Microinsurance in Brazil: Current Situation and Outlook

Informações

Código: GCT2448
Divisão: GCT - Gestão de Ciência, Tecnologia e Inovação
Tema de Interesse: Tema 09 - Inovação e Sustentabilidade

Autores

Valentin Vidal, Lauro Gonzalez

Resumo

Summary-Microfinance is defined as the supply of financial services and productsto poor people, such as money transfers, loans, savings and insurance on a sustainableway, that is, by incorporating these services and products into the business.Innovation remains the main tool for achieving that. In this sense, much have beensaid about microcredit and its innovations, however there is a lack of formal studiesrelated to microinsurance. This research attempts to fill this gap with an specificfocus on the Brazilian case. The main objective of the research is to is evaluate thecurrent situation and outlook of microinsurance in Brazil. From the theoretical pointof view, there are many empirical factors that lead to market failures that constrain theaccess of the poor to financial services. The main source of these failures is related tothe problem of incomplete markets. Poor people have limited access to credit andinsurance markets due to asymmetric information and the lack of collateral. In orderto deal with incomplete markets, low-income households attempt to mitigate their riskin two ways. First, they may prevent themselves ex-ante by investing in low riskactivities and/or diversifying their investments. Second, to reduce the variability ofincome ex-post they can borrow from informal lenders or depleting their assets after anegative shock. Although these strategies help deprived households to alleviate theimpacts of an adverse shock to a certain extent, they constitute clearly imperfect riskmanagement instruments and consumption tends to be preserved at the expenses ofcutting important investments, such as children education. Microinsurance is anattempt to offer a more efficient mechanism for dealing with risk, mainly based oninnovative business models. The data collection has been realized during interviewsand meetings with Bradesco and SUSEP staff members, whose positions within thecompany/institution are strategic and decisive as far as microinsurance operations areconcerned. The reason for interviewing a small number of people is related to the factthat microinsurance is recent and so far a very limited number of people worksdirectly in the area. The main findings of the empirical investigation point out theimportance of market-driven solutions, which means adapted to client needs andexpectations. In addition, the products have to cover basic needs and to be easilyunderstandable and affordable. The payout application process has to be simple andquick, especially for households living in remote communities. Innovation must playa major role by building new approaches instead of replicating already existingbusiness models. In this case, Brazil has a comparative advantage related the existentbanking correspondents’ network that could be use for microinsurance expansionthroughout the country.

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