Low-income households are vulnerable to risks and economic shocks. One
way for the poor to protect themselves is through insurance. By helping
lowincome households manage risk, microinsurance can assist them to
maintain a sense of financial confidence even in the face of
significant vulnerability. If governments, donors, development agencies
and others are serious about combating poverty, insurance has to be one
of the weapons in their arsenal.
Among low-income populations, risk pooling and informal insurance are
not entirely new. Informal risk-sharing schemes have been around for
generations, even in some of the most inaccessible places. However,
these schemes are usually limited in their outreach and the benefits
typically cover only a small portion of the loss. A key aspect of the
interest in microinsurance is to explore ways of significantly
increasing the number of poor households that have access to insurance
while enhancing the benefits.
The
purpose of this paper is to identify the nature of these concerns and
to find mechanisms that the donor community could employ to respond
creatively to the challenges that are likely to emerge in this domain.
