Micro-insurance can help poor brace up for future: experts

Micro-insurance is a key tool to help the world’s poor cope with unexpected setbacks, a panel of Asian Development Bank (ADB) experts said.

The panel, titled “Protecting the Bottom Billion the Private Sector Way”, said micro-insurance provides a prime opportunity for private sector insurers to help a large, underserved customer base and still make a profit.

Many of the worlds poorest remain mired in poverty because a sudden illness or death in the family, crop failure, or natural disaster causes an unexpected loss of income or large expense. Others can be pushed back into poverty by these same events.

Micro-insurance — low-cost insurance for low-income people – can help the poor cope in such times of difficulty, allowing them to plan for a better future.

President Bill Clinton, founder of the William J. Clinton Foundation and 42nd President of the US delivered an introduction to the seminar via video.

Micro-insurance is not yet available to the vast majority of the nearly 2 billion who live on less than $2 a day in Asia and the Pacific. In part that is because regulation and supervision, where it exists, does not support insurance products aimed at the poor.

Private insurers have been slow to provide Micro-insurance given the regulatory uncertainties and the difficulties of delivering policies and paying small claims on such a vast scale.

Those companies already offering Micro-insurance, by contrast, report strong demand and predict growth in the sector. That suggests there is interest in using such products when regulatory circumstances allow.

Low-income clients also look for policies that are offered at a price they can afford and in a way they can understand and use, the panel said.

“There is a huge untapped market for Micro-insurance for lower-income households. The commercial sector will drive the dramatic expansion of the industry, but we will have to address it in a systemic way across the value chain,” said Michael McCord, President of the Micro-insurance Centre.

ADB has, in recent years, spent $4.4 million to promote Micro-insurance in Sri Lanka, Bangladesh, the Philippines, and elsewhere.

In 2010, it allocated $750,000 to help develop the nascent Micro-insurance markets in the People’s Republic of China and Mongolia where there are over 200 million potential clients.

The panel, a part of the ADB 44th annual meeting held in Hanoi, Vietnam, was moderated by Dean Karlan of Yale University, a noted evaluation expert on tools for access to finance, and, as well as Mr. McCord, comprised Doug Barnert, Executive Director of the Group of North American Insurance Enterprises; Evangeline Crisostomo Escobillo, Advisor to the Board of Phil Plan Inc. and former Insurance Commissioner of the Philippines, Tilman Ehrbeck, Chief Executive Officer of the Consultative Group to Assist the Poor; and Andrew Kuper, Founder and President of LeapFrog Investments. – Tuoitre

Tags: Micro-insurance