Microinsurance - effective protection against poverty?

Allianz offers low-income families insurance that specifically caters to their needs. 45 million people in eleven countries in Asia, Africa and Latin America are already covered by Allianz microinsurance. A current study by the name of MILK has examined two types of microinsurance, with considerably varied results. What conclusions has Allianz drawn from these findings? The two Allianz project managers for Burkina Faso and Indonesia explain their perspectives.

 

Small-scale farmers in Burkina Faso who had taken out an Allianz microinsurance policy against poor weather were left in a worse state than their uninsured colleagues following a drought in 2012. This is the surprising conclusion reached by a study by the Microinsurance Centre, commissioned by Allianz. This is particularly startling because weather insurance products are intended to help protect small-scale farmers from poverty in a more effective manner.

The Microinsurance Centre explains this surprising finding by stating that this satellite-supported parametric product was overly complex and farmers had been lulled into a false sense of security. Unlike their colleagues without insurance, their sources of income were not adequately diversified. Given that they only received 20 per cent of the anticipated total loss, their financial need was hardly met.

However, another study from Indonesia suggests that microinsurance can create added social value. It was easier for families covered by micro life insurance to cushion the impact of a death than for families without insurance cover.

"Even more added value could be created if the Indonesian customers are encouraged to invest a larger proportion of the insurance payments in the family's future, rather than in a more impressive funeral. In addition, most people covered by insurance are female micro borrowers as the insurance comes attached to micro-loans. Their husbands, who often earn more, should also be insured," explains Andrea Keenan, Deputy Chairperson  at Microinsurance Network.

What conclusions has Allianz drawn from these findings? The two Allianz project managers for Burkina Faso and Indonesia explain their (different) perspectives.

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Nicolai Tewes
Allianz SE
Phone +49.89.3800-4511
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