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Understanding the Concept of Micro Insurance

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Fola Daniel, commissioner for Insurance
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The importance of micro insurance in bailing Nigerian out of its low insurance esteem cannot be over estimated. In recent times, the practice has been receiving tremendous support among operators. With the integration of insurance businesses in Africa, especially as the country makes in-road into African countries, experts have opined that the time to embrace micro insurance is now.
According to Dr. Mike Ikupolati, president of West Africa insurance Association, insurance over the world,  has been found to be a major player in the socio-economic development of societies and more recently in strive towards poverty eradication in our societies.  Insurance in West Africa cannot therefore be an exemption.  Given its rightful place in this poverty alleviation crusade, Insurance can help tremendously in uprooting completely the causes and effects of poverty in our societies.
To provide protection against risks, the poor have in the past developed informal and non-insurance mechanisms such as diversifying income sources, building assets by saving money, stocking food and investing in housing and healthcare, strengthening social networks, participating in reciprocal borrowing and lending systems, welfare associations and other informal group-based insurance systems. Some of them are enrolling in formal insurance or pension schemes or other formal social security systems.  It also involves managing money well by controlling consumption and maintaining access to multiple sources of credit selling assets, exchanging gifts, cash transfer, diversifying crops etc,.
In West Africa, people had tried “OSUSU” as a means of providing for unforeseen contingencies.  Unfortunately these have proved inadequate and have instead retarded economic growth and social mobility.  Many elderly people live in poverty due to limited access to pension plans and saving facilities.  These are the specialties of micro-insurance products today.  Since loan facilities are increasingly impossible to access by the poor, the micro-insurance principles take cognizance of the situation of the poor and hence created products and services that are at the reach of the poor.
With this privileged information at the back of our minds, let us attempt to have a better understanding of micro insurance.
Micro insurance is a financial arrangement to protect low-income people against specific perils in exchange for regular premium payments proportionate to the likelihood and cost of the risk involved (Craig Churchill, 2006).  This definition Churchill adds does not refer to the size of the risk-carrier; some are small and even informal while others may be very large companies.
The scope of risk, the risk themselves are by no means ‘micro’ to the households that experience them.
The delivery channel can be done through variety of different channels including small community-based schemes, credit chains or other types of micro finance institutions, but also by enormous multinational insurance companies.
Micro insurance is synonymous to community-based financing arrangements (Peter et al, 2002), including community health funds, mutual health organization, rural health insurance, revolving drugs funds and community involvement in user-free management.  Most community financing schemes have evolved in the context of severe economic constraints, political instability and lack of good governance.  The common future within all is the active involvement of the community in revenue collection, pooling resource allocation and frequent service provision.
Insurance functions on the concept of risk pooling and likewise regardless of its small unit size and its activities at the level of single community, so does micro insurance.  Micro insurance links multiple small units into layer structure, creating networks that enhance both insurance functions through broad risk pools and support structures for improved governance i.e. training data bank, research facilities, access to reinsurance, etc.  This mechanism is concerned as an autonomous enterprise, independent of permanent external financial lifelines and its main objective is to pool both risks and resources of whole groups for the purpose of providing financial protection to all members against the financial consequences of mutually determined risks.
Transactions are low-cost and reflect members’ willingness to pay.
Clients are essentially low-net-worth but not necessarily uniformly low and
communities are involved in the important phases of the process such as package, design and rationing of benefits.
The essential role of the network of micro insurance units is over and above what each can do when operating as a stand-alone entity.
And finally that cooperation among stakeholders is the key to successful provision of micro insurance to the poor, who constitute the teaming population in West African; mainly illiterates and are of low-income group who could hardly afford the prices of the conventional insurance products, currently sold by commercial insurers.
Small benefits amount are clearly defined and simple rules and their restrictions are
easily accessible, encompassing claims documents requirements and fast payment of benefits.
Also of value is the need for specially adapted client education, affordable premiums payable in small amounts as exclusive as possible.
To thread successfully in this unpopular road, the insurance practitioners must be facing or are ready to face some obvious challenges. The key principles of innovation for this market with enormous potentials are;
conventional wisdom in delivery of products and services has to be challenged even as
significant investment in customer education is imperative.
Volume is also a basis for returns on investment especially as technology has to be combined with the existing infrastructure.
It is paramount that for micro insurance to be successful,government huge investment in guaranteeing confidence in the sector by the private sector is paramount.
The challenges of micro insurance in West Africa are many.  It is vital to know that our local conditions are unfavourable premium income is low, administrative costs are relatively high and infrastructure for insurance support is lacking.  These explain why the commercial insurers in West Africa have not taken more interest in this market.  Reaching the poor people, many of whom are illiterates and making a living in the informal economy is difficult.  And benefit of insurance is often misinterpreted since most of them do not understand why the premiums are not refunded if no claim is made.
These challenges are compounded by the following;
No mechanism to systematically reach the informal workers and the workers themselves are largely unorganized in most cases, especially in cases where there is no employer contribution.
The poor may not be able to afford the full cost of running a conventional insurance due to insufficient government resources to cover recurring expenses and
inadequate infrastructure to provide appropriate services.
Micro-insurance as social security therefore,
fills the gap to provide coverage to the excluded and responds to an urgent need in the absence of formal social security.
Ikupolati had stressed that it also creates delivery mechanisms to extend government programmes to the informal economy while striving to integrate the informal and the formal.
The institutions or set of institutions implementing micro-insurance are commonly referred to as a micro insurance scheme.
There are government policies and programmes to reduce poverty and vulnerability by diminishing people’s exposure to risk and enhancing their capacity to protect themselves but in West Africa, these programmes are not particularly effective.The main obstacles being no mechanisms to systematically reach informal worker as well as the absence of employer contributions as earlier stated.
Micro-insurance is not a new invention.  The industrial life assurance sold at factory gates in American cities in the early 1900s made the then Metropolitan life insurance company, the largest industrial life assurance as the forerunner of what today is known as commercial micro-insurance.
It was simply a response to a market demand managed in a manner that made the products appropriate for the market.  The delivery channels, agents at each factory gates, were specific to this market.  The premiums reflected the particular risks of the factory worker market.  Coverage responded to the workers specific needs, premium collection on pay day as the workers exited the factories were efficient.  In general, industrial life assurance was then a response to a market that provided access to quality insurance products for low income workers and access to a large market for the insurers.
Today the need to meet the demand of the poor is becoming increasingly significant as majority of the population in West Africa especially live in the rural areas where access to micro-finance has been limited and hence insurance provisions are at low ebbs.  Consequently, the provision of insurance products to micro-finance clients is becoming increasingly common and popular.  Much has been learnt over the past decade about how to design products to better meet the needs of the poor.
The provision of any financial services to the poor must start with an understanding of client demand.
What are the financial needs of the poor?
In developing economics and particularly in the rural areas, many activities that would be classified in the developed world as financial are not monetized, that is, money is not used to carry them out.  Almost by definition, poor people have very little money.  But circumstances often arise in their lives in which they need money or the things money can buy.
In Stuart Rutherford’s recent book The Poor and Their Money, he cites several types of needs
Lifecycle Needs:  such as weddings, funerals, childbirth, education, home building, widowhood, old age.
Personal emergencies such as sickness, injury, unemployment, theft, harassment or death as well as disaster such as fires, floods, cyclones and man-made events like war or bulldozing of dwellings.
The work of Rutherfod, Wright and others had caused practitioners to reconsider a key aspect of the micro-credit paradigm: that poor people get out of poverty by borrowing, building micro-enterprises and increasing their income.  The new paradigm places more attention on the efforts of poor people to reduce their much vulnerability by keeping more of what they earn and building up their assets.
While they need loans, they may find if as useful to borrow for consumption as for micro-enterprises.
A safe, flexible place to save money and withdraw it when needed is also essential for managing household and family risk.
Poor people over the years have found creative and often collaborative ways to meet these needs, primarily through creating and exchanging different forms of non-cash value.  Hence, the idea of micro insurance cannot be totally strange to them.
Therefore, micro insurance can be offered in many areas among them; health risks, injury or death as well as property risks such as agriculture risks such as low yield, theft travel risks etc,.  Individuals in the low-income bracket have needs and preferences that may vary.  Micro insurance product design must therefore reflect this heterogeneity and premium payments should also be tailored to the customers’ cash flow position.

