The term "microinsurance” typically refers to insurance services offered primarily to clients with low income and limited access to mainstream insurance services and other means of effectively coping with risk.
More precisely, microinsurance is a means of protecting low income people against specific risks in exchange for a regular payment of premiums whose amount is proportional to the likelihood and cost of the relevant risk. The principal distinction from traditional insurance is in the targeting of low income people, which leads to distinct characteristics and objectives, including addressing the particular risks of low income people, affordability and inclusiveness, simplicity and clarity in documentation, accessible processes, and building trust among target clients.
Microinsurance is a highly diversified sector, in terms of:
- Stakeholders: Microinsurance is developed and offered by commercial insurers, mutual funds, microfinance institutions, NGOs, governments or semi-public bodies. Microinsurance ventures are often joint efforts among several of these stakeholders, who can play roles ranging from market research and product design to selling, delivering, and servicing claims.
- Products: Microinsurance products can cover any insurable risk, including death, illness, accident, property damage, unemployment, crop failure, or loss of livestock.
- Portfolio size: Microinsurance can operate at any scale; a microinsurer may cover dozens of policyholders, or millions.
The links on the right provide a primer on microinsurance, illustrating the qualities that distinguish it from main stream insurance and providing an easy guide to the sector.
- Molly Ingram & Michael J. McCord (2011). Defining "Microinsurance": Thoughts for a journey towards a common understanding. Appleton: MicroInsurance Centre.
- Michael J. McCord (2012). Microinsurance product development for microfinance providers. Rome: International Fund for Agricultural Development.