Summary (English)

This paper looks at microinsurance from the perspective of microfinance institutions (MFIs), which are important microinsurance delivery channels. By reviewing the experiences of three Indian MFIs –SPANDANA in Andra Pradesh, and SHEPHERD and ASA in Tamil Nadu– it seeks to answer questions about what products to offer, and how to design and deliver them.
Several lessons can be drawn from the extensive experiences of these MFIs in offering microinsurance. These include, inter alia:

• The challenge for the MFI and its clients is to figure out the most cost-effective solutions to their clients' primary problems.
• For women to really benefit from life insurance, the coverage should be on the lives of their husbands. As the cases will show, however, this is easier said than done because of adverse selection problems that can emerge when coverage was extended to husbands without screening or age restrictions.
• While an MFI might undertake prevention strategies to fulfil its social mission, these interventions could have the additional advantage of reducing claims.
• It makes sense for MFIs to start with a simple life policy to learn about insurance. However, once MFIs know how to manage insurance risks, then it makes sense for them to move on and provide coverage that better meets clients' needs.
• Simple products work best because they are easier to administer and easier for clients to understand.
• The link between insurance and a loan can improve efficiencies, but it also has significant limitations. Of the three, only SHEPHERD has concluded that insurance should not be linked to microcredit since risks can happen when people do not have a loan.
• If MFIs sell microinsurance to non-members, the organizations (or their insurance partners) are vulnerable to adverse selection risks. To control this risk, insurance should only be offered to persons who have joined a group for the purposes other than accessing insurance.

Related info

Microfinance Gateway

Note

Good and Bad Practices in Microinsurance, Case study No. 15