 


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Nigeria First Policy: FG Reaffirms Galaxy Backbone as ICT Provider

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Federal government , through the Office of the Secretary to the Government of the Federation (OSGF), has issued a circular reaffirming its commitment to leveraging the substantial investment in the National Information Communications Technology Infrastructure Backbone (NICTIB), for the benefit of Ministries, Departments and Agencies (MDAs).

Nigeria First Policy: FG Reaffirms Galaxy Backbone as ICT Provider

Chidi Okpala, spokesperson for Galaxy Backbone Ltd, disclosed this in a statement on Monday.

The directive, issued in line with the Nigeria First Policy, endorsed Galaxy Backbone Limited, as the designated provider of ICT infrastructure for federal government institutions.

Commenting, Professor Ibrahim Adeyanju, managing director, Galaxy Backbone Ltd, reiterated that the agency is well positioned to actualise the Nigeria First Policy in the country’s ICT sector.

“We have repositioned our organisation in such a way that the MDAs experience the quality, reliability, and innovation of our services, and they can see us as a partner in their digital transformation journey.

“Our pledge is to listen, collaborate, and provide tailored digital infrastructure solutions that meet the unique needs of each agency, while ensuring Nigeria’s data remains safe within our borders,” he said.

According to him, federal government MDAs are expected to accelerate Nigeria’s digital transformation and contribute directly to national economic growth through the implementation of the Nigeria First Policy.

Galaxy Backbone Ltd was established by the Federal Government with the core mandate of ensuring data sovereignty through a centralised e-government platform that offers secure connectivity and related ICT services.

