Changing Role of Family Networks in Coping with Risk

This Microinsurance Learning and Knowledge (MILK) Brief examines the importance of family networks, the ways in which recent demographic trends indicate a weakening of these networks, and the emergence of new gaps in risk-coping ability which formal insurance products may be able to fill.Low-income people have traditionally relied on families for managing and coping with risk. Changing family patterns, aging populations in low-income countries, increase in migration, and growth of urban areas have caused family networks to weaken in recent years. Conclusions include:

• Public alternatives and safety nets are not always available to take the place of family networks in managing risk;
• Insurance, pensions, social safety nets, composite insurance, and savings products may be useful in filling the gaps left by weaker family networks;
• Potential for adverse selection and the possibility that riskier populations will be more likely to purchase microinsurance must be kept in mind when thinking about microinsurance's sustainability.