Effective Micro-Insurance Programs to Reduce Vulnerability

The provision of insurance products to microfinance clients is becoming increasingly common and much has been learnt over the last ten years about how to design products to better meet the needs of clients. This paper sets out to provide an overview of some of those lessons learnt.

The paper stresses that the provision of any financial service to the poor must start with an understanding of client demand; the authors take this one step further and explain how client demand is tempered with other factors such as regulations, the operational environment and insurance supply. A product development process is outlined providing examples of how an effective product can be developed and implemented within a microfinance organisation.

The paper continues to look at some lessons learnt and some common features that are found in effective products. This is conducted both at the generic level for those features that are common across different types of products and then in more detail for each type of product (e.g. life, property, health etc).

Whilst the provision of insurance to the poor has mainly been via either mutuals/cooperatives or microfinance organisations using the “partner-agent” model; the authors argue that in fact there are a myriad of ways to provide the poor with access. The distribution chain is broken into distributor, administrator and risk carriers so that the reader can consider potential options.

The paper concludes by considering some of the issues that the industry faces as it seeks to expand beyond mainly life insurance via microfinance loans and into the provision of insurance to the mass market:

  • Why are the poor not buying?
  • Client education
  • Health insurance suppliers
  • Crop insurance suppliers
  • Transaction costs
  • Challenging the exiting models

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