Microinsurance provides a degree of protection for the world’s most low-income and vulnerable populations, but we already know that inclusive insurance penetration rates are alarmingly low in developing economies. The current coronavirus pandemic will only make things worse for them.
Most obviously, health insurance can help with hospital bills, medicines or cash to replace lost income. In Kenya, after initial reports that some health policies - which typically exclude pandemics - would not cover coronavirus-related medical costs, the government’s Insurance Regulatory Authority has stepped in to ensure payments will be made. Indian insurers have gone out of their way to reassure life policyholders that nominees of individuals who die from coronavirus will get the sum assured, even though many life products exclude coronavirus on the grounds that it is not classified as a ‘critical illness’. “Lots of policies have had exclusions placed in them in the last 10 years due to [insurers’] experience with flu-type outbreaks,” says Michelle Crorie, a partner at law firm Clyde & Co.
If enforced, exclusions are unlikely to improve trust in insurance, which is often cited as a key barrier to scaling up penetration in developing markets. Not everyone is pessimistic, however. Juan Paolo Roxas, head of the Philippines Insurance Commission microinsurance division, believes the coronavirus pandemic could actually help Filipinos become more aware of the importance of insurance cover. “I think more people will be inclined and be aware that insurance is actually there and helping us,” says Roxas. Jonathan Batangan of Philippines insurance brokers Cebuana Lhuillier thinks the pandemic could provide an opportunity to create new products to provide cover against coronavirus. However, with many countries encouraging ‘social distancing’ and self-isolation, distributing and accessing inclusive insurance products through mobile network operators (MNOs) and online – as well as supporting clients with information – will become even more important.
Should the worst happen, a life policy - perhaps bundled with a microfinance product - will provide some financial cushioning. Funeral cover will help defray what in some cultures can be an onerous financial burden. Yet with so few low-income individuals and families covered, the personal economic impact could push many of them back into debt and deep poverty.
The economic fall-out for micro, small and medium enterprises (MSMEs), and for the millions of low-income people who are informally employmed, will be significant. According to the Asia Business Review, business interruption (BI) insurance typically protects against losses caused by physical damage such as fire or flood - but it is unclear whether this will extend to the presence of coronavirus. In addition, micro BI insurance for low-income businesses is still in its infancy, and needs urgently to be scaled up. As with other types of microinsurance, the vulnerable are those that need it most and the sums insured are relatively small. Insurers themselves will be hard hit: “The main losers will be firms with large whole of life books but low levels of reinsurance, and there is likely to be a large amount of sum at risk for policyholders in their 50s and 60s,” notes the Review.
Africa is particularly vulnerable. At the time of writing, infection rates across Africa are lower than in other developing regions. While this is possibly due to existing containment measures for dealing with other infectious diseases such as ebola, capacity to roll out testing is limited and the potential for widespread transmission remains. The World Health Organization (WHO) has sent coronavirus test kits to 40 African countries; until two weeks ago there were only two laboratories on the entire continent that could test for the virus. If there is any good news, it is that inclusive health insurance products have - according to the Landscape study - “experienced a boom since 2014”. Health products represents the second highest proportion of reported lives covered in the countries covered by the study - 4.3 million people - but that’s still a tiny fraction of those at risk.
Furthermore, healthcare systems in many African countries are already stretched by the “big three”: HIV-AIDS, TB and malaria. The IMF has set aside US$10 billion in emergency funding for low-income countries aimed at helping fragile states support their health care systems, especially maintaining supply chains of personal protective equipment for front line health workers and building virus-testing capabilities. The WHO Director-General Tedros Adhanom Ghebreyesus says his “biggest concern” is coronavirus spreading in countries with weak health systems. One report in sciencemag.org claims “experts worry the virus may ravage countries with weak health systems and a population disproportionately affected by HIV, tuberculosis (TB), and other infectious diseases. Social distancing will be hard to do in the continent’s overcrowded cities and slums.”
However, the report does note some grounds for optimism. “Sub-Saharan Africa has one major advantage when it comes to COVID-19: Its average age is the lowest in the world … Children rarely get sick from COVID-19, and most young adults appear to suffer mild symptoms … Only 3% of sub-Saharan Africa’s population is older than 65, compared with about 12% in China.”
Nonetheless, as a BBC report points out, about a billion people globally live in slums with little ventilation, drainage and sewage facilities, with diseases spreading easily. For example, Nairobi’s Mukuru slum is home to around 7,000 primary school children, half of whom cannot afford soap and who live in houses with no mains water or sanitation. “It’s not clear how confinement would work in African households where many generations live together,” Francine Ntoumi, a parasitologist and public health expert at Marien Ngouabi University in the Republic of Congo, told sciencemag.org. “How do you protect the elderly, how can you tell village populations to wash their hands when there is no water, or use gel to sanitise their hands when they don’t have enough money for food?”
It’s not just low-income people in emerging economies who will be hit hardest. Nearly ten percent of the entire population of the United States - that’s around 27 million people - had no health insurance at any point in 2018, according to the US Census Bureau. As a recent article in Time puts it, “Low-income people are disproportionately more likely to be uninsured or underinsured for medical care, and for many, even stocking up the pantry can be an impossible financial hurdle…Lacking resources to prepare and protect against the coronavirus, many of these individuals face a higher risk of contracting—and subsequently spreading—the virus.”
Lack of health, unemployment or life insurance is a particular challenge for the millions of people who work in the informal economy. Vidya Diwakar, a Senior Research Officer at the Overseas Development Institute (ODI), notes that such workers - many of them women - may not have the luxury of staying at home without paid sick leave. “People living in or near poverty often lack disposable cash and cannot easily stockpile food. Hunger, malnutrition, pneumonia and other forms of health-related shocks and stresses compound vulnerability to the virus and contribute to a vicious cycle of disease, destitution and death. Poverty can fuel contagion, but contagion can also create or deepen impoverishment,” she says.
Diwakar cites a study by the Chronic Poverty Advisory Network of 11 countries in sub-Saharan Africa and South and Southeast Asia, which found that in the absence of health insurance or other forms of universal health coverage, responses to health shocks by people in poverty or near the poverty line commonly included “distress sales of assets and taking out loans from informal moneylenders, sometimes at exploitative rates.” In other words, lack of insurance can drive already poor people further into poverty - hence the MiN’s ongoing work to improve access to affordable, responsible inclusive insurance products in emerging economies.
Coronavirus may not discriminate, but the poor and uninsured are likely to suffer disproportionately. A recent study concludes that politicians and public health officials should do more to take social inequalities into account when forming international preparedness plans. Failing to help low-income people prevent and treat the coronavirus might come back to hurt us all in the end.