Loss Prevention and Control (Microinsurance in Focus No. 6)

Publication Date: Dec 2007
Published by: CGAP Working Group on Microinsurance
Document Type: Other (PDF)

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This note explains how microinsurers can help their clients prevent losses.

This note discusses various aspects of loss prevention and loss minimization. While loss prevention, common among mainstream non-life insurers, involves initiatives to avoid the occurrence of risk, loss minimization strives to reduce the impact of risk when they do occur. The note states that in microinsurance, loss prevention activities include counseling customers to take care of themselves and their possessions. This activity:

• Reduces the frequency and severity of claims and controls the insurers’ expenses and the client’s premiums in the short term;
• Ensures that customers remain healthy and productive and continue their association with the insurer in the long term.

The note further suggests methods through which microinsurers can educate their clients about loss prevention. It also lists the key aspects of loss minimization.

The note concludes by outlining a five-step process that helps a microinsurer determine the prevention measures to use. These steps are:

• Identify claims trends;
• Develop prevention strategies;
• Implement prevention activities;
• Monitor results;
• Consider benefits beyond cost reduction.