Developing Microinsurance

Draft report to the government of New Microland: Dear government of New Microland, We appreciate your act of retaining us for further advice and services. We shall endeavour in earnest to assist your nation and your administration in developing an environment in which microinsurance can be offered to the general population, in view of their life and general insurance needs. This report is written such that the technical details are omitted, however, the readers are expected to have a reasonable grasp of the general workings of insurance and its related products in order to appreciate the report. Most of our recommendations pertain specifically to the government. In general, microinsurance refers to insurance products catered to people with low-income. Typically, microinsurance is characterised by its relatively lower premium, smaller coverage limits and simplicity in design compared to conventional insurance for practical purposes (Kalra, 2010). Even so, microinsurance is built on the same principles as conventional insurance. As such, some of our recommendations may be relevant to facilitate insurance in general. Microinsurance may manifest itself in various forms of delivery. For example, direct, partner agent, provider and community based programmes. In this report, we will only look into state-subsidized or sponsored insurance schemes in the form of Public Private Partnership (PPP) considering its importance in the start-up and early expansion phase of microinsurance. As with the basic economics of all financial products, it all boils down to supply and demand. For microinsurance offerings, the demand side consists of the national population; the supply side consists of the insurers, reinsurers, state programmes and NGOs. However, before we proceed forth, we should investigate the reasons as to why New Microland does not have an insurance marketplace in the first place as it may shed light on the existing and impending challenges ahead in our effort to...