Microinsurance: A Review of the Literature

In most of the developing world, the poor are disproportionately vulnerable to risk. Whether these risks come in the form of the death of a family member, severe illness, the loss of an asset such as livestock, or a natural disaster, these events have a particularly debilitating affect on the poor who are less able to financially absorb and recover from such shocks.

Increasingly, providing the poor with access to reliable and reasonably priced insurance instruments has become viewed as an integral component of inclusive financial sectors. This type of insurance is commonly referred to as microinsurance and is defined as “the protection of low-income people against specific perils in exchange for regular monetary payments (premiums) proportionate to the likelihood and cost of the risk involved.” ("Protecting the Poor: A Microinsurance Compendium " 2006, Churchill, C.)

The field of microinsurance is still relatively new and in its infancy stage. As such, there is much debate surrounding the implementation, product design, and effectiveness of microinsurance schemes. The papers and blog posts listed below provide a brief overview of some of the ongoing discussions within the field. The selected papers and posts were pulled from FAI’s archives and by no means represent a full review of the literature regarding microinsurance. Rather, they should be viewed as a sampling of some of current ideas and debates within the nascent field of microinsurance.

Microinsurance 101: How do poor people deal with risk? provides a basic introduction to the subject of microinsurance.

Based on the financial diaries research from Portfolios of the Poor, "How do the Poor Deal with Risk?" offers insight into the ways poor households manage risks. The brief describes the formal and informal risk management tools used by poor households in Bangladesh, India, and South Africa.

FAI’s Jonathan Bauchet and Jonathan Morduch with Aparna Dalal, Parimal Mayasudhakar and Ralf Radermacher explore whether having access to microinsurance can improve the quality of healthcare for poor patients in India. Their findings are presented in "Can insurers improve healthcare quality? Evidence from a Community Microinsurance Scheme in India."

In their blog post, "Does microinsurance provide value to clients and their families?" Michael McCord and Emily Zimmerman question whether microinsurance schemes are actually effective in helping poor households manage risk.

Xavier Giné and Dean Yang investigate whether the provision of insurance induces farmers to take out loans to adopt a new crop technology. Their randomized field experiment is presented in Insurance, credit, and technology adoption: "Field experimental evidence from Malawi."

Michael J. McCord and Emily Zimmerman examine the profitability of microinsurance for insurance organizations. Their discussion is presented in the blog post, "Is there a Business case for Microinsurance?