MICROFINANCE PAPER WRAP-UP: “Literature Review on the Impact of Microinsurance,” Published by Microinsurance Innovation Facility

“Literature Review on the Impact of Microinsurance,” published by the Microinsurance Innovation Facility, October 2013, 15 pages, available at http://www.microinsurancefacility.org/publications/rp35

Microinsurance is a financial instrument that provides coverage to help low-income individuals hedge against various risks. The Microinsurance Innovation Facility (MIF) is an office within the UN’s Switzerland-based International Labour Office that provides technical assistance and grants to organizations that develop microinsurance products. “Literature Review on the Impact of Microinsurance” is an overview of approximately 60 studies that research the impact, effectiveness and challenges of providing microinsurance in developing nations.

Most of the studies reviewed find that microinsurance increases overall financial protection for poor people, though the gauges for measuring this vary across the studies. The body of evidence about other aspects of the impact of microinsurance is inconclusive, however. Several of the research papers indicate that health insurance reduces out-of-pocket expenditures for subscribers, which usually results in an increase in the number of visits made to healthcare providers. One study on the Sokapheap Krousat Yeugn (SKY) microhealth insurance program in rural Cambodia shows that access to insurance reduces hospitalization expenses, with an average decrease of 44 percent in treatment costs for serious health incidents. However, the same study did not find a significant increase in the percentage of insured pregnant women receiving antenatal, delivery or postnatal care.

Uninsured populations bear a high degree of risk exposure that often perpetuates the poverty cycle. One study found insured groups exhibited a lower level of indebtedness, with fewer loans pursued from the informal sector. There is also evidence that insured families are less likely to sell off assets, such as livestock, to pay for unexpected health problems. While insurance provides some financial security, it also may lead to an increase in risk-taking behavior. One study found that Indian farmers who were insured against weather shocks were less likely to use drought-resistant crops.

One of the biggest obstacles to the success of microinsurance is a lack of information about its provisions, leading to lower utilization of available services. For example, a study on West African microinsurance programs documented pregnant women missing out on insurance benefits because they unknowingly delivered at non-participating health providers.

The authors also review studies that seek to address the reasons for the varied outcomes of microinsurance programs. One reason for mixed results is that the methods of collecting and evaluating data are not uniform. For example, the barometer for measuring expected outcomes such as “increased financial protection” is not clearly defined. Additionally, the selection of individuals in the sample groups used by researchers may not be random, leading to skewed data. While many aspects of the impact of microinsurance are inconclusive, most of the studies reviewed indicate that – when offering high quality services to well informed individuals – health microinsurance can be effective in reducing net health expenses.

By Meraj Husain, Research Associate

About Microinsurance Innovation Facility (MIF)

Launched in 2008 with a USD 34 million grant from the US-based Bill & Melinda Gates Foundation, the Microinsurance Innovation Facility (MIF) is an office housed at the International Labour Organization’s (ILO’s) Social Finance Programme. MIF’s goal is to increase the availability of insurance for low-income families in developing countries to help them overcome poverty. MIF provides grants to help organizations develop innovative microinsurance products, with an emphasis on agriculture, health, life and property insurance. MIF also provides technical assistance and advice. ILO is an agency of the United Nations and is located in Geneva, Switzerland.

About International Labour Organization (ILO)

Founded in 1919, the International Labour Organization (ILO), is an agency of the United Nations, an organization promoting peace and improved living standards. The objective of ILO is to advance opportunities for men and women to obtain productive work in conditions of freedom, equity, security and human dignity. Headquartered in Switzerland, its founding mission is that labor peace is critical to prosperity. For the biennium 2012-2013, ILO anticipates a budget of USD 861 million.

Sources and Additional Information

[1] Microinsurance Innovation Facility, October 2013, “Literature Review on the Impact of Microinsurance,” http://www.microinsurancefacility.org/publications/rp35

MicroCapital Paper Wrap-Up, December 13, 2013, ““‘Doing the Math’ – Women’s Health Microinsurance in Guatemala, Studying Aseguradora Rural’s VivoSegura Microinsurance in Quetzaltenango,” by Derek Poulton and Barbara Magnoni, Published by The MicroInsurance Centre”, https://www.microcapital.org/microfinance-paper-wrap-up-doing-the-math-womens-health-microinsurance-in-guatemala-studying-aseguradora-rurals-vivosegura-microinsurance-in-quetzaltenango/

MicroCapital Paper Wrap-Up, April 18, 2013, ““Why People Do Not Buy Microinsurance and What Can We Do About It;” by Michal Matul, Aparna Dalal, Ombeline De Bock and Wouler Gelade; published by Microinsurance Innovation Facility,” https://www.microcapital.org/microfinance-paper-wrap-up-why-people-do-not-buy-microinsurance-and-what-can-we-do-about-it-by-michal-matul-aparna-dalal-ombeline-de-bock-and-wouler-gelade-published-by-microins/

MicroCapital Universe Profile, Microinsurance Innovation Facility (MIF) https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=MicroRate

MicroCapital Universe Profile, International Labour Organization (ILO) https://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Accion

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