Insuring really small aliens

Insurers like to push the boundaries of what they can insure. The other day I was chatting with someone who was once involved in designing alien abduction insurance. He has now moved on from his feckless youth to become a leading figure in the microinsurance world, and certainly its most entertaining.

When people try to guess what microinsurance is, nine times out of ten they say something about insuring small things, and they're certainly on the right track.Having gone as big as possible and as weird as possible, the time came for insurers to go smaller. In fact there was a market worth around 40 billion dollars that they were completely ignoring.

I'm sorry to tell you microinsurance isn't about insuring really small aliens. It's actually much more exciting (promise).

Microinsurance is all about insuring small risks, i.e. charging a small amount to insure something that is worth a small amount financially. But that's misleading, because the reason that microinsurance matters is that it insures things that are very valuable to its clients. Microinsurance covers the lives, livelihoods and assets of poor people; anything from insuring a couple of acres of crops against a hurricane to insuring a market stall in case it is burnt down.

The idea is to offer greater stability to a poor person's life: a safety net to support them through crises.

Living in a society with advanced social protection, insurance provision and relative wealth, a crisis is usually a setback. For many of the world's poor their vulnerability to crisis can be critical.

This is the starting point for microinsurance. In reality it can be both more and less than a safety net.