Demand for Microinsurance by the Poor

This presentation examines the role that microinsurance can play to help the poor out of poverty.The presentation defines microinsurance as, 'risk-pooling mechanisms for the low-income market that respond to needs in terms of costs, terms, coverage and delivery mechanisms'.

The presentation states that microinsurance innovation requires an understanding of demand.It classifies:

• Shocks, into most stressful risks, such as death of an income earner and other risks, such as enterprise risks;
• Impacts, into immediate and secondary impacts;
• Coping strategies, into four categories: self-insurance, informal group-based mechanisms, formal insurance, social protection.

The presentation then derives the following lessons from existing risk management practices:

• There is a need for 'additionality', not displacement of informal services;
• Mix of risk management services needs to match heterogeneity of demand;
• Product design needs to match client preferences;
• Payments need to match customers cash flow.

The presentation states that microinsurance needs to identify opportunities by filling in the gaps with effective microinsurance products, keeping in mind factors such as market segments, coverage, accessibility, timeliness and affordability.

It concludes that microinsurance needs to:

• Change perceptions and financial behavior;
• Use local concepts and local language to describe the products;
• Create new risk management products and institutional delivery mechanisms that work for the low-income market.