Microinsurance in Aceh: Feasibility Study

This study assesses demand for microinsurance in Aceh province (NAD), Indonesia, and provides recommendations regarding suitable products, delivery channels, capacity development needs and cooperation with other organizations.The study finds that:

• The main risks for the people of Aceh are: the risk of illness, education expenses for the children and business risks;
• Risk coping mechanisms are limited and inadequate to protect low-income groups;
• Depletion of personal savings, selling of valuables and borrowing from family members are the most common risk-facing strategies;
• Although many insurance companies operate in Aceh, none tap into the low-income market;
• Most microfinance institutions (MFIs) and cooperatives are small, have a limited outreach and are of low organizational strength;
• Secondary structures, such as the apex organizations, are weak;
• Few can be taken into consideration when selecting potential partner organizations;
• Microinsurance may strive towards an innovative pilot approach rather than reaching out to a large number of clients;
• Substantial progress seems possible with a new approach covering critical illness/ hospitalization;
• Strengthening apex bodies would have a tremendous impact not only for microinsurance operations, but also as an institutional basis for other development activities.

The paper concludes by emphasizing the need to select good hospitals, which provide satisfying treatment, transparency and good governance.