Current Status and Issues in Microinsurance in Asia

Focusing on the status and key issues facing the Asian micro-insurance sector, this presentation argues on the need for commercialization of micro-insurance. It states that the poor need a variety of products and services such as, savings, credit or insurance, to manage their risks effectively.

The paper:

• Enumerates and compares the various micro-insurance products available to the poor, such as those for life, property, endowment, agriculture, and health insurance;
• Draws on specific examples to illustrate their advantages and disadvantages for the poor;
• Taking the example of India, explains the emergence of new micro-insurance approaches, post-liberalization in 1990s;
• To illustrate these approaches further, explains the difference between micro-agent model, non-commercial model and partner-agent model.

Further, the paper lays out the regulatory obstacles facing the micro-insurance industry in India. These include:

• Absence of entry-level insurance category;
• Inappropriate capital requirements for small policies;
• Onerous agent licensing requirements.

Finally, the paper lists ten challenges in commercializing micro-insurance:

• Reducing transactions costs;
• Managing adverse selection, moral hazard, fraud and over-usage;
• Creating an enabling regulatory environment;
• Developing sustainable health, agriculture and property products;
• Overcoming natural resistance and educational barriers;
• Providing reinsurance for micro-insurance;
• Helping states collect useful data;
• Conducting sufficient actuarial analysis;
• Distinguishing between commercial insurance and social protection;
• Getting commercial insurers interested in the low-income market.