Part 2: Major Risks and How to Protect Against them
 | The feet of a homeless napping on a street of Shenzhen, China. China needs to focus more on improving insurance and social welfare programmes now that it has made initial progress in the fight against poverty, the World Bank says (Photo: Reuters) |
Better knowledge of poor clients' needs has also improved microinsurance. According to a recent study, the major risks for low-income households include serious illness, education of children, poor harvests, and the death of a relative. Other studies have tried to define how low-income clients will use microinsurance.
"One of the insights is that insurance is going to be used by households alongside other coping mechanisms they have (like savings)," says Jonathan Morduch, professor at New York University who has closely studied the microfinance needs of poor households.
"The point is to offer some simple products that provide some basic ways to reduce risks at a reasonable price," adds Morduch. "Sometimes thinking about insurance only from the US or European perspective - assuming people need expensive, comprehensive packages - gets in the way of making contributions which are viable and simple, and could make a major difference."
New projects, new challenges
There is now a variety of low-cost microinsurance products available, including life, health, property and disability insurance. Microfinance providers, such as BRAC in Bangladesh, FINCA in Uganda, and the Self-Employed Women's Association (SEWA) now provide thousands of clients with life or health insurance - often with the technical and financial support of larger banks or insurance providers.
 | Microinsurance Coverage (click on the image to enlarge)Find out what fraction of households in a given country has access to financial services |
Allianz has also launched microinsurance projects in Indonesia and India, with the help of experienced organizations, such as UNDP, GTZ, CARE International and Activists for Social Alternatives (ASA).
Allianz's life insurance product, which covers around 170,000 people in southern India, charges 87 cents per year and pays households 370 US dollars in the event of an accidental or natural death. In August, Allianz introduced a credit-life insurance product in Indonesia that covers the outstanding balance of a loan if the loan taker dies.
There are still a number of obstacles that restrict the reach and impact of microinsurance. Jonathan Morduch says one of the pressing issues - particularly when providing micro-health insurance - is the shortage of doctors and health staff in many parts of the developing world.
"I think a lot of institutions would like to provide health insurance, but are finding that they need have doctors there to provide the services - and in many places, medical staff just aren't there in the quantity or quality needed," says Morduch. "The insurance company has to be able to respond quickly after a health or environmental crisis. It's not easy, but it's critical and depends on doctors and nurses being there to provide services. One hope is that the spread of insurance will add pressure to improves medical services in places with sub-standard care."
Along with facing such shortages, NGOs, insurers and microfinance institutions must also build public awareness about the benefits of insurance among the hundreds of millions of people who have never had access to financial services.
"While there is a need for insurance, the big challenge is to convert need into demand," Vipin Sharma, director of the microfinance program at CARE International in India, told Allianz.com News in July. "If the products are customer-oriented, and the customers understand the critical value that insurance adds to the quality of life, they would definitely pay the premium."
Part 1: Reducing the Risk of the Poor
Editor: Valdis Wish
publishing date: November 22, 2006
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safety at work benefits microinsurrance
NGO workers health impulse can help micro insurrance by reducing see www.workershealth.eu