Daily Insurance Industry News
Daily Insurance Industry News
Thursday 22nd of March 2018
September 26, 2009

Why are the poor insurance averse?

by David Masters

Story link: Why are the poor insurance averse?

A new book explores why the world’s poorest people are averse to buying insurance.

The authors of ‘Portfolios of the Poor: How the World’s Poor Live on $2 a Day’ researched the finances of poor households in Bangladesh, India, and South Africa.

Households were found to be financially savvy, managing their money well rather than immediately spending earnings.

Few poor households, however, bother with insurance.

According to the book’s authors, there are three reasons for this.

First, the income of poor people is precarious, often fluctuating between $0.50 and $5 per day.

Because of this, they’re reluctant to buy insurance, which asks them to decide in advance how many risks they might face. Instead, when they need extra money, they prefer to take out loans.

Second, most poor people have a safety-net of friends and family to help them through difficult times.

“Given a risk that is frequent and pressing enough, poor households will develop specialised mechanisms to anticipate, and at least partially relieve, its consequences,” the researchers said.

Finally, people don’t like to think about the possibility of bad things happening, so they put off buying insurance.

These challenges haven’t put insurers off trying to sell products to the world’s poorest.

Munich Re is piloting flood insurance in Jakarta, Zurich Re is selling disability insurance in China, and Swiss Re is offering health coverage in Pakistan.


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