Costly micro insurance a setback to poorer sector
Today low and middle income earning families do not have access to
micro insurance services since they are costly and this is a major
setback to their income standards, said Asian Development Bank (ADB)
Country Director Richard Vokes.
He was speaking at a regional workshop on micro insurance sector
development organised by the ADB and the Insurance Board of Sri Lanka (IBSL)
on Thursday. Fire, theft and other natural disasters will be a severe
blow to the poorer sector in the country. Micro insurance services will
not only have a social impact on people but also on their economic
activities to improve income levels and generate employment
opportunities in rural communities, Vokes said.
He said the ADB has launched 10 partnership model programs to develop
the micro finance sector to reduce the cost of the low income households
in the country.
Micro insurance for low income households in the region will help
bridge the gap between the rich and the poorer sectors helping the less
affluent to increase their income level and face occupational risks with
more confidence, he said.
Principal Finance Specialist (Micro Finance), ADB, Nimal Fernando
said low and middle income earning families are price sensitive and they
will not opt for an insurance scheme which they cannot afford. The
prices of insurance should be reduced if the industry is to penetrate
the potential market.
The number of people covered by micro insurance schemes in developing
countries is very low, which is around 2 percent of the population in
Asia since the per capita income of the majority is less than US$ 2 a
day.
The poor face the same risks as the non-poor but their ability to
cope with risks is much lower. The low income families have a risk
management system and insurance substitutes. They will sell their assets
to face risks. If they sell a productive asset the risk may be bigger.
Agricultural micro insurance is very limited. It is a monopoly of
state institutions managed inefficiently.
The penetration level of micro insurance in the Asian region is an
indication of the underdeveloped market. Micro insurance penetration
levels in countries are Bangladesh 1.5 percent, Indonesia 0.7 percent,
Pakistan 0.7 percent and Philippines 1.7 percent.
He said though the micro insurance market in developing countries is
in its infancy stage there is a huge potential for it in the region to
help the low and middle income earning households to develop their
economy.
LF |