MR Microinsurance_2012_03_29.indd - International Labour ...

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2 The potential of microinsurance for social protection
Yvonne Deblon and Markus Loewe
The authors wish to thank Christine Bokstal (ILO), Valerie Schmidt-Diabate (ILO), Iddo Dror
(Micro Insurance Academy), Gaby Ramm (consultant), Anja Smith (Cenfri) and John Woodall (ILO)
for their review of the chapter.
Social protection is recognized internationally as a human right. 1 However, this
right is not well enforced by most countries around the globe for different reasons,
leaving large segments of their populations without access to adequate
social protection measures and vulnerable to numerous risks. In addition, vulnerable
people are often unable to improve their socio-economic situation: they
are reluctant to invest excess income into productive physical capital or education.
Instead, they accumulate “rainy day” funds, savings in cash or in assets (e.g.
gold, livestock) that can be accessed if a risk event occurs. As a result, their
savings yield only limited returns, which are too small to enable them to build a
better life and escape poverty.
People who work in the informal economy are particularly prone to becoming
marooned in the perpetual circle of vulnerability, risk-aversion and low
income. They fall into the widening gap in coverage that exists between the different
kinds of social protection schemes found in most developing countries (see
Figure 2.1). Wealthy households can afford to buy private health, life, liability
and asset insurance. Civil servants are usually entitled to tax-funded pensions
and free medical treatment in government hospitals. Other formal-economy
employees in many countries are covered by social insurance. Some of the
extreme poor may benefit from targeted social assistance. All other people – especially
the inhabitants of rural areas, the urban poor, and those working in the
informal economy – often have no access whatsoever to any such formal social
protection schemes.
Workers in the informal economy rely on, and often benefit from, the support
provided by relatives and neighbours within their communities. In addition,
some households are organized in groups that have the explicit goal of helping
their members to manage risks – such as health mutuals and burial societies.
While such non-formalized social protection schemes are of considerable importance
for their members, they remain limited in terms of their scope and scale.
1 See the Universal Declaration of Human Rights, 1948 (Article 22) and the International Covenant on
Economic, Social and Cultural Rights, 1976 (Article 9). Also, the constitutions of more than 110 independent
States make reference to the right to social protection in one way or another.