Microinsurance as a tool for social protection of low-income community Essay

Microinsurance is seen by many as a promising tool to improve the social protection of low-income community. This assumption is supported by the positive experience of existing microinsurance schemes. Part of the success has been due to the innovations developed mainly for the microinsurance industry, which is quite different from traditional insurance. At many times, many schemes have achieved to organize sustainable insurance arrangements that are affordable for the low income sector (Loewe, 2009).
Hence, the same way some insurance in the field of microfinance, such as microcredit and savings accounts, help the people progress and acquire assets, microinsurance also helps these people to protect their properties and profits, thus becoming a powerful tool for social inclusion (Araujo, 2009).
Latest estimates suggest that there are some 500 million microinsurance clients throughout the developing world. According to Craig Churchill, this could pass the one billion mark by the end of the decade (Micro Insurance Network, 2013). The reason for this large growth has been the increasing activity of governments, insurance companies, and providers worldwide broadening the geographic scope and range of insurance services available to low-income people.
Before, the situation in the Philippines is very similar since the low-income of the population is exposed to all kinds of risks, both due to the nature of activities they are engaged in and to the conditions in which they live in their poor communities. This part of the population does not know the protection through insurance and tend to manage their risks by using personal savings, emergency loans or by seeking official networks of social protection. However, these alternatives are not always adequate and are often unable to provide the protection needed by this poorer segment.
But today, microinsurance in the country has been growing rapidly, and there is considerable scope for further evolution and growth. From the article written by the Department of Finance (2015), it is stated that the country leads the way to microinsurance industry. Coverage rises from 20.4 percent to 28.1 percent in just two years, being the highest among the Asia-Pacific Economic Cooperation or APEC member countries. From the recent APEC summit, the members recommended the micro insurance industry in building inclusive economies for Asia-Pacific.
Recently, the Insurance Commission said that microinsurance industry now covers almost 31 million Filipinos surpasses the expected coverage of only 29 million. Also according to the recent statement, Philippines is now the number one in micro insurance industry in Asia. The initiative of the people for security and protection urge them to have micro insurance policy with good assistance but in a lower premium (Business World, 2016).
Due to this fact, the microinsurance business is then presented as an venture to contribute towards economic growth and human development, having a significant presence in a segment that lies somewhere between a financial service and social protection. Microinsurance is also a part of the government policy to alleviate the standard of living through the access to savings, credit and insurance for the low-income population.