Thinking about distrust

Clients' risk aversion is a double edged sword for microinsurers. On the one hand, we would expect the high levels of risk aversion often shown by poor people to push them towards seeking ways to manage risks, like insurance. On the other hand, for our clients microinsurance itself is a risk.

The truth is that for most poor people insurance is new and untested. Where they do have experience it is often negative. Insurance is difficult to understand and the protection is always limited to certain conditions.

How can a poor person be sure that insurance is the best way to deal with their risks? And even if they are convinced in principle, how can they be sure that the insurance company will still be around and will honour its promises?

It's easy to lament this lack of trust and try to change this 'wrong' mindset. But we need to start off by recognising that this attitude is legitimate, even sensible. Taking insurance is a risk and our clients do well to weigh the pros and cons carefully.