Financial inclusion is red hot right now, pulling in big bucks from funders like The MasterCard Foundation, MetLife, the Western Union Foundation, and the Gates Foundation. With so many big players on board with all manner of financial inclusion efforts—like microfinance, mobile money, and financial literacy, why hasn't there also been a focus on microinsurance?
Having insurance goes a long way toward financial security, especially in the face of medical emergencies or catastrophic weather events like floods, droughts, and typhoons. In developing countries, though, the cost of traditional insurance products is often out of reach. Acknowledging this problem, fun funders like Gates and the Omidyar Network began funding work on microinsurance as a vehicle toward achieving financial inclusion and security. Omidyar Network once cited microinsurance “as an important extension of microfinance.” Back in the mid-2000s, Microinsurance was a hot area.
The Gates Foundation alone dedicated over $75 million to outfits like MicroEnsure, the International Labor Organization, and Opportunity International from 2007 to 2008. The Ford Foundation was also onboard, making over $650,000 in grants to the MicroInsurance Center, the National Association of Social Sector Credit Union, and Vietnam Women’s Union for their microinsurance programs.
Other funders put money into Leap Frog Investments, which is considered the world’s first microinsurance fund. In its first round of fundraising, Leap Frog received over $137 million with some pretty hefty grants from JP Morgan Chase, TIAA-CREF, Omidyar Network and the Soros Economic Development Fund in 2010. And with the help of a $500,000 grant from the Aga Khan Fund for Economic Development, the First Microinsurance Agency (FMiA) was established in Karachi, Pakistan, in 2008.
Since the mid-2000s, though, we haven't heard so much about microinsurance in the funding world. To be sure, some funders are still interested. The Omidyar Network, for example, joined an investment round last year for MicroEnsure.
But the overall picture suggests that microinsurance isn't so hot among funders right now. This is a challenging area for a number of reasons. Demand for microinsurance products has turned out be weaker than initially anticipated and insurance is a very regulated area. Additionally, making insurance business models work isn't easy. Another factor is that market actors have stepped up efforts in this area, making the role of philanthropy less crucial. Nearly a decade after Gate, Ford, and the Omidyar Network tentatively entered the microinsurance market, over half of the world’s leading insurance companies have come onboard by adapting their products and a number of countries including Brazil, India, and the Philippines have created microinsurance mandates.
We'll keep an eye on what funders are doing in this area. Chime in below in the comments if you have interesting information to add.