 

 


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FG Reaffirms Galaxy Backbone as Its ICT Infrastructure Provider Under Nigeria First Policy

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The Federal Government, through the Office of the Secretary to the Government of the Federation (OSGF), has issued a circular reinforcing its commitment to leveraging the substantial investment in the National Information Communications Technology Infrastructure Backbone (NICTIB) for the benefit of Ministries, Departments, and Agencies (MDAs).

This directive, in line with the Nigeria First Policy, endorses the use of Galaxy Backbone Limited (GBB) as the designated provider of ICT infrastructure for Federal Government Institutions, covering IP-network services, data centre hosting, and related infrastructure solutions.

GBB was established by the Federal Government with the core responsibility of ensuring data sovereignty through a centralized e-government platform that offers secure connectivity and related ICT services. Over the years, the organization has consistently invested in upgrading its capacity, achieving multiple international certifications and recertifications that position it as a provider of world-class, secure, and reliable technology services.

With this renewed endorsement, GBB is also officially positioned as the Government Data Exchange Platform and the interoperability layer for the nation’s Digital Public Infrastructure implementation, reinforcing its role as the body that coordinates, manages, and integrates all federal digital infrastructure and services, ensuring they comply with Nigeria’s data sovereignty goals and work harmoniously as part of the nation’s digital public Infrastructure.

While this directive ensures compliance with the Nigeria First Policy, GBB emphasizes that its mission is to deliver excellence through building trust and collaboration with Ministries, Departments and Agencies (MDA). Federal Government Institutions currently hosting data abroad are encouraged to migrate to GBB’s secure platforms, confident in the assurance of improved service delivery, enhanced security, and alignment with global best practices.

“We have repositioned our organisation in such a way that the MDAs experience the quality, reliability, and innovation of our services and they can see in us as a partner in their digital transformation journey,” said Professor Ibrahim Adeyanju, Managing Director/CEO, GBB.

He further reiterated; “Our pledge is to listen, collaborate, and provide tailored digital infrastructure solutions that meet the unique needs of each agency, while ensuring Nigeria’s data remains safe within our borders.”

GBB’s commitment is rooted in service excellence, security, and innovation; principles backed by its ISO certifications and global standard operating frameworks. This renewed collaboration between GBB and MDAs is expected to accelerate Nigeria’s digital transformation and contribute directly to national economic growth.


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Virtual Reality in Healthcare: Nigeria’s Untapped Opportunity for Training, Patient Care, and Medical Innovation

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Across the world, Virtual Reality (VR) is proving to be far more than a gaming technology. In healthcare, it is emerging as a practical solution to train professionals, improve patient care, and speed up medical innovation. For Nigeria — where health facilities face workforce shortages, infrastructure gaps, and tight budgets — VR offers a unique chance to leapfrog into modern practices without the prohibitive cost of traditional methods.

Training Without Risk, Learning Without Limits

One of the biggest hurdles in healthcare is preparing professionals for real-life emergencies. Nursing students can read about procedures in textbooks, but they need hands-on experience to master them. VR bridges this gap by simulating real hospital scenarios: inserting an IV line, performing CPR, or managing a trauma patient — all in a safe, repeatable virtual environment.

Emergency response teams can also rehearse disaster situations, from mass-casualty events to fire outbreaks, without risking lives or resources. Instead of waiting for rare live drills, responders can practice repeatedly in lifelike VR settings until every step becomes second nature.

Across Nigeria, a new wave of innovators, like Insightful3d Studio, is developing these immersive training programs locally. By building high-quality VR modules tailored for Nigerian hospitals, universities, and teaching centers, they reduce dependence on expensive foreign programs and make advanced training more affordable.

Improving Patient Understanding and Confidence

VR isn’t just for training staff. Patients can also benefit. For example, a woman preparing for childbirth can take a guided virtual tour of a delivery room to reduce anxiety. A family deciding on surgery can visualize what the procedure involves and better understand the risks and benefits. When people clearly see what to expect, trust in medical care increases — and so do positive outcomes.

A Platform for Local Innovation

VR also allows medical teams in Lagos or Abuja to collaborate seamlessly with specialists abroad. They can jointly review virtual models of medical cases, discuss treatment options, and learn new techniques in real time. For research institutions and pharmaceutical companies, VR provides an interactive environment to test ideas faster and with fewer physical resources.

Nigeria’s Window of Opportunity

Globally, VR in healthcare is growing rapidly — projected to become a multi-billion-dollar industry this decade. Nigeria does not need to be a latecomer. With forward-thinking hospitals, training schools, and government support, the country can develop home-grown solutions instead of importing them at high cost.

Companies like Insightful3d Studio are proving that this is not futuristic wishful thinking — it is already happening. The real question is not whether VR belongs in Nigerian healthcare, but how quickly hospitals, regulators, and investors will adopt it. Early movers will improve patient outcomes, cut training costs, and set a new standard for African healthcare.


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