Why The World's Poor Refuse Insurance

Insurers are trying. Munich Re is piloting flood insurance in Jakarta; Swiss Re is peddling health policies in Pakistan; Zurich Re is trying out disability coverage in China. The trickiest part, says Brandon Mathews, who heads Zurich's developing-markets business, isn't figuring out what to sell but rather connecting with customers. Some of his team's more creative ideas: sell unemployment insurance in Brazil on people's utility bills and push personal accident policies in Bolivia via scratch cards sold at newsstands.

It might seem logical to partner with established microlenders, yet insurers are finding that their policies as microloan tagalongs come with their own set of problems. In its Pakistan health-care trial, Swiss Re has seen many fewer claims than expected submitted by people receiving insurance as part of a loan. Giné, who has observed similar results in the Philippines, suspects loan officers sweep the added benefit under the rug. Reason? They fear that potential customers will walk if they feel they're paying for something they didn't ask for. So they never know about the coverage they have.

There is also a much more basic explanation for why insurance doesn't sell. Insurance has proved its worth for centuries, but people still resist it. They don't like thinking about the possibility of bad things happening. That's why car insurance is mandatory--and health insurance may soon be. If supposedly financially sophisticated Americans have to be coerced to buy insurance, should we really expect people in less rich countries to be any different?