Microinsurance for people at the bottom of the pyramid

Poor people confront many of the same risks faced by the non-poor, but these risks have greater financial impact and occur with greater frequency. Moreover, the vulnerability of poor people is exacerbated each time they incur a loss, creating a vicious cycle that precludes lasting improvements in human and economic welfare. Key risks include death, illness or injury, loss of property (e.g., theft, fire), and natural disaster (e.g., earthquake, drought).

Approximately 3.75 million people (ILO, 2000) are covered by official social security programmes in the formal economy. Some of the (roughly) 60 percent of workers classified as ‘unorganized’ workers are in a position to pay significant insurance contributions. The lower – income groups and the poor can only afford small payments, however. Thirty percent of the unorganized workers in India consist of very poor groups who are unlikely ever to be in a position to make contributions and become members of a contributory social security system.