micro-insurancethenextrevolution.docVIP

Micro-insurance: the next revolution? Jonathan Morduch New York University Jonathan.Morduch@ Prepared for Policies for Poverty Alleviation, edited by Abhijit Banerjee, Roland Benabou, and Dilip Mookherjee( First version: 12/11/2002, Dhaka Next version: 4/11/03, Tokyo Update: 6/1/04, New York Introduction The insurance challenge What we don’t know (and why it shouldn’t stand in the way) Thinking about life insurance Health insurance: focusing on the biggest risks Insuring rainfall: a new solution to an old problem Rainfall insurance: from the population’s perspective Concluding thoughts  1. Introduction Managua is a city of gaps. City blocks are scattered across the terrain as if they had been dropped from an airplane and had then broken into pieces upon hitting the ground. A block of buildings is followed by an open field, and then more buildings, and then a stretch of grass and dirt, more buildings, another field, and on it goes. The topography is a product of the earthquake of 1972, which killed 6,000 people and toppled 80% of Managua’s buildings. Neither the right-wing president Anastasio Somoza Debayle, nor the leftist Sandinistas, nor subsequent governments have patched the city together again. The scattered blocks are an ongoing reminder to residents of both the power of nature and the limited means they have to respond. The most recent reminder of nature’s vast power came in 1998 when Hurricane Mitch sat over Nicaragua for ten days. Three thousand people are reported to have died, and twenty percent of the population suffered directly. Even today, four years later, the hurricane is cited to explain disrepair and dislocation. While Mitch was particularly devastating, hurricanes course through the Caribbean with regularity. Nevertheless, most citizens and businesses cannot buy insurance against weather-related risks; as in much of the developing world, insurance markets are thin and public responses are limited. Health in