Microfinance - Insurance

Micro insurance products offer coverage to low-income households or to individuals who have little savings. It is tailored specifically for lower valued assets and compensation for illness, injury, or death. Micro insurance, like regular insurance, is available for a wide variety of risks. These include both health risks and property risks. Some of these risks include crop insurance, livestock/cattle insurance, insurance for theft or fire health insurance, term life insurance, death insurance, disability insurance, and insurance for natural disasters, etc. Like traditional insurance, micro insurance functions based on the concept of risk pooling, regardless of its small unit size and its activities at the level of single communities. Micro insurance combines multiple small units into larger structures, creating networks of risk pools that enhance both insurance functions and support structures.Micro insurance is not confined to any specific product or product line or a specific provider type. It covers a wide variety of risks—basically any risk insurable and appropriate in terms of affordability and accessibility to low-income households. Micro insurers have increasingly turned to innovation to tailor products to accommodate the needs of their low income target market.In case of Micro Insurance, farmers are liable to pay only 25% of the total premium; remaining 75% is subsidized by the Nepal Government so that most of the farmers are benefited by this policy. Micro Insurance includes:

1. Crops Insurance
2. Fruits Insurance
3. Vegetable Insurance
4. Fish Insurance
5. Cattle Insurance
6. Birds Insurance and
7. Bee Insurance

Similar to regular insurance, micro insurance is available for a wide variety of risks, including health, term life, death, disability, and even farming-related insurance risks for crops and livestock.

Micro-insurance Mechanism

Delivery of micro insurance is a challenge. Several methods and models exist, which can differ according to the organization, institution, and provider involved. In general, there are four main methods for delivering micro-insurance to a client base: the partner-agent model, the provider-driven model, the full-service model, and the community-based model:

Partner-agent model: 

This model is based on a partnership between the micro-insurance scheme and an agent. In some cases a third-party healthcare provider. The micro-insurance scheme is responsible for the delivery and marketing of products to the clients, while the agent retains all responsibility for design and development. In this model, micro insurance schemes benefit from limited risk but are also limited in their control.

Full-service model: 

In this model, the micro-insurance scheme is in charge of everything; both the design and delivery of products to the clients, working in conjunction with external healthcare providers. While benefiting from full control, the disadvantage of the full-service model is the higher risks.

Provider-driven model: 

In this model, the healthcare provider is the micro-insurance scheme, and similar to the full-service model, is responsible for all operations, delivery, design, and service. This disadvantage of this method is the limitations of products and services that can be offered.

Community-based/mutual model:

In this method, policyholders or clients are run everything, working with external healthcare providers to offer services. This model is advantageous for its ability to design and market products more easily and effectively, but the small size and scope of operations limit effectiveness.