Microinsurance

The win-win potential of microinsurance for migrants

International migrants send home over US$ 400 billion a year, yet they and their families often lack basic social protection. That is where microinsurance can step in.

Analysis | 29 October 2012
GENEVA (ILO News) – Migrants often serve as the equivalent of an informal insurance policy when adversity strikes their families back home but they themselves tend to be vulnerable and have limited access to social protection in host countries.

Insurance could help address some of the risks involved but it is often too costly, complex and difficult to access for many low-income migrants.

“These households require simple products that can be delivered inexpensively and conveniently, characteristics common to microinsurance,” says Craig Churchill, head of the ILO’s Microinsurance Innovation Facility. “The benefits could be substantial, both for insurers and migrants.”

A wide range of insurance schemes could be offered to them, including accident or repatriation insurance, remittance flow protection and cover for the migrants’ families in their home countries.

Microinsurance is a type of insurance aimed at protecting poor people against risk, (accident, illness, death in the family, natural disasters, etc.), in exchange for payments tailored to their needs, income and level of risk.

Some constraints…
Having a good product that meets the needs of migrants is in itself not a guarantee of success. Reaching out to migrants and showing them the potential benefits of insurance are key steps and challenges for insurers.

Insurers may need to find key partners to help them approach migrant workers. Diaspora associations and money transfer agents can often play that role, as migrants tend to trust them.

Legal and regulatory restrictions constitute another major constraint. Insurers are often not licensed in both the migrant’s home country and host country, and at times it can be difficult to establish which jurisdiction applies.

The undocumented status of many migrants can also pose serious challenges if they buy insurance in their host countries.

“While the challenges are significant, the potential rewards for both insurers and transnational families, of formalizing the informal risk management created by migration, can be substantial,” Craig Churchill says.

While still rare, there are several examples of insurance for migrants
  • Indonesia requires placement agencies – which as many as 95 per cent of migrants use – to provide them with an insurance package that covers death, disability, medical expenses, unpaid wages, deportation and physical abuse.
  • SeguraCaixa, an affiliate of Spain’s La Caixa cooperative, offers some of the few large-scale migration-linked insurance products: In 2008, 80,000 migrants – most from Africa and Latin America – were insured with schemes that pay death insurance, cover repatriation of the migrant’s remains, and provide a regular monthly income to bereaved families for five years.
  • El Salvador’s cooperative insurance company, Seguros Futuro, recently launched an insurance product for migrants covering repatriation costs and year-long remittances in case of death.