MR Microinsurance_2012_03_29.indd - International Labour ...

3 What is the impact of microinsurance?
Ralf Radermacher, Heidi McGowan and Stefan Dercon
The authors would like to acknowledge useful comments on the earlier version of this chapter received from
Aparna Dalal (ILO) and Dirk Reinhard (Munich Re Foundation).
Insurance is not an end in itself. Households purchase (and donors support the
development of) microinsurance because they want to manage risks better. Does
microinsurance improve risk management and reduce the vulnerability of lowincome
households? Does microinsurance improve the well-being of clients,
their families and communities?
Based on a systematic literature review, this chapter takes stock of what we
know so far about the impact of microinsurance on low-income households and
their livelihoods. After defining impact and reviewing its importance, it describes
the challenges involved in performing accurate impact evaluations and summarizes
the currently available literature on the impact of microinsurance. Using
insurance theory, it explains the expected impact of microinsurance and compares
it to evidence from the literature. The chapter concludes with trends
observed thus far and describes the remaining knowledge gaps in the hope of catalysing
additional work in this field.
Most of the rigorous impact assessments available focus on health insurance
in Africa and Asia. The evidence is mixed. There are robust findings proving that
health microinsurance reduces out-of-pocket health expenditure and increases
the utilization of healthcare services. Knowledge on other impacts and impacts of
other products is limited. Given the complexity of health insurance, the insights
presented below should be considered as a contribution to our understanding of
microinsurance benefits, rather than an evaluation of whether health insurance
can revolutionize protection against health shocks in developing countries.
3.1 What is impact?
Impact encompasses the changes that microinsurance makes to the economic
or social circumstances of insured people or their households, enterprises or
communities. It can be positive or negative, affect both insured and uninsured
populations, occur either before, ex-ante, or after, ex-post, insured events
happen, and have micro-, mezo- and macro-level implications, often in ways
that are linked. For example, livestock cover can provide payouts that smooth
household consumption ex-post after animals become sick or die, but can also
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