Microinsurance for Markets Affected by HIV/AIDS

This note examines the potential of microinsurance as an effective risk management strategy to protect poor households from HIV/AIDS related losses. It also discusses how insurers have responded with appropriate and affordable coverage, and the challenges of serving communities with high HIV/AIDS prevalence. Microinsurance can complement other methods that households use to cope with HIV/AIDS related financial crises, stimulate private sector reach to underserved markets and build on government efforts to provide social protection services to vulnerable populations. Challenges to these initiatives include difficulties in assessing risk, insurer reluctance to enter these markets and expensive products. To alleviate these risks, insurers need to:

• Include different risk groups and ensure sufficient spread of risk;
• Utilize accurate mortality data to price products;
• Design benefit packages based on willingness to pay;
• Ensure that members contribute regularly to premiums.

Finally, the note states that stakeholders interested in providing microinsurance to HIV/AIDS related populations should promote non-exclusive insurance products tailored to specific contexts, reduce cost of screening and keep products simple. Donors should carefully target subsidies, with clear and time-bound exit strategies.