Microinsurance provides a degree of protection for the worlds most low-income and vulnerable populations, but we already know that inclusive insurance penetration rates are alarmingly low in developing economies. The current coronavirus pandemic will only make things worse for them.
Most obviously, health insurance can help with hospital bills, medicines or cash to replace lost income. In Kenya, after initial reports that some health policies – which typically exclude pandemics – would not cover coronavirus-related medical costs, the government’s Insurance Regulatory Authority has stepped in to ensure payments will be made.
Indian insurers have gone out of their way to reassure life policyholders that nominees of individuals who die from coronavirus will get the sum assured, even though many life products exclude coronavirus on the grounds that it is not classified as a ‘critical illness’. “Lots of policies have had exclusions placed in them in the last 10 years due to experience with flu-type outbreaks,” says Michelle Crorie, a partner at law firm Clyde & Co.
If enforced, exclusions are unlikely to improve trust in insurance, which is often cited as a key barrier to scaling up penetration in developing markets. Not everyone is pessimistic, however. Juan Paolo Roxas, head of the Philippines Insurance Commission microinsurance division, believes the coronavirus pandemic could actually help Filipinos become more aware of the importance of insurance cover. “I think more people will be inclined and be aware that insurance is actually there and helping us,” says Roxas.
Jonathan Batangan of Philippines insurance brokers Cebuana Lhuillier thinks the pandemic could provide an opportunity to create new products to provide cover against coronavirus. However, with many countries encouraging ‘social distancing’ and selfisolation, distributing and accessing inclusive insurance products through mobile network operators (MNOS) and online – as well as supporting clients with information – will become even more important.
Should the worst happen, a life policy – perhaps bundled with a microfinance product – will provide some financial cushioning.
Funeral cover will help defray what in some cultures can be an onerous financial burden. Yet with so few low-income individuals and families covered, the personal economic impact could push many of them back into debt and deep poverty.
The economic fall-out for micro, small and medium enterprises (MSMES), and for the millions of low-income people who are informally employed, will be significant. According to the Asia Business Review, business interruption ( BI) insurance typically protects against losses caused by physical damage such as fire or flood – but it is unclear whether this will extend to the presence of coronavirus. In addition, micro BI insurance for low-income businesses is still in its infancy, and needs urgently to be scaled up. As with other types of microinsurance, the vulnerable are those that need it most and the sums insured are relatively small. Insurers themselves will be hard hit: “The main losers will be firms with large whole of life books but low levels of reinsurance, and there is likely to be a large amount of sum at risk for policyholders in their 50s and 60s,” notes the Review.
Africa is particularly vulnerable. At the time of writing, infection rates across Africa are lower than in other developing regions. While this is possibly due to existing containment measures for dealing with other infectious diseases such as ebola, capacity to roll out testing is limited and the potential for widespread transmission remains. Source: Microinsurance Network.