding to other markets.   © Reuters

TOKYO -- Japan's Nippon Life Insurance will start selling "micro" plans targeting low-income customers in Asia, with the goal of issuing at least 350,000 policies in the next five years.

Nippon Life will first make the policies available in Indonesia as soon as this month through the local group company Sequis Life. The business will then expand to three more group companies in India, Thailand and Myanmar.

The Nippon Life group looks to enter the microfinance business, which is estimated to have a global market topping $90 billion. But microinsurance is a domain that contains potential pitfalls that Nippon Life must navigate.

Nippon Life will offer life insurance policies that grant payouts of roughly $1,300 on monthly premiums of about 38 cents. The provider will mainly target employees at companies that do business with multinationals.

To extend the reach of the business, customers will be able to bypass background checks to be eligible. Nippon Life sees demand among local companies that seek to broaden employee benefits from a social responsibility standpoint.

Major local banks, including affiliates at Japanese banks, have found success in the microfinance sector. Such operations generate annual yields of 10-20%.

But there is no proven business model for microinsurance. Many parts of the emerging world have not developed health insurance infrastructure. When it comes to low-income customers, providers are exposed to substantial insurance payouts due to the unstable quality of life.

Nippon Life looks to reap stable earnings by selling policies to workers through their employers. The company will tap the know-how accumulated from domestic workplace sales.

Global rivals such as Germany's Allianz have taken the lead in this field. But policies targeting low-income clients are normally marketed directly to individuals, and the business has yet to take off.

Nippon Life is entering Asian microinsurance in part to shore up its overseas business by developing a new business groupwide. The company has twice injected capital into Australian life insurance affiliate MLC since the unit encountered financial trouble last year.

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