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Reducing risk for growth, stability and inclusion
The microinsurance industry is rapidly growing and evolving to provide new instruments to help manage the risk of life-changing losses, especially for the poor.
Whether you are a small-scale farmer in Andhra Pradesh growing groundnuts worried about drought, or need healthcare coverage for workers in your Karachi coffeeshop, or wish to provide a decent burial for your loved ones in Bulungula, you now have a powerful tool available to you: microinsurance.
The microinsurance industry is rapidly growing and evolving to provide new instruments to help manage the risk of life-changing losses, especially for the poor. By providing low-income households or micro-enterprises with insurance products, they can be more confident in making decisions or investing more in their businesses knowing they are protected from catastrophic loss.
ILO Photo / J. Suministrado
Growth in microinsurance has been largely enabled by active government involvement as well as private sector engagement. For example, thirty-three of the world’s 50 largest insurance companies reported that they offered microinsurance in 2011, up from just seven in 2005.
The benefits of insurance extend beyond low-income households to their community and country. Various studies have demonstrated a causal link between the development of the insurance industry in general and national economic development. More broadly within the economy, by mobilizing long-term savings, insurers are an important source of long-term investment capital for initiatives such as infrastructure improvements, and they can stimulate the development of debt and equity markets. Studies have shown that the rise of microinsurance has contributed to social and economic development.
Microinsurance can be an integral means to extend or supplement social protection benefits, particularly for the working poor. Not only can microinsurance support the distribution of social protection benefits to under-served populations, but it can also supplement the basic benefits of social insurance schemes.
Microinsurance is also intended to correct a failure in the financial markets to enable the working poor to access previously unavailable insurance services.
By leveraging social protection with financial inclusion, it is possible to increase the effectiveness of both, enhancing the ability of workers in the informal economy to cope with the costs associated with the illness or death of breadwinners, the theft of productive assets and the destruction wrought by disasters.
On July 9th the International Labour Organization’s Microinsurance Innovation Facility will hold a meeting in New York City to present the financial performance of selected insurance companies engaged in microinsurance. Senior insurance professionals from CIC (Kenya), ICICI Lombard (India), La Positiva (Peru) and Old Mutual (South Africa) will be on hand to explain how their efforts to enhance value for their customers contribute to a better business case.
