What is Microinsurance?

Insurance is a kind of a financial service whereby clients pay a premium on regular basis in return for reimbursement at higher rate when a risk occurs.  In principle, it is one of the risk management tools to counter the losses suffered from a crisis.  It is a pool of resources developed by the contributions from many people and benefited by those who are at risk. There are various kinds of insurance services from life, health, cars, electronic equipment etc. Micro-insurance, on the other hand, is also an insurance service provided to low-income people, designed and distributed in accordance to their needs and capacities. According to ILO, it is an element of social protection. It is referred to as a tool in a collective toolbox to help provide social protection to the poor. According to Stalpers, Dahal and Upadhyaya in the Training Toolkit on Gender-sensitive Health Micro-Insurance Schemes, “Micro-insurance is defined as the pooling of resources among people that are excluded from formal social protection mechanisms and that usually belong to the same community (village, cooperative, trade union, micro-finance institution etc) to share risks.”

Like microfinance, microinsurance can be relevant for the poor because:

• The poor are bankable and can make small contributions towards a pool of resources
• The success of micro-finance movements in developing countries
• The risks faced by the poor can be insured
• Affordable and tailor-made insurance products can be developed and marketed

Read about…the principles of microinsurance