MR Microinsurance_2012_03_29.indd - International Labour ...

Th e potential of microinsurance for social protection
Moreover, it is often the case that such schemes are insuffi ciently reliable because
they are based on moral obligations and goodwill rather than on any formal
obligation. Th ere is no mechanism that allows for members to enforce the
provision of benefi ts in the event of default, and these schemes are also often
highly susceptible to economic stress. Finally, the combined eff ect of trends
towards migration, urbanization and the diminishing importance of traditional
values and norms are resulting in the evident erosion of, in particular, mutual
support networks.
Figure 2.1 Th e gap in social protection coverage in a typical developing country
Income stratifi cation:
Higher income
Social insurance:
covers 5–60 per cent of the
population in low- and
middle-income countries
(the shaded area illustrates
that some countries have
been better able than
others to extend the
coverage of their social
insurance schemes to
most formal and
even some informal-sector
employees.
Lower income
Source: Loewe, 2009b.
Formal
sector
Informal
sector
Microinsurance is one potentially eff ective instrument for overcoming this
situation. Unfortunately, microinsurance is often discussed in isolation and is in
many cases implemented without consideration of the underlying context. Its
ultimate goal is to reduce the vulnerability of people living on low incomes by
enabling them to manage risks more effi ciently. It is thus a social protection
instrument, which should not be overlooked when a social policy strategy is
developed. Th ere are alternatives to microinsurance for reaching this goal, which
may be more or less eff ective depending on the particular context concerned, but
it still warrants consideration.
41
Private insurance: up to 12 per cent
Th e dotted line represents the border between
the formal and the informal sector, which is,
of course, less clear-cut than the fi gure makes
us assume. Th e shape of the line illustrates
that all the poor are working in the informal-sector,
while not all informal-sector
workers are poor!
Th e bulk of informal-sector workers
enjoy no social protection other
than mutual support provided on
voluntary grounds among friends,
relatives and neighbours.
Microinsurance:
up to 5 per cent
Basic social protection/
social transfer schemes:
up to 10 per cent