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insurance

Why wait? Insurers, take steps to reach the women’s market

M. Esther Dassanou's picture

In most developed nations, when dealing with the aftermath of a natural catastrophe, an accident, a divorce – or even retirement – women know they can buy and rely on insurance to handle the damages, give them access to long-term savings or, at a minimum, cover a portion of their lost assets. 

In emerging and developing markets, on the other hand, this is usually not the case. Working at IFC in Washington and staying in touch with my family at home in Senegal, I’ve heard countless stories of men and women living in terrible conditions after a natural disaster.

These are not only people with lower incomes. I’ve met women who have lost everything following their spouse’s death or divorce because customary practices and inheritance laws did not give them access to the family assets. (In fact, in 20 percent of economies around the world, women do not have the same inheritance rights as men.) Worse, there are women whose children have died because the public hospital was too full and too busy to accommodate them at the time they needed medical help, and because they did not have the means to afford private health care. 



These are sobering and, sadly, true stories that very seldom make headlines. Yet if we look at families’ needs and at how women tend to be more affected by death, disaster and family illness, the answer seems simple: insurance.

It’s only when something bad happens that, all of a sudden, people – especially women, who tend to be more risk-aware – wish that they had planned better to deal with the situation at hand. What tends to keep women from choosing insurance as the solution to their risk-mitigation needs are misperceptions, affordability, lack of awareness, lack of bank accounts or access, and the stories of people with insurance policies that do not seem to cover any claims.

Insuring small firms against big political and economic risks: an experiment in post-revolution Egypt

David McKenzie's picture
The Arab Spring brought about a wave of joy in many countries in the Middle East and North Africa as repressive regimes that had ruled for years were overthrown. But the aftermath brought about considerable turmoil and uncertainty as to what was going to happen in many countries. In Egypt, the immediate aftermath of the January 2011 revolution which toppled Hosni Mubarak included closing the stock market for 55 days, curfews of up to 18 hours a day, and an interim government under the control of the Armed Forces.

How should donors respond to resource windfalls in poor countries?

Alan Gelb's picture

Natural resources are being discovered in more countries, both rich and poor. Many of the new and aspiring resource exporters are low-income countries that are still receiving substantial levels of foreign aid. Resource discoveries open up enormous opportunities, but also expose producing countries to huge trade and fiscal shocks from volatile commodity markets if their exports are highly concentrated. A large literature on the "resource curse" shows that these are damaging unless countries manage to cushion the effects through countercyclical policy. It also shows that the countries least likely to do so successfully are those with weaker institutions, and these are most likely to remain as clients of the aid system. A new World Bank policy research working paper by Anton Dobronogov, Fernando Brant Saldanha, and  me considers the question of how donors should respond to their clients' potential windfalls. It discusses several ways in which the focus and nature of foreign aid programs will need to change, including the level of financial assistance.

Why We Must Engage the Private Sector in Climate Change Adaptation Efforts

Alan Miller's picture

 Lauren Day/World Bank

Late last month, I retired after spending more than 30 years in the climate arena, the last decade as a principal climate change specialist at the International Finance Corporation.

During the span of my career, climate change has moved from the sidelines to be recognized as a serious development challenge. And while we’re still far from achieving the international commitments needed to avoid potentially dangerous and even catastrophic climate events, much has been accomplished.

Scientists have reached near-consensus about climate change and its impacts. We’ve also seen the creation of several significant donor-supported climate funds, as well as a steady increase in policy and financial support for climate-friendly technologies.

In one critical respect, however, we need more progress: making the private sector a partner in helping nations build resilience and adapt to climate change.

What Drives the Development of the Insurance Sector?

Erik Feyen's picture

The insurance sector can play a critical role in financial and economic development in various ways. The sector helps pool risk and reduces the impact of large losses on firms and households—with a beneficial impact on output, investment, innovation, and competition. As financial intermediaries with long investment horizons, life insurance companies can contribute to the provision of long-term finance and more effective risk management. Moreover, the insurance sector can also improve the efficiency of other segments of the financial sector, such as banking and bond markets, by enhancing the value of collateral through property insurance and reducing losses at default through credit guarantees and enhancements.

Indeed, a growing literature finds that there is a causal relationship between insurance sector development and economic growth. However, there have been few studies that conduct look at what drives the development of the insurance sector. Of the literature that does exist, most focuses on the growth of the life sector as measured by life insurance premiums.

Can We Boost Demand for Rainfall Insurance in Developing Countries?

Xavier Gine's picture

Ask small farmers in semiarid areas of Africa or India about the most important risk they face and they will tell you that it is drought. In 2003 an Indian insurance company and World Bank experts designed a potential hedging instrument for this type of risk—an insurance contract that pays off on the basis of the rainfall recorded at a local weather station.

The idea of using an index (in this case rainfall) to proxy for losses is not new. In the 1940s Harold Halcrow, then a PhD student at the University of Chicago, wrote his thesis on the use of area yield to insure against crop yield losses. In the past two decades the market to hedge against weather risk has grown, especially in developed economies: citrus farmers can insure against frost, gas companies against warm winters, ski resorts against lack of snow, and couples against rain on their wedding day.

Rainfall insurance in developing countries is typically sold commercially before the start of the growing season in unit sizes as small as $1. To qualify for a payout, there is no need to file a claim: policyholders automatically qualify if the accumulated rainfall by a certain date is below a certain threshold. Figure 1 shows an example of a payout schedule for an insurance policy against drought, with accumulated rainfall on the x-axis and payouts on the y-axis. If rainfall is above the first trigger, the crop has received enough rain; if it is between the first and second triggers, the policyholder receives a payout, the size of which increases with the deficit in rainfall; and if it is below the second trigger, which corresponds to crop failure, the policyholder gets the maximum payout. This product has inspired development agencies around the world, and today at least 36 pilot projects are introducing index insurance in developing countries.