MR Microinsurance_2012_03_29.indd - International Labour ...

The potential of microinsurance for social protection
Second, as an alternative to social insurance: microinsurance can also play
a crucial role where social insurance schemes do exist, but are not (and unlikely
to become) attractive for all informal-sector employees. This may be due to the
fact that the risks covered constitute a major threat only for workers in the urban
formal sector, whereas farmers and workers in the informal economy are vulnerable
to other types of risk. Likewise, the contribution rates may be too high or the
payment procedures may not be appropriate for people with an irregular income.
Furthermore, the population may mistrust the systems administered and organized
by public institutions.
In these cases, microinsurance can be built up in parallel as an alternative to
social insurance, with the result that households can opt for the kind of social
protection instrument that best suits their specific needs and preferences, i.e.
social insurance, microinsurance or traditional commercial insurance. For example,
in Viet Nam, a few cooperatives offer health microinsurance despite the fact
that every citizen not legally covered by the country’s standard social health
insurance scheme can enrol voluntarily at a moderate contribution rate in a separate
social health insurance scheme, which is also run by the official social insurance
corporation to meet the needs of people outside the formal economy
(World Bank et al., 2007). Similarly, Ghana allows independent mutual health
insurance schemes to co-exist with district health insurance schemes affiliated
with the National Health Insurance Fund (see Box 2.1).
Third, it can be linked to social insurance: microinsurance can help even
where social insurance is potentially attractive for the entire population. Some
countries face difficulties in integrating informal-sector employees into their
social insurance schemes even though – and this is in contrast to the second scenario
described above – their enrolment in them would benefit the large majority
of households in the country. The problem may be that the social insurance
administration is unable to reach rural areas, serve informal urban settlements or
convince low-income households of the merits of enrolment. Informal economy
workers may also be reluctant to enrol because they are not sufficiently aware of
their risks or mistrust the State. In Viet Nam, for example, many individuals do
not enrol in the country’s voluntary social health insurance unless they are suffering
from serious health problems. In Tunisia, the number of informal-sector
employees contributing to the social insurance scheme increased only after the
Government added child allowances to the benefit package of the social insurance
scheme. Previously, these had only been part of the benefit package for formal-sector
employees and proved to be very popular among informal workers
(see Loewe, 2009).
In cases such as these, social insurance corporations may consider cooperating
with microinsurance providers, who act as their local agents. The task of these
agents is to convince households of the advantages of enrolling in social insurance
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