|
Microinsurance is a mechanism to protect poor people against risk (accident, illness, death in the family, natural disasters, etc.) in exchange for insurance premium payments tailored to their needs, income and level of risk. It is aimed primarily at the developing world´s low-income workers, especially those in the informal economy who tend to be underserved by mainstream commercial and social insurance schemes.
The challenges
The challenges in increasing insurance cover among low-income people in developing countries lie in three main areas - products, models and education.
Products: The concept of 'product´ covers not only price, benefits and terms, but also product management and delivery processes. In microinsurance, the challenges include accurately setting price and benefits, coping with huge volumes of small policies, collecting premiums from people without bank accounts, verifying and paying small claims, and controlling fraud, adverse selection and moral hazard.
Models: New models and partnerships are needed to capitalise on the strengths and overcome the weaknesses of current institutional models for providing microinsurance. The challenge is to devise institutional solutions that are efficient, provide relevant and affordable coverage, and balance the interests of risk carriers, delivery channels and policy holders.
Consumers Education: The poor tend to have short-term planning horizons, to be suspicious of insurers´ motives and to believe that insurance is only for the rich. They often do not understand how insurance works or how it compares with other risk-management tools such as savings and credit. The challenge is to make insurance more accessible to them not just physically and economically, but also intellectually - that is, to develop an insurance culture among the poor.
|
 |
|
|
|
