News 27 of 217

Photo: Sarah McCanns

In many parts of the world, a negative turn of events can bring a family to destitution. The death of the main breadwinner, a sick family member who requires medical attention, theft, a fire, or a flood—these misfortunes can wipe out a lifetime of hard work.

Insurance can play a crucial role in reducing vulnerability. However, few insurers offer low-premium and low-coverage products to the poor; many potential customers don’t see the value of insurance; and government regulations often discourage the growth of micro-insurance.

The FinMark Trust in South Africa is leading IDRC-supported research on micro-insurance in Colombia, India, the Philippines, South Africa, and Uganda. Researchers have found that people in different cultures prefer different types of insurance. In South Africa, for example, the desire and pressure to provide loved ones with a dignified funeral has prompted people to pool their resources to cover funeral costs. In India, buyers are more likely to opt for endowment policies, which have a savings component.

Not only does government regulation need to allow and even encourage formal financial institutions to design insurance products for the poor, it also needs to bring informal service providers into the fold to ensure that consumer rights are protected.

A potential market in micro-insurance

  Hennie Bester, a consultant with the Centre for Financial Regulation and Inclusion (Cenfri), describes the risks that the majority of people in developing countries face and the micro-insurance products that already exist in several countries. Innovations include insurance sales via mobile phones.  Listen to the 5-minute audio clip.

Regulation needed in South Africa

 Doubell Chamberlain, Cenfri’s managing director, describes South Africa’s burial societies and the role financial institutions can play in micro-insurance. Policy recommendations to accommodate South Africa’s formal and informal sectors have fallen on receptive ears. Listen to the 4-minute audio clip.

Awareness and more agents needed in India

 Swetan Sagar, director of research and consulting at Micro-Credit Ratings International Ltd., describes India’s young micro-insurance market and the obstacles to its growth. Listen to the 4-minute audio clip.

2009-04

News 27 of 217