Microinsurance
 |
Insurance is most needed by those who have the fewest resources for it. Poverty is, after all, vulnerability. The smallest of setbacks can cause serious problems, pushing people under the poverty line.
A disappointing harvest, profuse rainfall or drought, illness or a death can greatly influence the income of the poor. An unexpected event could mean the end of the company, less money coming in, that the children are unable to continue going to school, that the loan cannot be repaid, etc. |
For the majority of the poor in developing countries, formal insurance mechanisms are financially or geographically inaccessible. For example, in Sub-Saharan Africa, the social security systems cover less than 10% of the population. The insurance companies rarely develop activities there because this “market” does not appear to be profitable to them or it would require too great a financial investment. Other protection mechanisms (savings, sales of goods, resorting to loans, self-help networks) are not always profitable in relation to the risks. Requesting urgent help when a serious health issue occurs can be extremely expensive.
Types of microinsurances
In theory, microinsurance systems can cover various types of risks connected to persons or economic activities. In practice, the existing microinsurers mainly cover risks regarding health or death. Regarding medical insurance, the persons insured, often members of a mutual health insurer, pay only a small percentage of their medical expenses, the rest is paid by the insurance.
Microfinancing organisations increasingly link credit insurance to a microcredit, which determines that in the event of the creditor’s death, his family is not required to repay the loan.
Despite the advantages these insurances offer, it is not always easy to convince people of their usefulness. The lack of financial resources certainly plays a large role in this. Financial illiteracy and cultural aspects are other challenges facing the introduction of microinsurances. For example, in some African countries “paying for a disaster which may occur” is equal to “asking for that disaster to happen”.
More information?
Microinsurances collection at the International Insurance Library
In close collaboration with BRS, the International Insurance Library manages a collection of publications on microinsurances.
More information and the complete collection can be found here.