Report 14th International Microinsurance Conference 2018
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Keynote Inclusive insurance should focus on important and destabilising risks
Keynote presentation by Dr. Daryl Collins, CEO, Bankable Frontier Associates (BFA), a firm specialising in using finance to help low-income people Dr. Daryl Collins made a compelling case for microinsurance by sharing stories of families interviewed for the Kenya financial diaries. The financial diaries is a methodology to obtain multi-dimensional qualitative and quantitative data on the lives of low-income households. Researchers make visits twice a month during one year to families randomly selected. During these visits, the researcher asks questions about their financial activity and their life events. The result is good information on income, expenses, risk faced, and the many transactions that the poor undertake to make ends meet (borrowing from neighbours and
banks, saving under the mattress, credit in kind, support from the community and family, savings in ROSCAs, etc.). This methodology was recorded and described in Portfolios of the Poor: How the World’s Poor Live on $2 a Day, a book co-authored by Dr Daryl Collins, along with Stuart Rutherford and Jonathan Morduch. Contrary to common beliefs, the poor use many financial tools, albeit the majority linked to informal networks and family. The Kenya study revealed more than 10 sources of income, including agriculture, casual work, side businesses, support from communities, remittances, family support, loans and savings. They need to use all of the possible (or available) sources of income, mainly because expenses are steady (when there are no unexpected shocks ) but income is highly volatile.
One important risk that looms like a Sword of Damocles is health issues and illness. Analysis of the overall expenses of a typical family indicates that health spending is not overwhelming. Approximately, 5 median days of income equivalent to KES 1,073 (US$ 12.60) with an average of KES 3,962 (US$ 47) are consumed by health costs during one year. Risks happen however and they seriously affect their livelihoods. This was illustrated by several cases exposing the nature of the risks and coping mechanisms; these cases also show that if insurance had been in the equation, the situation could have been less stressful.
Figure 10 Financing shocks – Most often, the family needs to help
George Median monthly HH income: KES 9,155 (US$ 108)
George could manage with the medium-sized costs associated with his wife’s sickness, but his ability to cope alone was soon exhausted: First bill: KES 3,000 (US$ 35) Had KES 1,000 on hand, left KES 2,000 in arrears and paid a couple weeks later. Second bill: KES 8,000 (US$ 94) Asked for a loan from chama (KES 5,000/US$ 59), sold pig & chicken (KES 4,000/US$ 47), received from friend (KES 1,800/US$ 21) Third bill: KES 30,000 (US$ 353) Friends and family supported. Funeral: KES 50,000 (US$ 588) Friends and family supported. (Son stole an extra KES 10,000 (US$ 118) sent to him to get body released from hospital)
Source: Collins, Daryl. Keynote address “BFA Presentation.” 14th International Microinsurance Conference 2018
