Microinsurance

Microinsurance is the protection of low-income people (those living on between approximately $1 and $4 per day( below $4)) against specific perils in exchange for regular premium payment proportionate to the likelihood and cost of the risks involved. This definition is exactly the same as one might use for regular insurance except for the clearly prescribed target market: low-income people. The target population typically consists of persons ignored by mainstream commercial and social insurance schemes, as well as persons who have not previously had access to appropriate insurance products.

The institutions or set of institutions implementing microinsurance are commonly referred to as a microinsurance scheme.

Insurance functions on the concept of risk pooling, and likewise, regardless of its small unit size and its activities at the level of single communities, so does microinsurance. Microinsurance links multiple small units into larger structures, creating networks that enhance both insurance functions (through broader risk pools) and support structures for improved governance (i.e. training, data banks, research facilities, access to reinsurance etc.). This mechanism is conceived as an autonomous enterprise, independent of permanent external financial lifelines, and its main objective is to pool both risks and resources of whole groups for the purpose of providing financial protection to all members against the financial consequences of mutually determined risks.

The last definition therefore, includes the critical features of the previous three:

Microinsurance, like regular insurance, may be offered for a wide variety of risks. These include both health risks (illness, injury, or death) and property risks (damage or loss). A wide variety of microinsurance products exist to address these risks, including crop insurance, livestock/cattle insurance, insurance for theft or fire, health insurance, term life insurance, death insurance, disability insurance, insurance for natural disasters, etc.

Microinsurance has made a significant difference in countries like Mali, as Maxime Prud'Homme and Bakary Traoré describe in Innovations in Sikasso. Still, many countries face continuing challenges. Specifically in Bangladesh, micro health insurance schemes are having trouble with financial and institutional sustainability, Syed Abdul Hamid and Jinnat Ara describe, but things are improving. Progress in Bangladesh

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