managing risk.pdf

62 Chapter 4 - Microinsurance: Anticipating Client RisksConclusionThe microinsurance industry is still in its infancy, but it can play an important role in the risk management andconsumption smoothing of low-income households. It can also contribute to the growth of microbusinessesand their financial service providers. Low-income households and microbusinesses face a wide range ofunpredictable shocks, both large and small. These can include slow onset problems (such as a drought) orsudden, devastating shocks (such as hurricanes, earthquakes, and illnesses). Rural producers are also exposedto a series of production-related risks that can be addressed in an efficient and cost-effective way by innovativemicroinsurance products.Because of the needs and limitations of clients, microinsurance has important differences compared tocommercial insurance. It has special characteristics in design, delivery, claims processing, and premiumstructuring that make microinsurance an important alternative risk pooling mechanism for the poor. Althoughalternative models have shown success in some cases, in many countries the path to large-scale microinsurancecoverage will be through traditional insurance companies. These companies already have the skills, information,and risk management systems required for microinsurance.Governments and donors can help to foster the partnerships that can result in large-scale coverage by supportingresearch to develop actuarial tables, client education campaigns, financial literacy efforts (including insurance),and conferences and exchanges to share experiences in the region.