MR Microinsurance_2012_03_29.indd - International Labour ...

Microinsurance and climate change
– Regulators: removing regulatory obstacles, developing systematic and comprehensive
approaches (see Chapter 25)
In the context of climate change, the question is slightly different. Who needs
to know the subject and how? How must climate change be taken into account
and communicated? Climatic changes take place over years and decades. As a
result, the phenomenon is abstract, even though it is becoming better understood
(Edenhofer et al., 2010). It may be assumed that while people in affected
regions do perceive changes in the weather, there is often no association with the
complex phenomenon of climate.
In this respect, climate change must be communicated in different ways at
different levels, raising awareness about strategies to adapt to new conditions and
effectively manage additional risks. For example, within an insurance company,
the staff can be trained and made more aware. It is also essential to publicize success
stories and obstacles. If valuable insights fail to catch on, the wheel will be
constantly reinvented. For intermediaries, aggregators and clients, communication
should be tailored to create an understanding of weather-related concepts by
referencing weather conditions that have been experienced and risk mitigation
steps that they can take. Responding to local specifics and addressing the individual
situation of the target group makes it easier to introduce cover concepts.
4.3.5 Sustainability
Sustainable solutions are good solutions. They are economically stable and
improve the living conditions of insured persons for years. As the microinsurance
sector is young, it is difficult to achieve a balance between years with few claims
and years with many. The following guidelines should be considered if microinsurance
is to be transacted sustainably against the background of climate change:
– Multi-year terms: Risk partnerships based on trust develop over a long time and
are one of the foundations of successful risk sharing. Insurance schemes that are
geared only to short-term profit do not work. Stable partnerships are therefore
clearly preferable to competition for favourable premiums.
– Geographical spread: The more insurance products are geographically spread
across borders, the easier it will be to shoulder the burden of climate-related risks.
The solidarity-based system of insurance works best when it is diversified over a
large area, and hence the important role of reinsurance.
– Efficient operations: For agriculture insurance, a link between loans and crop
insurance is essential for scaling-up and keeping transaction costs within reasonable
bounds. Other bundling opportunities can be found in the agriculture supply
chain, such as linking cover to seeds and fertilizer. For non-agriculture cover,
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