ILO launches facility to spark innovation, develop range of insurance products in developing countries - Grant, technical assistance aim to improve insurance services to the poor; funded through us$34 million gates foundation grant.
GENEVA (ILO News) – The International Labour Organization (ILO) today announced a partnership with the Bill and Melinda Gates Foundation that aims to develop new kinds of insurance and improve existing products to promote decent work for tens of millions of low-income people in the developing world.
The US $34 million Gates Foundation grant will help create the Microinsurance Innovation Facility, a one-of-a-kind, five-year initiative that will provide grants and technical assistance to dozens of organizations serving the poor. Over the course of the next three years, the facility will issue bi-annual requests for proposals and provide funding to pilot new insurance products, improve efficiency in the field, and use technology to create new products that better meet people’s needs. The facility will also train technical specialists to help replicate successful models.
The effort is part of the foundation’s Financial Services for the Poor initiative, which is working with partners to develop and employ innovative ways to bring a wide range of financial services, including microinsurance, to people living in poverty and throughout the developing world. Microinsurance includes a range of products that can help workers manage economic hardship brought on by situations such as drought, hospitalization, or a death in the family.
Microinsurance can be used as a strategy to extend social protection coverage to excluded persons, such as workers in the informal economy or the rural poor, and contributes to more inclusive insurance markets. Through the facility’s grantees, by 2012 at least 25 million people living in poverty will have access to insurance coverage that they otherwise would not have. In addition, the facility will conduct research to quantify the impact of the expanded availability and use, in order to guide future investments in the microinsurance industry.
More specifically, the new Microinsurance Innovation Facility will provide grants and technical assistance to support the development of valuable insurance products for low-income and rural households; encourage the emergence of institutional models and partnerships that effectively deliver insurance to large volumes of low-income women and men; and promote market education to help low-income consumers appreciate the utility of insurance and identify high value products.
By successfully tackling these three themes, this facility will be able to make a major impact on the insurance providers and social protection schemes that serve the low-income market. Its grantees will also dramatically improve the ability of their customers or members to manage risks and thus enable them to break the perpetual cycle of poverty.
According to the MicroInsurance Centre, a US-based consulting firm, there were an estimated 246 risk-taking providers of microinsurance covering over 78 million lives in the 100 poorest countries in 2006.
“Although these numbers may seem impressive, they are pale in comparison to the billions of poor women and men for whom microinsurance would be an appropriate contributor to their risk management strategy. Furthermore, few of the microinsurance products that are available provide sufficient value to substantially protect the poor”, says Bernd Balkenhol, head of the ILO’s Social Finance Programme.
The new facility is led by the Social Finance Programme, the ILO’s microfinance focal point, which promotes financial policies and appropriate financial services to create decent jobs and reduce the vulnerability of workers. Microfinance, including microinsurance, is an important aspect of the ILO’s work and a key outcome in its next biennial plan. The Social Finance Programme recently co-published a new study which provides practitioners and policy makers with guidance on how to deal with the issue of balancing business and poverty reduction by defining criteria for supporting microfinance institutions (Note 1).
“The Bill and Melinda Gates Foundation is proud to partner with the ILO in efforts to serve millions of people with great needs and few resources,” said Bob Christen, director of the foundation’s Financial Services for the Poor initiative. “We hope the Microinsurance Innovation Facility will catalyze dozens of new, innovative approaches to offering and delivering microinsurance services. Through the ILO, their grantees, and the Microinsurance Innovation Facility, we are committed to learning more about the impact and value of insurance for people in developing countries.”
About the Gates Foundation
Guided by the belief that every life has equal value, the Bill and Melinda Gates Foundation works to help all people lead healthy, productive lives. In developing countries, it focuses on improving people’s health and giving them the chance to lift themselves out of hunger and extreme poverty. In the United States, it seeks to ensure that all people – especially those with the fewest resources – have access to the opportunities they need to succeed in school and life. Based in Seattle, the foundation is led by CEO Patty Stonesifer and co-chair William H. Gates Sr., under the direction of Bill and Melinda Gates and Warren Buffett.
About the ILO
The International Labour Organization (ILO) is devoted to advancing opportunities for women and men to obtain decent and productive work in conditions of freedom, equity, security and human dignity. Its main aims are to promote rights at work, encourage decent employment opportunities, enhance social protection and strengthen dialogue in handling work-related issues.
In promoting social justice and internationally recognized human and labour rights, the organization continues to pursue its founding mission that labour peace is essential to prosperity. Today the ILO helps advance the creation of decent jobs and the kinds of economic and working conditions that give working people and business people a stake in lasting peace, prosperity and progress. For more information, visit www.ilo.org.
Note 1 - Microfinance and Public Policy - Outreach, performance and efficiency, edited by Bernd Balkenhol, International Labour Office, Geneva, 2007. ISBN 978-92-2-119347-0. To order your copy, please visit: www.ilo.org/publns.
For more information on microinsurance, please also refer to Protecting the Poor: A Microinsurance Compendium, edited by Craig Churchill, International Labour Office, Geneva, and the Munich Re Foundation, 2006. ISBN 978-92-2-119254-1. To order your copy, please visit: www.ilo.org/publns.