Ninth Annual Conference on Management of the Pakistan Economy Human Capital Development for Sustained Economic Growth/ Microinsurance in Pakistan: Progress, Problems, and Prospects

Abstract

Microinsurance in Pakistan is still in its early stages. More than half of current microinsurance policies in Pakistan are being offered through the Benazir Income Support Program, with the remainder being offered in conjunction with microcredit services offered by microfinance institutions (MFIs), banks (MFBs), NGOs, and the rural support programs (RSPs). BISP’s life insurance policies for breadwinners currently cover 4.1 million households. The policies offered through the microcredit sector are mainly credit-life policies, which cover loan balances in the event of the borrower’s death. In addition, small health insurance policies covering hospitalization is also offered by some lenders, principally the rural support programs, to the borrower and (sometimes) their spouse. As health costs and deaths in the family rank among the most important economic stressors that households face, it makes sense that microinsurance should first make inroads in these areas. There are currently small pilots in agricultural microinsurance, but it will be some time before these products will mature. It is difficult to say what the impact of microinsurance has been in Pakistan, since rigorous evaluations have not been conducted to date. What we do know is that utilization has been low, but gradually increasing as households become more aware of the coverage that they have. In the short to medium term, microinsurance outreach could be extended through offering health insurance coverage to the entire household of microcredit borrowers, and by offering microinsurance to all members of the rural support programs, rather than only its borrowers and spouses. Partnering with mobile phone operators for payments could reduce the transaction costs. Provinces could use the existing database of households and poverty scorecards executed by BISP to target subsidized microinsurance policies to poor households above the BISP threshold. The value to customers of existing microinsurance policies such as credit-life could be enhanced by extending coverage to other members of the family (such as spouse) and by offering the option for higher levels of coverage in the case of death.