Originally published at: https://www.mawazna.com/blog/fundamentals-of-microinsurance-in-pakistan/
Microinsurance in Pakistan is really plugging a gap for those who are living in poverty as it is providing them with a safety net that is designed to protect and support those who are living on a lower wage. Those people are unable to buy the general insurance products. Microinsurance is aimed at assisting people at a time in need such as medical emergencies while also helping to encourage improvements in the way that basic healthcare is provided to the poor.
The Importance of MicroinsurancePakistan is a developing country and so, micro insurance is playing a huge role in the economy while the social impact of micro insurance cannot be ignored due to its potential reach to masses of low income communities. A huge percentage of Pakistan residents live on a low wage and that is where microinsurance plays an important role. Many people who live on a low income face risks on a daily basis but micro insurance offers a way of managing those risks. This need based insurance is supported by a number of initiative and is encouraging the emergence of a new form of insurance that is certainly helping those on a low income. Over time, the belief is that micro insurance will help to manage risks and help to avoid debt and so, it will protect any wealth that they have. This in turn will help to generate more income which will then help to propel them out of poverty and into a life that is richer in terms of the way in which they live their lives. This is where it has a strong role in the economy in Pakistan.
It Meets the Needs of Low-income FamiliesMicroinsurance really does meet the needs of low-income families because it is tailored to their needs. Many low income families cannot afford to pay for the usual insurance cover and that in itself is a concern. They do not have direct and easy access to credits, savings and other investments such as property. Sometimes they sell any of their tangible assets to run their day to day life and the means of earning such as a small business. Low income families will benefit from being protected against specific day to day risks for a regular a low premium amount that has been calculated so that it is proportionate to the risks and costs that are associated with the risks. Microinsurance is characterised by low premiums as well as low coverage limits and is therefore, a perfect solution for low income people that are not served by common social insurance schemes. In can help to reduce the child labour in the country as well.
What Microinsurance Products are currently being Offered?A number of leading insurance providers and other institutes are currently offering micro-health insurance, accident insurance, micro-life insurance, disability insurance, micro credits etc. In Pakistan the following are some of the leading providers playing their role in provisioning of the microinsurance and microfinance based products:
Jubilee Life Insurance
NRSP (National Rural Support Program)
Adamjee Life Insurance
EFU Life Insurance
Tameer Microfinance bank
A number of leading providers are also exploring the possibility of providing easy access to microinsurance product to the potential low income customer segments and societies through mobile phones.
Microinsurance is geared up for the low income population and is provided by a number of providers but it does conform to the general insurance practices which means the cover is sufficient and managed efficiently. The risk that is insured with a microinsurance policy is based on insurance principles and costs are covered by the premiums. With all of this in mind, it is a mechanism that has been implemented to protect the poor from risks such as accidents, illness, natural disasters and even death in the family. All of these can have a detrimental effect on the finances and well-being of a family should cover not be in place and so, microinsurance has been designed to alleviate these concerns by providing a form of cover that is tailored to their specific needs.
It Really Does WorkThe great thing about microinsurance is that it is there for individuals but it is also there to help boost the economy as well as protect it. There are many costs included in health care and the insurance is there to cover these costs. The hope is that microinsurance will act as a platform to help bring people across the poverty line and into a world where their health and well-being helps them to prosper financially which can benefit them and their families.
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