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Tara James

Microinsurance, Big Impact

by Tara James Wednesday, January 25, 2017

Professionally, I am drawn to the insurance industry by a desire to support economic stability. Insurance serves as a powerful tool for self-sufficiency by assisting individuals, corporations and governments in managing risks and coping with disaster.  

When I was given the opportunity to lead a discussion with my classmates about a topic of my choosing, microinsurance was the obvious choice. As an emerging sector, the existence, purpose and scope of microinsurance are not well known so my goal was to investigate these ideas.

What did we learn?

Microinsurance functions much like traditional insurance products in that it provides protection against specific risks in exchange for premiums. Microinsurance is differentiated by its target market (low income persons) and characteristics such as affordability, simplicity and accessibility that make these insurance products more suitable for that group.

By providing an opportunity for risk transfer to at-risk populations in developing economies, microinsurance can reduce dependence on government assistance and international aid. It can also provide a safety net for vulnerable groups that supports actions to end the cycle of poverty. Not only is microinsurance good for society, it is a growth opportunity for insurers with potentially 4 billion customers and USD $40 billion in premium income.

While the sector faces challenges, as does any new idea, microinsurance products are leading the industry in their use of technology and low-cost distribution models. I’m excited to observe how nascent micro-products will evolve and what their impact will be on mainstream insurance services.

This blog highlights the research discussed during a RMI 765-RMI Topics class discussion that was prepared and led by Tara James. This arrangement exposes students to a broad range of topics, encourages collaboration of ideas, and builds a strong learning community.