Insurance

© GIZ/Dirk Ostermeier

Insurance enables the financial consequences of shocks to be dealt with efficiently, contributes to securing livelihoods, and can help prevent people from sliding into poverty.

Many people in developing and emerging countries are not adequately protected against the consequences of everyday risks, natural disasters or failed harvests. Without access to insurance, the only way they can avoid sliding into poverty is to take measures such as selling their assets or consuming less.

This situation can be remedied by insurance schemes adapted to the special needs of people on low incomes. As a rule, these schemes are characterised by easily comprehensible mechanisms and low premiums, and provide financial security in the face of risks. This makes an important contribution to securing livelihoods. Moreover, sustainable insurance solutions strengthen the financial system and enable access to loans, thus stimulating growth and employment.

There are, however, numerous challenges associated with providing insurance. In reality, many markets have to contend with weak political and regulatory frameworks, a poor range of appropriate insurance products, low levels of consumer awareness of insurance, and in many cases little trust in providers.

Agricultural and climate risk insurance schemes are becoming increasingly important due to climate change and in view of increasing weather-related risks. Agricultural insurance services – usually in the form of extreme weather insurance – often form an integral part of public support systems that help to protect farmers against financial losses. In the context of climate change, public stakeholders are increasingly recognising the potential of insurance solutions to provide protection from extreme weather events or other natural disasters. GIZ supports the introduction of insurance on several levels:

  • It advises supervisory authorities and ministries on designing legal frameworks for the development of inclusive insurance markets.
  • It supports the establishment and strengthening of insurance associations, and educational and training institutions.
  • It advises private and public insurance companies on developing innovative, needs-based insurance products. This includes the expansion of marketing activities and business organisation.
  • It provides advice on the selection and implementation of new technologies that are necessary for data collection.
  • It supports the planning and implementation of awareness-raising campaigns. The aim is to inform people, including those with a lower level of education, of the benefits and obligations that result from taking out an insurance policy, with a view to building greater trust in insurance products and providers.

Practical experiences