Microinsurance is Key to Managing Risk: Wrapping-up
This blog series brought together over a dozen practitioners, researchers, and thought leaders to explore the potential of insurance in helping to build resilience among the poor. The series confirmed that microinsurance is an important service to help poor households protect their fragile livelihoods and lives against inevitable risks and unexpected catastrophes. Without access to risk mitigation tools, insurance or adequate social security services, poor people are extremely vulnerable and ill-equipped to meet shocks that life inevitably brings. There were plenty of rich contributions, but my key take away is that insurance “value”— both monetary and non-monetary (e.g. the peace of mind from knowing that you are insured)—will need to be at the heart of any dramatic expansion of insurance for the poor.
Providing added value to the client. Insurance is a complex service: a thorough understanding of clients’ needs, preferences, and behaviors is crucial to transforming a need for protection into real demand for insurance. As pointed out by Michal Matul and Aparna Dalal, recent evidence suggests that demand constraints are not always what we think: trust and liquidity constraints matter as much as insurance knowledge, awareness, and skills. Behavioral research hence holds an important promise for helping the industry to overcome demand-side barriers, including fostering higher take-up of mobile insurance.
Understanding the impact. Efforts to assess impact of microinsurance on vulnerability and well-being of clients in a rigorous way are still few but are encouraging, as pointed by Ralf Radermacher: studies show that insurance helps poor people by reducing catastrophic spending when emergencies hit and out of pocket expenses in cases of health shocks. However, more work is needed to demonstrate under what circumstances the poor benefit most from insurance.
Making the economics work. Although insurance coverage is expanding, life products still strongly dominate the markets in both Latin America and Africa, as pointed out by Michael McCord and Dirk Reinhard. Figuring how to make products such as catastrophic and health insurance financially viable for providers while still offering good value for clients is no small task: patient pilot-testing as described by Anne Hastings in Haiti and initiatives such as MILK which explore the business case for microinsurance will help the industry move forward.
As suggested by Craig Churchill and Therese Sandermark, a key role for funders is to explore, document, and fund demonstrations of microinsurance schemes that are both high-value and viable in new markets. The landscape is evolving extremely rapidly with an increasing number of public and private investors seeking to explore how their instruments – debt, equity, and guarantees – can be effectively used to stimulate the microinsurance sector in a financially viable and responsible way. The Microinsurance Network Funder Discussion Group, facilitated by CGAP and the Grameen Crédit Agricole Microfinance Foundation is organizing a workshop in September 2013 that will bring together investors, leading insurers, and microinsurance practitioners to understand their experiences to date, discuss investment opportunities, and assess the possible paths forward.
---------The author is a Microfinance Specialist at CGAP. She is the Task Team Leader for the CGAP-Ford Foundation Graduation Program, a global effort to understand how safety nets, livelihoods, and microfinance can be sequenced to create pathways to help the poorest out of extreme poverty and the relationship manager for the Microinsurance Network.