In a nation that has been deeply impacted by a lingering financial crisis — where home prices have plummeted and job gains have yet to take hold — the long-held view of realizing a prosperous American Dream is no longer a monolithic, singular concept. In its place, a new American Dreams is emerging, one that focuses more on achieving personal fulfillment over financial success.

The 2011 MetLife Study of the American Dream reflects an uncertain era where Americans no longer seek to become wealthy; rather, they want to achieve a sense of financial security that allows them to live a sustainable lifestyle.

This has led to new thinking about what the American Dream means, and to a portrayal of Americans as resilient and adaptive. And while achieving the Dream remains important — particularly to younger Americans — how it is achieved has changed.

This is the third in a series of State of Knowledge Reports (SKRs), produced by GlobalAgRisk, regarding various aspects of weather index insurance. The first SKR focused on data challenges that face many weather index insurance products and how those data challenges vary for different types of products and different target markets. The Data SKR also assessed the status of emerging data technologies and scientific advances that may one day reduce the need for significant investments in weather station infrastructure. Weather stations are sparse and difficult to maintain in many lower income countries. The second SKR focused on legal issues associated with weather index insurance.

This SKR focuses on developing markets for weather index insurance. Three general recommendations emerge from this SKR and the preceding reports in this series.

1. From the outset, projects supporting index insurance must formulate evaluation strategies related to targeted development objectives. When derived from a clearly defined causal theory of change, these strategies can aid investment and expansion decisions.
2. Rather than providing premium subsidies, donor and government funds should be used to invest in building local capacity and establishing the proper institutional frameworks that can support the development and growth of index insurance markets in lower income countries.
3. To address challenges in the market development process, product design should focus on: a. Starting with products for risk aggregators; b. Insuring against the broader economic consequences of weather risk, not just direct losses; c. Insuring against low‐frequency, catastrophic risks; and d. Reducing costs and adding value through innovative design and delivery features.

Some health microinsurance (HMI) schemes require that patients pay cash at the time of receiving health care services, and then seek reimbursement from the insurer at a later date. For low-income households, this can be a severe financial barrier. One common way to alleviate this barrier is to set up a third-party payment (TPP) mechanism with selected health care providers. A TPP mechanism is a model for claims payment in which insured patients are not required to pay the entire cost of health services covered by the HMI scheme at the time the services are rendered. This paper draws on the experience of various health microinsurance schemes and presents the pros and cons of using a TPP mechanism. It also presents key issues to address when establishing and managing a TPP mechanisms, as well as tips and solutions collected from case studies and experts` interviews.

This is the Access to Insurance Initiative's first "Inside" publication, which introduces the Initiative and presents its goal, aspirations and activities to partners and all interested parties. The "Inside" also provides details on the Initiative's four key activity areas: 1. Building knowledge and learning; 2. Undertaking country projects; 3. Contributing to IAIS standard-setting and 4. Advocacy and engagement in international platforms. "Inside" further explains how the Initiative works and its plans for the future. The Initiative is entering the next phase of its life. Work in the four activity areas is expanding and the search for partners and funding is on-going. In future, the Initiative will continue to hold dialogue events and training seminars. As evidence of the impact of policy and regulatory changes on market development becomes available, it will share these lessons with supervisors and others. Increasing focus will be placed on consumer protection, index-based insurance and health insurance. Also, the Initiative plans to develop innovative training programmes. It will continue to carry out country diagnostic studies and implementation support, expanding geographic reach (for example to cover the Pacific, the Caribbean, Middle East and North Africa and Central Asia regions) and to gain momentum in implementation support. As it takes time to implement a reform agenda, the Initiative takes a multi-year view of country-level implementation support. The Initiative will continue to work with the IAIS as its strategic partner. It will also strengthen and expand other partnerships that advocate financial inclusion and share a financial inclusion agenda. Though a relatively new organisation, the Initiative is excited to play a role in promoting policy and regulatory change and sound supervisory systems in emerging insurance markets.

This report was commissioned by Funenseg and CNSeg, the Brazilian insurance school and insurance industry association respectively, as an independent assessment of the microinsurance market in Brazil, the drivers of its development and how this development has been shaped by regulation. It proposes a strategy for the further development of the microinsurance market, with specific focus on regulatory strategy and design.

A number of dedicated focus group discussions held in Rio de Janeiro, São Paulo and Fortaleza (for which a separate report is available) were conducted as part of the research, as well as an analysis of available IBGE socio-economic and fi nancial services usage data subcontracted to Rio de Janeiro-based firm IETS. The Brazilian private insurance supervisor, SUSEP, kindly made their database available for dedicated analysis that identified trends in product lines especially relevant to microinsurance.

Over the last ten years there has been a renewed interest in providing agricultural insurance in developing countries. However, voluntary demand for unsubsidised insurance products has been low, particularly from the poorest farmers.

Chapter One presents a model of rational demand for hedging products, where there is a risk of contractual nonperformance. Demand is characterised and bounded for risk averse and decreasing absolute risk averse decision makers. For constant absolute and relative risk averse utility functions, demand is hump-shaped in the degree of risk aversion when the price is actuarially unfair, first increasing then decreasing, and either decreasing or decreasing-increasing-decreasing in risk aversion when the price is actuarially favourable. The apparently low level of demand for consumer hedging instruments, particularly from the most risk averse, is explained as a rational response to deadweight costs and the risk of contractual nonperformance. A numerical example is presented which suggests that some of the unsubsidised weather derivatives currently being designed for and marketed to poor farmers may in fact be poor products.

