Insurance acts as a safety net and risk mitigation mechanism that can reduce the vulnerability of poor households to adverse life events. Microinsurance encompasses several products:  health, life, agricultural, disaster insurance and more. These products, however, are either unavailable or prohibitively expensive in many developing countries.  Most consumers also struggle to understand how insurance products work and how they can generate long-term benefits.

Microinsurance, the delivery of insurance products to low-income clients, is a powerful tool to help low-income households protect themselves against risks and losses that can trap them in a vicious cycle of destitution.

Consumer protection  is critical to developing and distributing insurance products.  Empowering consumers, gainconfidence and trust, and become better positioned that they can play an active role in protecting themselves and by using insurance products effectively.  A recent paper by the Microinsurance Network on “Challenges and Good Practices in Consumer Protection in Microinsurance” highlights the need for a coordinated approach in which regulators and supervisors, industry players, and consumers themselves all share the responsibility to develop a fair and sound microinsurance industry.

The main challenge in consumer protection in microinsurance is to strike the right balance between effectively protecting the consumer and increasing access to microinsurance by promoting the development of the microinsurance market. Efforts to stimulate the market scale of microinsurance and increase access to insurance must be balanced against consumer protection needs, but in the long term there are synergies between the two. Given that effective consumer protection promotes stability, value, and trust in microinsurance, scale and access goals will also ultimately benefit from consumer protection.

Global initiatives include: