MR Microinsurance_2012_03_29.indd - International Labour ...

Current trends in microinsurance
(see Box 1.2), insurers have recognized that the risk management needs of lowerincome
people could form the basis for a viable business model. Historically,
approaches to providing the working poor with specialized cover have often
characterized the industry. As formal employment expanded, and as people
opened bank accounts, it became easier for insurers to provide cover more effi -
ciently through employers and banks. Th e resultant effi ciency, coupled with
expanded social security programmes in many countries, moved insurers away
from the labour-intensive collection of small premiums, and over time away
from the low-income market. Today, microinsurance is a way for the industry to
get back to its roots and become relevant again for the majority of the world’s
workers and their families.
Box 1.2 Origins of microinsurance
“Th us industrial assurance was … simply life assurance adapted to the special cir- circumstances
and requirements of the masses of people. As compared with “ordi-
nary’ life assurance its essential distinguishing feature is the manner in which
premiums are paid, the modifi cation having been introduced solely for the con-
venience of the small wage-earners for whom it is designed … A household to
which wages are brought home weekly frames its budget accordingly; it seldom
has a reserve of income from which to make large payments at infrequent inter-
vals, and still more seldom a bank account on which cheques can be drawn. If
systematic contributions to assurance are to be kept up in these conditions, they
must be related to the weekly or monthly pay envelope and collected when the
money is in hand. Failing this, the odds are that the money will be used in other
ways. Th e surplus remaining after provision for such essentials as rent, food and
clothes is generally small, and the temptation to spend it on entertainment, luxu-
ries or immediate pleasures is often too strong to be resisted without the moral
support of the industrial assurance collector. Th ese were the conditions of work-
ing-class thrift in 1854.”
Source: Morrah, 1955, p. 25.
In the contemporary version of microinsurance, there have been three
primary risk takers: a) community-based and mutual insurers managing the
insurance risk of their members; b) commercial insurers adjusting products and
processes to cover the insurable risks of the low-income market; and c) governments
with national social protection schemes. Th is section considers the fi rst
two, while the latter is covered in section 1.3.3.
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