World Bank Group Economic Rationale for Microinsurance The role of the World Bank Olivier Mahul...

World Bank GroupWorld Bank Group

Economic Rationale for MicroinsuranceThe role of the World Bank

Olivier MahulProgram managerInsurance for the Poor World Bank


Insurance for Poor: Historical context

Fatres: Roman burial insurance societiesFriendly Societies in the late middle agesNon-governmental social insurance

arrangementsUK: 5 million people covered by 26,000

friendly societies in the early 20th centurySimilar arrangements in Europe and North

America


Two steps forward, one step back

Trends in household poverty in 35 North Indian Villages (poor households, %)

Source: Anirudh Krishna (2004); “Escaping Poverty and Becoming Poor: Who Gains, Who Loses, and Why?”; World Development Vol. 32, No. 1, pp. 121–136, 2004.


Reasons for descent into poverty


Insurance for the poor does not really work as an individual product

Area-Yield Insurance in India

0%

5%

10%

15%

20%

25%

30%

35%

40%

2000 2001 2003 2004 2005 2006

Loss

cos

t

Loanee farmers

Non-loanee farmers


Moving towards a public-private partnership

The public sector may not be the best manager of financial services…

…But insurance for the poor is unlikely to be scaled up without government support

Public-private partnership Delivery of agriculture and health services to the

working poor Premium subsidies to those below the poverty line


Is health insurance an oxymoron?

Self funded out of current income headache, colds etc

Community funded outpatient and secondary care - malaria

Catastrophic events – referral hospital – congestive heart disease

0

1000000

2000000

3000000

4000000

5000000

6000000

7000000

Jan-07

Mar-07

May-07

J ul-07

Sep-07

Nov-07

Number of members

Community Based Health Insurance Program in Rwanda


Life insurance

So-called life insurance being issued by some microfinance institutions is Personal Accident Low probability of payout Confirmation of death is easy Profitable for both the MFI and the insurer Is it a good deal for the insured?

Full life cover can be exposed to extreme adverse selection and fraud

Funeral insurance is a fundamental need for the poor


The WB role in insurance for the poor

Developing business models Microeconomics of providing insurance and risk

related services to the working poor households

Promoting market development programs Developing market-based risk funding systems that

can be scaled up Threefold approach

Investments in building market infrastructure Technical assistance in developing new products Integration into social protection approach


The WB role in insurance for the poor

WB-FPDSNInsurance for the Poor

Social protection policy

Market models

Planners

Searchers

World Bank Group Economic Rationale for Microinsurance The role of the World Bank Olivier Mahul...

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