According to several government and private sector experts, microinsurance is not only a source of capital during a catastrophe, but it can also provide empowerment and a sense of dignity, according to Lean Santos of Devex.
Development stakeholders have shown increased interest in adding microinsurance, also known as inclusive insurance, as an adaptation measure, said Emmanuel Dooc, chairperson of the Mutual Exchange Forum on Inclusive Insurance (MEFIN).
“Providing people with financial coverage especially in times of disasters and risks is crucial. [Through microinsurance], people’s self-esteem is intact because the payment, however little, comes from their own pockets,” Dooc said during MEFIN’s public-private dialogue held last week.
Microinsurance also helps develop resiliency, according to MEFIN, as poor individuals “manage financial risks in the light of extreme weather events due to climate change.”
MEFIN is comprised of representatives from Indonesia, Mongolia, Nepal, Pakistan, the Philippines and Vietnam, and aims to facilitate constructive discussions among various development stakeholders in order to come up with insurance solutions for low-income and informal sectors of society. These benefit those that are most at risk from natural disasters.
Microinsurance also inculcates self-awareness and security for families, said Antonis Malagardis of German aid agency Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ).
“They don’t necessarily rely on dole-outs, which is exactly the point of creating self-respect,” he added.
These initiatives are much-needed in the Asia-Pacific region, which holds two-thirds of the world’s poor and is very vulnerable to natural disasters such as typhoons, earthquakes, and floods. Microinsurance benefits around 170 million people in the region, compared to 130 million and 80 million covered in South America and Africa, respectively.
However, there are several obstacles to microinsurance, first and foremost being the public’s mindset. “People have to start believing that insurance is not only for the rich. They have to understand that they can be protected by paying 20 or 30 pesos [US$0.40 – 0.60] a day or a month,” said Malagardis.
Other problems include the prevalence of a nomadic lifestyle in Mongolia, making monitoring and access difficult. Meanwhile, Pakistan does not formally recognize microinsurers, stifling expansion efforts.
Despite these hurdles, Malagardis believes that there are still incentives to encourage stakehodlers’ participation. If microinsurance is able to react quickly in the wake of a disaster, people will begin to trust in the system and the providers.
Engaging in microinsurance can also benefit existing insurers, providing them with avenues for expanding operations, gaining bigger market shares, and diversifying portfolios and product offerings.
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