Chapter Two presents experimental evidence collected from a framed microinsurance lab experiment using poor subjects in rural Ethiopia. In line with the theoretical model of Chapter One, demand for actuarially unfair index insurance is hump-shaped in wealth, first increasing then decreasing. In contrast with recent field experiments where it is not possible to demonstrate that low demand for indexed insurance is ‘too low’, use of a laboratory experiment with an objectively known joint probability distribution allows normative statements to be made about the observed level of demand. The observed level of demand for index insurance in the experiment is higher than the decreasing absolute risk averse upper bound of Chapter One, suggesting that subjects bought ‘too much’ index insurance.

Chapter Three presents a vision of insurance design for the poor. Technically optimal arrangements involve insurance providers, such as microinsurers or governments, acting as reinsurer to groups of individuals who have access to cheap information about each other, such as extended families or members of close-knit communities, who in turn offer mutual insurance to each other.

As a consequence of climate change, agriculture in many parts of the world has become a riskier business activity. Given the dependence on agriculture in developing countries, this increased risk has a potentially dramatic effect on the lives of people throughout the developing world especially as it relates to their financial inclusion and sustainable access to capital. This study analyzes the relationships between rainfall per crop gestation period (planting – harvesting) and crop yields and study the likelihood of crop yield losses. We make recommendations on how this information could be used to develop a trigger for index insurance to help mitigate the financial risks to farmers and lenders who make loans to farmers in Ghana. The focus of this paper is on rainfall and crop yield and explores the potential for a drought loss insurance index trigger. This study concludes by describing limitations and challenges that must be overcome in order to develop such risk management tools and by describing the potential for crop loss index insurance based on area crop yield in northern Ghana.

Insurance education is a valuable and important activity because the lack of understanding of microinsurance and its benefits is a major obstablce to the expansion of microinsurance.  Those who do not understand how insurance works are unlikely to trust it, and without an understanding of the benefits of insurance, people are less likely to see why the insurance is worth the money spent on it.  By creating awareness about insurance, families are at least given the option of considering adding insurance to their family planning strategies.  Insurance education is therefore often considered as an integral part of microinsurance schemes; a win-win solution that should add value to clients and provides, and contribute to good practices and consumer protection. 

The objective of this landscape study is to identify what insurance education materials and approaches are currently available, recognize existing gaps and some promising practices, and highlight some concrete areas where investment in insurance education can make a positive impact on the extension of microinsurance in developing countries. 

Microinsurance products are designed to be appropriate for the low-income market in terms of access, cost, terms, coverage, and delivery mechanisms. Such a specific market focus requires a systematic product development process. The steps crucial to the success of the process of developing microinsurance products are detailed in this manual. Following this process will help those developing microinsurance products to improve their potential for product success, while saving money and reputation.  This manual covers the following steps: institutional assessment, market research (demand, supply, delivery, regulations), prototype design and testing, partnerships, product design, pilot testing and review, rollout, and continuous assessment.

El énfasis de esta edición de primavera de la Trilogía de Microseguros es la Alianza entre el sector Público y Privado (PPP, en inglés) en los microseguros. El artículo principal examina los resultados y los puntos de debate de una discusión de tres días que tuvo lugar en Linkedln, que fue facilitada por Gaby Ramm, quien es autora del artículo presentado más abajo.

El artículo que sigue a continuación brinda una breve opinión del documento “Commercial Insurers in Microinsurance”, que fue comisionado por Microinsurance Network. Este documento examina el rol comercial que las aseguradoras desempeñan en los microseguros para comprender sus objetivos y sus motivaciones.

Ce numéro de Trilogie de la Micro-assurance est consacré aux Partenariats Public-Privé (PPP) en micro-assurance. L’article principal revient sur les sujets abordés dans le cadre d’une discussion de trois jours organisée sur LinkedIn et en présente les conclusions.

Gaby Ramm, modératrice de la discussion, est l’auteur de l’article. L’article suivant présente brièvement l’étude intitulée “Commercial Insurers in Microinsurance“, produit à la demande du Microinsurance Network et qui examine le rôle des assureurs commerciaux dans la micro-assurance, leurs objectifs et leurs motivations.

Apresentação sobre as principais características de microseguros incluindo traços de produtos e canais de distribuição

Credit life insurance is often designed poorly and provides little value to clients and their beneficiaries. When products provide little value to clients, they reinforce a common negative attitude towards insurance. Thus, improving the value of credit life products may improve clients’ attitudes towards insurance, and in turn improve overall demand for microinsurance.

To understand the status of credit life microinsurance, and to formulate ways to improve the overall quality of credit life products, this paper responds to the following questions:

1) What is credit life insurance and how is it structured?

2) Who benefits from this coverage: borrowers, lenders and insurers?

3) How is good value for clients measured, and is it achieved?

4) What are examples of credit life products that provide value to clients?

5) How might credit life products be expanded or adjusted to offer greater value to clients?

6) What operational considerations are necessary to improve credit life products?