Microinsurance: What Can Donors Do?
Microinsurance is growing increasingly popular among donors as a way to help poor people manage risks and reduce their vulnerability. This Brief addresses how donors can support microinsurance efforts.In most countries, reaching scale and providing real value to clients will likely require donor involvement in the medium term. Donors will need appropriate expertise and resources to engage effectively in microinsurance because it is relatively new, complex, and risky. Strategic clarity on the reasons for engaging in microinsurance also affects how a donor’s objectives are set, how expertise is recruited,and what type of monitoring is implemented.
Determining when and how to deploy the appropriate instrument—from technical assistance to grants, loans, equity, guarantees, and policy support—requires good knowledge of market conditions. In many instances, relatively small amounts of funding provided over longer periods are needed. In markets where commercial insurers show interest, donors should focus on brokering relationships with organizations close to target clients.
Donors can also support public goods like research and consumer education. However, in the numerous markets where formal insurers are not yet willing to step in, donor funding can help build the institutional capacity to provide insurance services. The Bill and Melinda Gates Foundation recently awarded a grant to ILO to create the Microinsurance Innovation Facility, which will provide competitive innovation grants to stimulate ideas and involve new players in providing insurance services.
There is still no consensus on what constitutes good performance for microinsurance programming. In part, this is simply because microinsurance is a relatively new area. To improve accountability for results, donors should agree up front on desired outcomes and performance.
The CGAP Working Group on Microinsurance’s subgroup on performance indicators is leading efforts to define industry wide reporting ratios and, ultimately, to establish benchmarks. This work is essential to improve performance reporting and will help shape donors’ performance agreements with partners.