Micro insurance coverage surges at tremendous pace
The number of people covered by micro insurance rose from 78 million in 2007 to 135 million in 2009, reaching nearly 500 million today, as published in the second volume of the “Micro insurance Compendium, Protecting the poor”.
Craig Churchill, Team Leader of the ILO’s Micro insurance Innovation Facility and Chair of the Micro insurance Network said, “Since 2008, we have seen numerous innovations emerging to overcome the challenges of providing viable insurance services to more low-income people.”
“Efforts now should focus on increasing effectiveness so that insurance products can successfully reduce their vulnerability. The Compendium comes at the right time to help insurers, delivery channels, donors and other stakeholders understand what it means to provide valuable risk-management services to the working poor,” Churchill adds.
China and India, which is referred as the micro insurance powerhouses is spearheading the trend, covering roughly 80 per cent of the market. It is estimated that 60 per cent of people around the world who are covered by micro insurance live in India. Latin America accounts for 15 per cent of the market and Africa 5 per cent.
Reasons for Asia being ahead is this game are large and dense populations, interest from public and private insurers, proper distribution channels and active government support, are some examples, the report says.
Dirk Reinhard, Vice Chairman of the Munich Re Foundation noted, “Indeed, what the developed world took several hundred years to accomplish cannot be replicated within a decade in the developing world, even given all the new technology and knowledge that is now available. Providing micro insurance effectively requires the involvement of many stakeholders from both the public and private sector who are not used to working together and who often have very different objectives and operating systems. What matters now is the process of getting key stakeholders to work together effectively.”
New products covering a variety of risks have been piloted and distributed to poor households through an increasing diversity of channels (e.g., banks, retailers or cell phone companies). Commercial insurers have also entered the low-income market, creating significant capacity for scale. At least 33 of the 50 largest commercial insurance companies in the world now offer micro insurance, up from only seven in 2005.
With 26 chapters the Micro Insurance Compendium covers wide range of topics from sector’s trends, contribution of micro insurance to social protection and resilience building, health, life and agriculture insurance and their distribution to the business case and client value of micro insurance.
Micro insurance is unlikely to break the cycle of poverty by itself, but it is a valuable tool in the poverty alleviation toolkit. When coupled with social protection, risk prevention and mitigation, and supplemented by other risk-managing financial services such as savings and emergency loans, micro insurance can play a critical role at multiple levels to efficiently manage risks, reduce vulnerability and contribute to poverty alleviation.