Microinsurance: “I am not going to die yet, but my vegetables will”

The weather in Mexico City has been miserable, pouring rain almost all day for the last several days. Yesterday, the rain finally ceased and sun came out for a little bit. Thank God it was on the day I was scheduled to go visit some clients in Coyoacan, one of the 16 delegaciones of Mexico city located at the east edge of the district. Even though it stopped raining, the roads were damped and almost the entire stretch of road was full of street vendors and food hawkers. I couldn’t help to notice the chaotic scene the rain had left behind. The most obvious and foul hazard was the waste that lined the street: broken and dirty stoves, rusty food carts, tattered tents, burned garbage and overflowing garbage dumpsters. Nonetheless, despite the terrible conditions, people went out to start their daily commercial activities and we drove further inside the barrio to meet with clients.

Mexican house

On this visit I traveled with two other Compartamos interns, Eva from UCLA and Ceci from TEC Monterrey. Both Eva and Ceci are conducting a research project in micro insurance and different insurance products that could be offered in the field of microfinance. It was really interesting to listen to the questions that arise regarding the issue of insurance applied to MFI clients. The central issue seems to be finding the right microinsurance product tailored for the specific needs of the clients. For example, Compartamos, as one of its core products it has a life insurance product that is given with no additional cost to all its credito mujer clients…The insurance covers up to 15000 pesos to face the immediate expenses of a death: funeral expenses, business maintenance, child support and so on. This cannot be used as a health insurance or to cover the client’s debt in case of decease; 100% of the insured amount is delivered to the designated beneficiary. Those clients who are not part of credito mujer or those who wish to purchase the life insurance can also purchase it voluntarily as another credit product for the amount they wish and to cover as many family members. Even though the microinsurance product offered by Compartamos has been a success, one cannot help to question whether it is the right insurance product for these Mexican microentrepreneurs . As we did our visits, we asked some clients what they think of the insurance product that is offered. In an obvious way, the responses varied according to the age of the clients. For those clients who have started their business at a later age, a life insurance product appears to be the right one. However, most of the clients who receive individual and/or commercial credits are more concern with immediate risks that could harm their businesses and their property such as natural disasters, theft, fire, flooding, etc.

One of the women we asked what  she thinks of the insurance product replied “ Yo no me muero, pero mis vegetales si ! “I am not going to die yet, but my vegetables will”.

While microinsurance does provide a wide array of benefits especially for low-income people, microinsurance in Mexico can still be seen as a safety net with too many holes. There is an overall lack of understanding of how insurance products work, the poor population’s general reluctance to part with what little financial resources they have, badly designed products and a shortage of localized risk management knowledge among providers. MFI’s and overall regulatory entities should consciously determine if the line of insurance products being offered to the poor are adequate risk-management tools that effectively reduce clients’ vulnerability and further looks out for clients’ income, food, health and asset security. Probably Compartamos could look into offering other micro-insurance products that could address in a better way its clients needs such as crop insurance, livestock/cattle insurance, insurance for theft or fire insurance, disability insurance and/or insurance for natural disasters.

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