Microinsurance: A Risk Management Strategy

Publication Date: Dec 2003
Published by: CGAP Donor Information Resource Center (DIRECT)
Document Type: Presentation

View this Document   Email this Document

What is the importance of microinsurance for the poor?

This presentation explores the key areas related to microinsurance. It states that:

• The key risks that poor people face are death, illness or injury, loss of property and natural disasters;
• They protect themselves from risk by:
  • Prevention and avoidance tactics such as sanitation and identification of business opportunities; Preparation tactics such as saving, buying insurance and educating children;
  • Coping tactics like taking emergency loans, depleting savings, selling productive assets, etc.

Addressing the issue of insurance, the presentation states that:

• It is difficult to provide insurance to poor people because:
  • It requires technical specialization and a distribution system;
  • Insurance products are relatively complex.
• Microinsurance protects low-income people against specific risks;however, it should be:
  • Responsive to their priority needs;
  • Easy to understand;
  • Affordable.
• Some microinsurance delivery models are:
  • Partnerships;
  • Full insurance provision;
  • Health care service providers;
  • Microfinance institution (MFI) - based insurance;
  • Community - based programs.

The presentation also looks at:

• The factors that affect demand for risk managing services;
• Basic insurance principles;
• The degrees of risk in providing insurance;
• The dismal history of crop insurance;
• The activities involved in offering insurance.

It concludes by offering the following preliminary guidance for donors:

• Consider client demand;
• Move cautiously and facilitate linkages;
• Work with strong institutions;
• Invest in technical expertise;
• Monitor performance.