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Micro Insurance is of big importance in many developing and underdeveloped countries. It can be an important tool for sustaining economic growth as they are for the lives of the vulnerable communities. As it has been established for the protection of low-income people against specific perils in return for the regular premium rates, Asian and African countries are mostly benefiting from these micro insurance schemes and projects for years.
Since its implementation, the number of individuals supported by micro-insurance in Asia increased by 40% while it grew by 200% in Africa. Overall, the number of people under this insurance has increased from 78 million to 500 million from 2010 -2015.
Asia, in itself, has expanded the use of micro-insurance for its people. For an instance, when the earthquake and tsunami happened in Japan, micro-insurance was able to provide rehabilitation and reformation for the damages and casualties.
At the same time, the government is not only viewing micro-insurance as a mere mechanism to assist when there is a natural disaster. It is also being considered to alleviate poverty, provide equal health care privileges to the less fortunate and also uplift a country’s economy.
With these expectations, challenges emerge.
Firstly, despite the government’s recognition of its importance, many civilians do not realize its significance until only after a disaster. This is one of the leading reasons why Indonesia, the 4th most populous country in the world, has low number of citizens under micro-insurance.
As pointed out by Jakarta Post, the salience factor is one of the hindrances of keeping people away from insurance. Humans tend to think less of unpleasant events and insurance often, if not always, give a premonition of ill occasions. If people make their expense allocations based on needs that are most salient, these unexpected events are the lowest on their list of priorities, even though they might have the largest impact on their well-being.
Next, because of the wide variety of culture in Asian countries, it makes it hard for providers to deliver it to their low-income clients. Methods and models for doing so vary depending on the organization, institution, and provider involved. Experts stated that one must be thorough and careful when making policies, otherwise micro insurance could do more harm than good.
Lastly, with the increasing number of individuals being insured, the same number of insurance scams also occurs, especially in Asian countries where there is no concrete information awareness of what the detailed scope of insurance really is.
