12. Micro-Insurance: Risks in the Informal Economy

Women and men working in the informal economy are exposed to numerous kinds of risks as they work under difficult work conditions. These conditions are characterised by risks associated with lack of hygiene, poor access to health care services and no fixed wages at fixed times. Besides, during times of social, political and natural crisis, the informal workers are exposed to greatest risks. For example, riots and strikes will put a porter or a rickshaw-puller in the market at risk as he will have no earning for that day; during times of natural disasters such as rainfall, the living conditions of informal workers can become pathetic as they usually stay in open on streets and roads. Informal workers are also exposed to work hazards which they are either unaware of or are unable to do anything about it. For instance, women making beedis or incense sticks do not take precautions and end up suffering from health problems.

Risk management strategies have been categorised into three categories:

Risk Reduction: Risk reduction strategy is introduced before a risk occurs. It is usually preventive in nature and reduces the probability of adverse risks. For example sound macroeconomics, public health, education and environment
Risk Mitigation: Risk mitigation strategy is also introduced before a risk; however, its function is mainly to reduce the impact of the risk. For example, in an existing situation where the poor are unable to access credit facilities in formal systems can opt for micro-finance system.
Risk Coping: This strategy is usually adopted to reduce the impact of the risk after it has occurred. It includes the people selling assets, going to the moneylender, migration or sending children to work.