Lean Alfred Santos :
Government officials and private sector players from the Asia-Pacific region agree microinsurance can provide more than the infusion of much needed capital during times of disasters and distress; it can restore a sense of dignity and empowerment.
That may be one reason development stakeholders are showing greater interest in adding microinsurance – also called inclusive insurance – to existing adaptation measures, said Emmanuel Dooc, chairman of the Mutual Exchange Forum on Inclusive Insurance. “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,” he explained during the MEFIN network’s public-private dialogue last week.
Microinsurance helps to develop resiliency, as the region’s poor try to “manage financial risks in the light of extreme weather events due to climate change,” according to one of the network’s documents. The network, currently composed of representatives from Indonesia, Mongolia, Nepal, Pakistan, the Philippines and Vietnam, aims to promote constructive dialogue between various development stakeholders to develop innovative, inclusive insurance solutions mostly provided by the private sector for the low-income and informal sectors – those most vulnerable to risks of natural disasters and events.
Microinsurance also creates a sense of self-awareness and security for the families, according to Antonis Malagardis from the German aid agency Deutsche Gesellschaft für Internationale Zusammenarbeit. “The point here is that people create a type of self-awareness that … they are conscious that risk can happen any time … and they are the ones to contribute and be responsible in addressing this,” Malagardis, who heads GIZ’s Regulatory Framework Promotion of Pro-poor Insurance Markets in Asia, told Devex. “They don’t necessarily rely on dole-outs, which is exactly the point of creating self-respect.”
Providing this kind of protection tool is essential in the Asia-Pacific region, home to two-thirds of the world’s poor and highly vulnerable to natural disasters including floods, typhoons, earthquakes and other climate-related events. Currently, there are about 170 million people in the region enjoying some sort of microinsurance coverage – with the Philippines having a 30 percent coverage rate – compared to the 130 million and 80 million in South America and Africa, respectively.
Despite the consensus around the value of microinsurance, countries face a number of challenges in extending or expanding microinsurance to the general population.
Malagardis said mindsets are often the first obstacle. “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 ($0.40 to $0.60) a day or a month,” he explained.
There are also context-specific challenges, according to Malagardis. For example, in Mongolia, a significant portion of the population still practices a nomadic life, making it difficult for continuous monitoring and access. Another difficult environment is in Pakistan, which does not formally recognize microinsurance providers, making the efforts to expand coverage and get more people to avail difficult.
Distribution of microinsurance products remains another challenge in expanding microinsurance to the marginalized sectors of society. Private microinsurance providers can also struggle with how to keep these products accessible and affordable, while still generating a profit.
Gil Beltran, undersecretary for policy development and management services at the Philippine finance department, said that this is where the government can help, by implementing policies to incentivize private sector players to get in the mix. Despite the challenges, Malagardis said the opportunities for microinsurance in Asia-Pacific could entice more stakeholders to cooperate and collaborate.
“[We have to] come up with value for the [microinsurance] clients … and that means providing products that they will be convinced to pay for,” he said. In addition to value for money, the market needs “a microinsurance that reacts fast whenever a flood or typhoon or a landslide happens. This is when people start to trust the [microinsurance providers].”
Focusing on microinsurance can also be beneficial for existing insurance providers, as it provides a way to expand their operations, attract a bigger market share, and diversify their portfolios and product offerings. Malagardis said insurance firms can benefit from new perspectives in risk leveraging, monitoring and evaluation, as well as policy outreach to potential clients.
“There are a lot of … lessons to be learned from the experiences of [the] six countries in the [MEFIN] network. It’s important that we get the challenges right and [see] how the countries have addressed” them, he concluded. “The opportunities come out of avoiding those mistakes.”
(Lean Alfred Santos is a Devex development reporter focusing on the development community in Asia-Pacific, including major players such as the Asian Development Bank and the Asian Infrastructure Investment Bank).
