Reducing risk: microinsurance

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Reducing risk microinsurance

• Hans Dahlberg, ICMIF
• 21 September 2005

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Poverty alleviation

• The poor are the most vulnerable
• The impact of losses are more severe
• They have minimum means of recovery
• Success of microfinance schemes show the poor can
  and want to save
• Savings and credit are used unproductively
• The poor need a safety net to escape poverty

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What is microinsurance?

• Simple product
• Frequent and affordable payments
• Non-profit

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What key risks face the poor?
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How are these risks currently being addressed?

• Own means
• Selling possessions
• Emergency loan
• Informal community systems

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• Insurance is being recognized as an important
  tool for poverty alleviation

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How is microinsurance currently provided?

• Formal insurance
• Informal insurance
• Partnerships between formal and informal

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Providing microinsurancethe challenges

• Coverage
• Regulation
• Moral hazard and fraud
• Adverse selection
• Education and trust
• Technical expertise
• Affordability
• Retention
• Sustainability

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Providing microinsurancethe possibilities

• The cooperative microinsurance model
• History of organizing the poor
• Operate for the interest of members by
• members
• Trust
• Ownership and loyalty
• Peer pressure
• Surplus reinvested or redistributed

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Providing microinsurancethe possibilities
High
Group and Individual Disability Individual
Health Individual Property
Group Health Group Property Individual Life
Institutional Risk
Permanent and Endowment Group Life
Group Life Term
Low
High
Administrative Complexity
Source Brown (1999 as cited from Weihe et al
1990).
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Providing microinsurancethe possibilities

• The partner model
• No-risk fee for microinsurance provider
• Better coverage for policyholder
• Access to new market
• Pooling of risks between the informal and formal
  sector

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ICMIF development function

• Methodology
• ICMIF fees
• Technical expertise provided by members
• Development projects led by members
• Partnerships with national and international
• donor agencies

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ICMIF development activities

• Established 25 people-orientated insurance
• organizations
• Unique Insurance Company Ghana
• Financial support received for Latin America
• Contract to write guidelines on microinsurance
• Health Mutual scheme Mali
• Currently involved in 22 countries

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Source ICMIF (2001).