The micro-insurance products provide the coverage to the low-income households and to those individuals who have the saving. And they tailor especially for the low-value assets and compensate for the illness, death or injury.
Breaking Down the Micro-insurance
As a part of the microfinance, the micro-insurance is to aid the poor families. It provides the insurance plans which tailor to their wants. The micro-insurance is quite often available in the developing countries. As there are not recent insurance markets which are quite efficient and non-existent. As the cover value is quite lower than the usual insurance policy. Thus the insured people actually pay the much smaller premium.
The micro-insurance, like general insurance, is typically available for the large variety of the risks. They include both the health-related risks and the property-related risks. Some of the risks include the crop insurance, death insurance, the livestock/cattle insurance, term life insurance, insurance for fore or theft, health insurance, the disability insurance, and the insurance for natural disasters and more.
Just like the traditional insurance, the micro-insurance functions are based on a concept of the risk pooling. They are regardless of the smaller unit size and their activities at a level of single communities. The micro-insurance actually mixes several mini units into the big structures through making the networks of risk pools. They increase the insurance functions and the support structures.
Methods of Micro-insurance Delivery
The delivery of the micro-insurance is the big challenge. Many methods and the models do exist, that might vary according to an organization, an institution and a provider that is there. In reality, there’re 4 major methods that deliver the micro-insurance to the client base: a partner-agent model, a full-service model, a provider-driven model, and a community-based model:
The model is depending on the partnership between a micro-insurance scheme and the agent. While in a few cases the 3rd-party healthcare provider. The micro-insurance is actually responsible for its delivery process and the marketing of the goods to their customers, whereas an agent is responsible for the designing and the development process. In the model, the micro-insurance schemes get benefits from the limited risks, but they are quite limited too in their control.
Here a scheme of micro-insurance is in the hands of anything that is a design and the delivery of its goods to their customers who work in the conjunction with the healthcare providers. Whereas benefiting from the full control, a disadvantage of a full-service model is quite higher risks.
Here it is a scheme of insurance. It is just like a complete-service model. It is responsible for the designs, delivery, operation, and services. Such disadvantage of the method is the limitations of the products & the services which might be offered.
Here the policyholders or the customers are running anything. They are working with the healthcare providers in order to provide the services. Such model is beneficial for the ability to design & market the products quite easily and much effectively, but a small size and its scope of the operations limits its effectiveness.
More accurately, the micro-insurance is the means of securing the low-income bracket against particular risks in exchange for the regular payments of the premium. Their actual amount is just proportional to likelihood as well as the cost of a relevant risk. A principal distinction from the traditional insurance is in targeting of the low-income bracket. It leads to distinct the characteristics and its objectives. They include the addressing of the specific risks of the low-income bracket, inclusiveness and affordability, clarity and simplicity inaccessible processes, the documentation, and building trust among target customers.
The micro-insurance is very large sector:
- Stakeholder: This type of insurance is designed and offered by the commercial insurers, microfinance institutions, mutual funds, NGOs or the governments. The ventures of insurance are typically the efforts among stakeholders. They might play the roles that range from the market research and the product design to delivering, selling, and servicing claims.
- Product: The insurance goods might give coverage of the insurable risk. It includes the death, crop failure, illness, unemployment, accident, the property damage, or loss of the livestock.
- Portfolio size: The micro-insurance might operate at any level; the micro-insurer might cover the dozens of policy-holders or even millions.