Making Micro Insurance WorkAs noted in an earlier post, when households have increased access to microcredit, one of the impacts can be less use of insurance because microloans make it easier to obtain informal credit in the event of a financial shock.
Last month, Knowledge@Wharton offered an overview of steadily expanding efforts to market microinsurance effectively to poor people in developing countries. As the article explains, micro insurance comprises
risk-sharing products characterized by low premiums and coverage limits [and it] generally covers everything from life and health care to weather, property, agriculture, livestock and catastrophe.For example, in a pilot program in Bangladesh, a partnership of six NGOs and a local insurance company is offering a product that combines life insurance with some hospitalization coverage. The basic idea is to provide a formal safety net for people who have income, even if small, to protect.
The article discusses the issues participants in micro insurance market need to address, such as making sure the perils covered by property and casualty insurance are relevant for a particular locality. Another key issue is developing a solid partnership among the parties involved typically, NGOs, micro finance institutions, insurance companies, regulators, and community groups. Last but not least is the issue of educating both the target population and the micro insurance providers.
You can learn more about good practice in micro insurance by reading a 2008 report, Lessons Learned and Recommendations for Donors Supporting Microinsurance (pdf), prepared by Taara Chandani for the CGAP Working Group on Microinsurance, with the support of USAID; and Protecting the Poor: A Microinsurance Compendium, published in 2006 by the Munich Re Foundation.