It’s always exciting to hear about new research results that shed light on the way forward for policymakers or practitioners working on microinsurance.
Without mechanisms like insurance in place to manage the enormous amount of risk in the lives of the poor, hard fought gains against poverty may be wiped out when the inevitable shocks of everyday life occur, be they the death or disability of a breadwinner, sickness, a failed harvest, or the loss of property due to a natural disaster or fire or theft.
At a recent ADB and IPA conference researchers shared results on the potential impact of microinsurance. Xavier Giné presented a study that found that having increased insurance induces farmers to substitute subsistence farming activities towards high-return, higher-risk cash crops.
Another study by Dean Karlan et al. shows that when provided with insurance against the weather related risk, farmers are able to find resources to increase expenditure on their farms, and their demand for insurance increases as they (or other farmers in their social network) experience insurance pay-outs. This “peace of mind” effect implies that insurance can generate both a protective and productive effect for clients, and that farmers might benefit more from products sold directly to them, versus, for example, products sold to their credit institutions to insure loans made to a group of farmers.
There is also growing evidence that health microinsurance insurance helps low-income households cope with the financial risk of illness by reducing out of pocket expenditure for healthcare. Additionally, emerging findings also point to a potential impact of insurance on better health (i.e. improved morbidity and mortality) – though certainly a more robust body of evidence is called for before we can make such a claim, and understand the nuances of how and when it works.
Where do we go from here? These findings of the impact of microinsurance are encouraging, especially when considering that 500 million low-income persons now have some form of insurance. Yet practitioners struggle with many operational challenges to improve products and processes. Their questions broadly fall within two main categories: 1) How to design and deliver products that clients value and demand, and 2) How can microinsurance be viable for those who provide it?
Gaining traction on answers to these questions is not easy. Research, practice and policy exist in (mostly) different worlds, responding to different agendas and priorities. To try to bridge this gap, the Microinsurance Innovation Facility convened a Forum for researchers and practitioners in health microinsurance to disseminate findings from several impact studies and to exchange views on challenges faced to conduct rigorous research in real world settings.
Discussions during this event suggest several key points to improve the utility of research to practitioners and policymakers:
- Real world relevance: Research should address questions that keep practitioners and policymakers awake at night
- Anchored in practice: Research design, implementation and analysis should continuously involve practitioners and policy makers
- Found in translation: A dissemination strategy for research is essential: how will findings be “translated” so they become accessible to non-research stakeholders? What channels will reach microinsurance practitioners?
Insurance is complex, not only across different contexts including regulation, but also in terms of products and operating models. Microinsurance products, and the processes to support them, take time to develop, improve and bring to scale. Products work better the more they are appropriate, accessible, affordable, and simple. Thus, it’s important to consider when it’s appropriate to focus on impact research (proving) versus when it’s important to focus on action research (improving). Practice-based research is an essential part of a larger effort to improve microinsurance products and processes and to enable practitioners to achieve quality at scale. Peace of mind for many more could be the reward.
--- The author is Chief Project Manager at the Microinsurance Innovation Facility at the International Labour Organization (ILO).
Extensive research based evidence now available on "impact" side of microinsurance should be enough to remove any apprehensions about the propensity of insurance as a risk management tool for the poor. It should have also, by now, appraised us of the limitations of the concept - what insurance cannot acheive. Therefore it is high time we start focusing on how to acheive a quantum as well as sustianable increase in outreach, especially voluntary outreach in a financially viable manner. Practitioners are confronted with manifold issues of scaling-up, financial viability, adverse selection, moral hazard, enabling regulation, etc. All of them are in some way correlated with each other and hence it would be dangerous to look at one or few of them in isolation. A holistic action research appraoch that enables practice in tangible ways needs to be designed.
Arman, thank you for sharing your thoughts on research that is relevant for the practice of microinsurance. It would be interesting to hear the views of research experts about how to design and carry out the holistic action research you’ve mentioned which could support scaling up of better insurance products for the poor.
The microinsurance sector will benefit greatly from demonstrations of success, where valued products are sustainable on a much broader scale. Then, we need to contemplate how to replicate those same successes across other contexts and settings.
You rightly point out that practitioners must simultaneously grapple with many diverse but related factors. It’s difficult to isolate the cause of how a product performs. Thus, most learning appears to be step-wise and iterative, during the search for a right, or better, path. This means that improvement and scale may come slower and more incrementally – or worse yet, that the wrong actions continue longer than need be, wasting time and resources, possibly leading to a failure that both clients and practitioners will be slow to forget. “Right” research, designed to improve real life practice, should improve results by helping us better understand the underlying factors of success (or failure).