Our Work: Microinsurance

Access to loans does not eliminate the economic vulnerability of low income households. Many MFI clients remain on the financial edge, highly vulnerable to health crises, natural disasters or death of breadwinners. Few have access to the protection that insurance offers. As MFIs expand and diversify their services, they are considering insurance for low-income people, an exciting new area of business that potentially meets both social and financial objectives.

Assessing the Demand for Microinsurance

Despite its strong appeal as a product with high value and a huge untapped market, insurance is a complex endeavor, and a different business from current MFI products. In the current exploratory phases of insuring the poor, each effort requires careful market research to answer many questions, including:

• What segments of the market should be targeted?
• Which risks are a priority for insurance protection for the poor?
• What do potential clients understand about insurance?
• Given their knowledge, how will insurance need to be marketed?

Microfinance Opportunities specializes in this market research on microinsurance. This is a challenging undertaking because the lack of exposure and access to insurance means that potential clients are unlikely to articulate demand for it. Microfinance Opportunties draws on extensive experience in assessing market demand and especially, its in-depth knowledge about how the poor manage risk. It applies market insights to product concepts and facilitates the institutional linkages that can transform these ideas to marketable products. For example:

• Vietnamese farmers are susceptible to typhoons, floods and heavy winds, but have no insurance coverage. After completing a market study of demand for microinsurance, Microfinance Opportunities will recommend potential products for further testing – insurance to protect crops against weather related losses and protection against loss of livestock.
  
  
• Indonesia has 73 insurance companies none of which insure the country’s 12 million low-income households. Microfinance Opportunities did research on demand for microinsurance among clients of three MFIs and identified several ways to extend coverage to this market.

Given its core mission to improve microfinance services to clients, its is well placed to help guide the development of this new product line.