NEW YORK — At the United Nations Insurance forum held in June 2015, UN Secretary General Ban Ki-moon, rallied the insurance industry to play a stronger role in sustainable development, stressing the need for insurers to target the poorest and most vulnerable of individuals with their products. In response, nine global insurers partnered to launch ten microinsurance ventures around the world.
Microinsurance, a term first coined in 1999, refers to a mechanism that is used by insurers to assist low-income individuals to manage risk in exchange for affordable premiums. Risks typically range from unforeseen health emergencies to the loss of the family breadwinner.
It is a tool which is used to halt the poverty that can result from heavy financial burdens accompanying unexpected disasters and losses.
Microinsurance is gaining traction on the world platform and for individuals who have benefited from it, because the tool has made a significant difference in their lives.
The International Labor Organization (ILO), gives an example of Monica Kirunguru, a Kenyan citizen who can attest to the benefits of microinsurance. When her husband passed away, she was devastated. However, she still had to come up with the funding to cover funeral expenses and settle the hospital bills. Fortunately, she was informed that her husband had purchased a health and life insurance covering two months after his death. The policy enabled her to pay off the hospital bills which amounted to 330 dollars, cover the funeral expenses worth 400 dollars and set aside some money to pay her children’s school fees.
According to the national health insurance program in India, Ayesh Begam and her husband are day laborers from Maharashtra State who could not afford good healthcare. The two could not even pay for basic hospital services. So when Ayesh began experiencing pains in her stomach, she ignored them until she had a 16 kilogram tumor growing in her belly.
Her husband later signed her up for the Indian national health insurance program and shortly after, Ayesh had the tumor removed for free.
It has been proven that microinsurance can do more than break the poverty cycle. In Pakistan, children from families that have a microinsurance policy have better school attendance rates and are less likely to engage in child labor. This stems from the fact that the parents are more secure about their financial situations.
Microinsurance programs also encourage saving practices in low-income communities. A good example of this is a microfinance bank that has partnered with a Mobile Network Operator (MNO) in Pakistan to offer microinsurance products. The bank uses the monthly balance in a customer’s mobile wallet to determine the level of coverage that they can receive.
Allianz is a big player in the microinsurance industry. It covers over 57 million people with its products obtaining up to 69.1 million euros in premiums. The company states that microinsurance delivers a “double bottom line” of both financial and social returns indicating that microinsurance is indeed a viable business option.
The importance of growing the microinsurance industry should not be understated. It gives insurers access to new markets, but most importantly provides a safety net for poor households in times of devastating setbacks.