Designing Insurance for the Poor

The provision of insurance for the poor, covering a variety of risks, could well be a key milestone in the fight against poverty. In richer economies, insurance achieved through broad public action and appropriately developed private mechanisms has fundamentally changed the lives of poor people. The difficulty in developing countries, however, is that insurance markets are limited, as (often) is the capacity of public agencies to provide sufficient protection. Much experimentation has occurred in the provision of health insurance, and microfinance institutions have begun to take more interest in insurance, providing coverage for risks like crop failure resulting from drought and loss of income due to illness or accident as part of their overall service delivery. The focus of this brief is the design of insurance schemes for the poor in some of the poorest settings of the developing world, taking potential synergies and pitfalls into account.