Micro-insurance is one of the formal risk management mechanisms to protect the mass community from the effect of their potential financial risks. Micro-insurance product is specially designed for the lower income people for ensuring their risk coverage in exchange of affordable premium. So any one can enjoy insurance benefits under this mechanism who, generally, do not have access to the traditional insurance due to higher premium.
Micro insurance plays a vital role in the economic development of any country. Bangladesh is now under the process of graduating as developing country. So micro insurance can create a vital role to ensure inclusive growth and support the livelihood of the vulnerable segment of the society and facilitate the sustainable economic growth of this country
Because their resources are so limited, poor people can experience great financial disruption when unexpected events befall them. If a breadwinner is injured or falls ill, there is not only the loss of income and labor, but the prospect that without cash in advance there will no treatments at all. If a breadwinner dies, not only must funeral expenses be paid, but continued cash for basic needs and education of the family is required. A poor person’s property may be limited to a few animals or crops and modest shelter, but the destruction of any of these may be a great blow to the family’s economy. Even small sums insured can ensure some protection and peace of mind (and dignity) for a poor person.
From the point of view of insures, however, small sums insured mean small premiums and low profit margins. Thus micro insurance has to be well-administrated, cost efficient, and delivered on a large scale if it is to benefit the poor, and those who provide the micro insurance.