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We all face uncertainty. An unforeseen calamity, such as an illness or natural disaster, can strike at any time. But for the world’s poorest people, the vulnerability to these shocks is extreme. Faced with inadequate medical services, deficient living conditions and severe shifts in weather patterns due to climate change, the poor are often exposed and susceptible to catastrophes. The poor not only face adverse living conditions and extreme vulnerability, they also lack the financial resources to cope with the hardships that result when disaster strikes. Without adequate savings or assets, a family has few financial options if a calamity occurs. When a family member falls ill, for example, the household may be forced to sell off moderate assets, take out a costly loan or use modest savings to cover medical costs. And far too often, the poor must go without necessary medical care because they cannot afford it. This is the poverty cycle. The poor are extremely vulnerable to calamities and when these calamities occur, households are pushed deeper into poverty, thereby increasing their vulnerability.
Microinsurance is the protection of low-income people against specific perils – from illness to crop failure, death to natural disaster. It operates in much the same way as the insurance policies that cover you and your family. Households pay a premium – typically between 1.50 to 4 EUR per person in MIA-supported schemes – for a year of coverage against specific events, like drought or illness. If the covered event occurs, the household is reimbursed for all related costs within the limits of their benefit package. It’s as simple as that.
What the poor lack in assets, they make up for in ingenuity, strong social networks and self-determination. We see these as valuable resources, and MIA has pioneered an approach that capitalizes on these resources. Our solutions are tailored to the local context; we involve communities, local partners, the insurance industry and governments according to their respective strength in each context. Many of our projects operate at the community level and we support local actors to design their own insurance packages, because we know insurance is more valuable if it reflects the needs of the community. MIA does not sell or underwrite insurance. Instead, we provide local partners with the technical skills and guidance to operate and govern their own insurance schemes, because we believe the schemes will be more successful if the community has full ownership.