The microinsurance market is expanding rapidly, with coverage in force for an estimated 500 million worldwide, according to the Microinsurance Innovation Facility of the International Labour Organization and the Munich Re Foundation.
Microinsurance is designed to protect underserved or poor people against risks related to accidents, illnesses, death, natural disasters and property losses—in exchange for premium payments tailored to their preferences and capacity to pay.
The number of people covered by microinsurance rose from 78 million in 2007 to 135 million in 2009, reaching nearly 500 million people today, reports the two organizations in the second volume of the "Microinsurance Compendium, Protecting the Poor."
The results show that Asia, in particular China and India, is leading the uptick, covering roughly 80 per cent of the market. It is estimated that 60 percent of people around the world covered by microinsurance live in India. Latin America accounts for 15 percent of the market and Africa 5 percent.
The report authors point to Asia’s large and dense populations, interest from public and private insurers, proper distribution channels and active government support as some of the reasons for Asia’s growth in this area.
"Since 2008, we have seen numerous innovations emerging to overcome the challenges of providing viable insurance services to more low-income people," says Craig Churchill, team leader of the ILO's Microinsurance Innovation Facility and chair of the Microinsurance Network, a global multi-stakeholder platform designed to promote the development and delivery of effective insurance services for low-income people.
"Efforts now should focus on increasing effectiveness so that insurance products can successfully reduce their vulnerability. The Compendium comes at the right time to help insurers, delivery channels, donors and other stakeholders understand what it means to provide valuable risk-management services to the working poor," Churchill adds.
"Indeed, what the developed world took several hundred years to accomplish cannot be replicated within a decade in the developing world, even given all the new technology and knowledge that is now available. Providing microinsurance effectively requires the involvement of many stakeholders from both the public and private sector who are not used to working together and who often have very different objectives and operating systems. What matters now is the process of getting key stakeholders to work together effectively," says Dirk Reinhard, vice chairman of the Munich Re Foundation.
According to the Compendium, there have been many innovations in the field of microinsurance over the past years. For example, new products covering a variety of risks have been piloted and distributed to poor households through an increasing diversity of channels (e.g., banks, retailers or cell phone companies). Commercial insurers have also entered the low-income market, creating significant capacity for scale. At least 33 of the 50 largest commercial insurance companies in the world now offer microinsurance, up from only seven in 2005.
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