Micro coverage a big help for Mexico's poor
A new plan to promote microinsurance could have a ripple effect in the region.
from the July 13, 2007 edition
Page 2 of 3
Microinsurance has been inspired by microfinance, which became part of the global lexicon last year when its pioneer, Bangladeshi economist Muhammad Yunus, won the Nobel Peace Prize for his efforts to alleviate poverty. But unlike microcredit loans that have immediate benefits, microinsurance is a tougher sell.
"They've never been exposed to any insurance in the past. These people don't have any bank relationship," says Daniel Garduno, the CEO of Seguros Banamex, which has offered life insurance to clients of Compartamos, Mexico's largest microfinance institution, since November 2006.
That coverage, which has reached 640,000 clients, is worth $1,400. The group has also launched a pilot program to purchase additional coverage, in increments of $1,400, for $1 to $7 a month. So far Banamex considers it a success: Of all of those offered the product, 50 percent have signed on, or 17,000 individuals. Officials expect to launch the program nationally in August. "The beauty of this is giving access to insurance protection to hundreds of thousands who would never have dreamed of buying an insurance policy," says Jorge Hierro, executive director of institutional relations at Banamex.
Now the government is setting up new standards for microinsurance, to make it easier for institutions to reach the uninsured and to make sure they are protected. Officials hope to have new regulations in place by next month. "We expect massive growth," says Norma Alicia Rosas, the vice president of studies and analysis at Mexico's National Insurance and Finance Commission. "Those with few means should be just as protected as the rest."
The government wants to exempt agents from having to pass exams to sell microinsurance, as traditional insurance agents must do, since the policies are so simple. It wants policies to be written in simple language, with no exclusions, copays, or deductibles – to reach the largest number of clients while at the same time protecting them.
Across the globe, the world's largest financial institutions are entering the microinsurance fold. "Five years ago you had to tell insurers there was this thing called microinsurance," says Michael McCord, the president of the Microinsurance Centre in Wisconsin, which tracks the industry. "Now it's not what it is, but how do we make it work."
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