Reducing Vulnerability: The Demand for Microinsurance
This paper seeks to understand:
- What people in Africa desire from micro insurance;
- How attributes that meet the needs and preferences of the poor can be incorporated into the design of micro insurance products.
Micro insurance covering loans, life and health risks is being tried in many African regions. Some of the emerging questions related to this service are:
- Is the insurance coverage enough? For poor people reliant on variable incomes, the full cost of even the smallest of disturbances is very high;
- Is insurance service accessible?
- Does insurance provide timely benefits to the poor?
The paper states that often the poor distrust the micro insurance sector. There is a need for significant client education in micro insurance to build up client confidence. Some of the product design elements that the study recommends are:
- Provide differentiated products that are able to meet different client needs;
- Time premium payments to match income flows;
- De-link micro credit and micro insurance.
The authors observe that there is a clear demand for micro insurance to help the poor manage risk. However, responding with the appropriate micro insurance products and services will take time and is a tough challenge. In order to succeed, private insurance players should be involved in the design and delivery of insurance products based on market analysis of potential customer preferences.
