Microinsurance can be a considered part of a comprehensive financial inclusion program, along with credit scoring, savings programs, and access to capital loans for small business and income generating ventures. While acceptance of microinsurance for health and life is fairly accepted, there is still little microinsurance available and being used for the poor in developing countries to cover losses associated with a natural disaster.
There have been a number of natural disasters startling in their human costs. The poor are impacted greatly, and usually rely on savings, the sale of assets, and loans in the event of a disaster. These insurance products do not, however, have the ability to impact large infrastructure repair, and many governments in developing countries do not have the resources, either. The loss of infrastructure, such as transportation and roads, energy grids, communication infrastructure, banking infrastructure, and access to clean water, are beyond the scope of microinsurance.
What microinsurance can do in the event of natural disaster is cover the cost of health care, deaths and burials, loss of livestock or crops or business assets, and support the business or income generating enterprise while the overall system recovers. This insurance product is part of an overall risk management and disaster preparedness approach, and it seeks to reduce and transfer risk and improve preparedness.
Having microinsurance coverage of a business venture, including natural disaster insurance, can improve the creditworthiness of a business. It is hoped that insurance will encourage people to improve their ability to manage a disaster. Efforts such as fire prevention strategies, for example, if tied to microinsurance, can promote prevention and risk reduction thinking.
But economic viability in developing countries relies on infrastructure, and that is beyond the scope of insurance. It is beyond the scope of many developing country governments all together. There is some concern that dependence on international aid efforts may keep planning, risk reduction, and risk transfer to a minimum; there is also the issue of who bears responsibility for natural disasters attributed to climate change, when the developed world has had a greater impact on climate change effects than the developing world.
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