Background

Micro insurance is gaining popularity as an important financial tool to help the poor in coping with their risks and vulnerabilities. The poor face many risks which make them further vulnerable, often one adding to the other. There is an increasing recognition of poor households' need for protection against risks. Micro insurance reduces the vulnerability of poor households and increases their ability to take advantage of opportunities. Also, it reduces the impact of household losses that could exacerbate their poverty situation, thus playing a vital role in curbing poverty becoming incremental in nature.

From time immemorial, the poor have developed variety of indigenous systems and practices of coping mechanisms against risks. However, in the recent years provision of access to financial services has been the most noteworthy development in addressing risks of the poor households. But savings and credit products have certain limitations. Insurance services extend the coping capacity of the poor to a next level of leverage complementing the role of savings and credit and providing synergistic effect. They provide greater economic and psychological security to the poor besides offering potential for profitability and sustainability of microfinance programmes. In response to this, in India and elsewhere, many of the microfinance institutions (MFIs) and NGOs have added insurance into their product portfolio as a complementary tool to include poor people in the social protection net.

Insurance industry in many of the developing countries is experiencing rapid and sweeping changes with decentralization and privatization. While it has provided the opportunity for better products and services, diversity and choice to the well-off segments of the society, but, with respect to the poor, the existing micro insurance schemes do not address their needs. To overcome this imbroglio, community based mutual solutions are being developed. Many field experiments have proven the feasibility of applying the concept of mutuality in delivering micro insurance services to the poor that are appropriate to meet their requirements.

A wide spectrum of institutions including the governments, commercial (re)insurers, international organizations, NGOs and MFIs have begun experimenting with ways to provide micro insurance. There is a need to promote and up-scale such experiments and their successes to expand their benefit basket providing comprehensive coverage including covariant production and market risks. The sector needs incentives and investments in large scale to promote, design and development of innovative products that would cater to the diverse needs of the poor.

ASKMI redefined
from
Asian Knowledge Centre for Mutual Insurance
to
Advanced centre for Skill and Knowledge on Mutual Insurance