Our work on financial inclusion is difficult to understand fully from Geneva, where nearly everyone has access to a huge range of financial services.
Fortunately, I have had a number of opportunities to do field research, conduct surveys, and organize focus groups in developing countries. That is when you get clear insights about the huge challenges that workers in the informal economy, day labourers, and microentrepreneurs face on a daily basis.
These discussions often evolve into conversations about risks – what are the risks that people are most concerned about, what keeps them up at night? Of course, the answers vary a great deal depending on the person and country: not having enough food to eat, no employment opportunities, concerns about their children’s future, natural disasters, theft and so on. But in general, the one concern that is mentioned most often is health: being able to afford decent health care without being impoverished in the process.
Promoting universal health coverage
Fortunately, in many developing countries, this concern is beginning to be addressed. Over the last five years, many governments have expressed an interest in promoting universal health coverage. And governments are increasingly recognizing the role microinsurance plays in achieving it.
Microinsurance provides protection for low-income people in return for small premium payments. The providers are usually private organizations, such as community-based organizations, NGOs and insurance companies. Microinsurance can cover a range of risks, including illness, death, drought and natural disasters. The ILO’s Microinsurance Innovation Facility, initially funded by the Bill & Melinda Gates Foundation, has played a key role in promoting better insurance services for low-income people in the developing world.
Organizations that offer health microinsurance often share the aims of governments and have experience extending access to health care. Governments therefore see the potential of collaborating with them. The contribution of these organizations takes many forms, including laying a potential foundation for universal coverage, providing a means to experiment and test new approaches, and supplementing basic government benefits, as summarized in one of our recent papers.
Increasingly, we are seeing evidence of the positive impact that these kinds of schemes can have. Recent research across a number of countries shows that insurance for low-income households reduces out-of-pocket expenditure and increases the use of health services. For example, our research in Kenya found that insured people had fewer medical expenses, allowing households to consume more. In terms of health outcomes, our findings from Guinea and Bangladesh show insurance-enabled access to health services reduced maternal and child mortality.
These positive results are enhanced when governments collaborate with insurers, community groups and organizations that distribute insurance, like microfinance institutions, cooperatives and even cell phone companies. But this collaboration between the public and private sectors is not a given. This is something that the Facility will focus on over the next five years: working even more closely with governments, insurers and other stakeholders to develop stronger microinsurance markets and promote public-private partnerships.
The ILO has been developing this approach since 2009 in Ethiopia and since 2010 in Zambia. As a result, nearly 3 million low-income people have access to some sort of insurance in those countries. The next step is to improve the quality of products and to make sure that they cover the risks that concern and affect low-income people the most, like a lack of health care. You can find out more about microinsurance market development in the recording of our latest webinar.
By engaging at all levels, with regulators and policymakers, with insurers and distribution channels, with low-income households and communities, we believe that we can make a significant difference in helping the working poor to manage risks more effectively, and to break the vicious cycle of poverty.