Is There Finally Some Movement on the Pressing Challenge of Microinsurance?

We recently had the pleasure of speaking with Nandika Madgavkar, assistant vice president of corporate responsibility at MetLife, to talk about the MetLife Foundation’s global financial inclusion work.

During that discussion, we also touched on the topic of microinsurance and its importance in the overall structure of any global poverty alleviation framework. “I have to think that it has to be included,” Madgavkar pointed out. “We talk about credit, we talk about savings, and you have to talk about insurance. I think that’s what keeps you from falling back into that terrible cycle of poverty.”

Having insurance goes a long way toward securing financial stability and economic security, not only in the face of medical emergencies, but also when catastrophic weather events like floods, droughts, and typhoons occur. Such events can, and often do, wipe out a family's entire livelihood within a short matter of time.

The need definitely exists for insurance for poor populations in the least developed countries, and the benefits of having insurance are obvious. Unfortunately, the cost of traditional insurance is often too high for the people that need it the most. Madgavkar also touched on a salient point here as well, paying for insurance, “...also means that the few dollars you have needs to be stretched a little further. How far can a few dollars go?”

Back in the mid-2000s, funders like Gates and the Omidyar Network acknowledged microisurance as an important piece of the financial security puzzle and began pouring millions of dollars into outfits like MicroEnsure, the International Labor Organization, and Opportunity and the MicroInsurance Center.

Philanthropy’s role in microinsurance has since dwindled for a number of reasons. For one, it turns out that demand for microinsurance products is weaker than initially anticipated, and for another, a decent number of players in the insurance market have stepped up their efforts in this space. One of those players is the Microinsurance Consortium and Venture Incubator, now rebranded as Blue Marble Microinsurance.

The consortium was established earlier this year with the goal of providing vulnerable populations and the least developed countries with insurance. Insurance giants such as American International Group, Aspen Insurance Holdings Limited, and Zurich Insurance Group are just a few of the consortium’s members.

Blue Marble CEO Joan Lamm-Tennant remarked that the consortium is “seeking to extend insurance protection to a broader portion of the population and advancing the role of insurance in society, in a socially responsible and sustainable way.”

Indeed, more market players are stepping into the microinsurance arena. If this still slow-moving trend continues, the role of philanthropy in this space may become less and less critical. However, insurance is a highly regulated area, and making insurance business models work—much less microinsurance business models—isn't easy. So the long-term role of philanthropy in this space is still very much up in the air.

According to Madgavkar, though, microinsurance is a frequent topic of conversation within the international development community lately. “In talking to our nonprofit partners, we hear a lot of what they are starting to talk about and push what they call the third leg of the stool in financial inclusion, which is insurance.”

From philanthropy to the insurance industry, the roles of all the actors in the microinsurance space are still really being shaped and solidified. As for Blue Marble, it has committed to launching at least one microinsurance venture over the next ten years.