Market for Microinsurance in Romania: Low-Income Households Needs and Market Development Projections
Microinsurance is a tool that allows low-income households to better manage the financial pressures of unexpected shocks and stresses. This paper explores the microinsurance needs of low-income households, and the opportunities and challenges that exist in way of effective and efficient delivery of such services in Romania. The paper presents the following reasons for the vulnerability to poverty of Romania's 21.73 million people:
- Increasing poverty rates;
- Significant regional and rural-urban disparities;
- Declining trust in the financial system (savings);
- Lack of accessibility of public health services to the poor.
In view of making market development projections, the paper identifies three zones in the microinsurance market:
- Market enablement zone: the group that can be covered by the existing products;
- Market development zone: the group that can be tapped if the new products are well-adapted and there is an enabling environment;
- Market redistribution zone: the group that should be provided with adequate safety nets and risk management tools by the government.
The paper further recommends that the products that could add a significant value in reducing the vulnerability of the low-income groups include:
- Life/disability insurance;
- Crop insurance;
- Health insurance.
It estimates that out of the 5.17 million poor households in Romania, 45% can benefit from private microinsurance services, and makes the following recommendations towards reaching that number:
- Develop new microinsurance products adapted to low-income market expectations;
- Provide basic education on microinsurance;
- Identify low cost delivery channels.
