The seductive appeal of insurance for the poor

In the context of the interest within international development circles about using insurance (crop, health etc) and micro-pensions to help the poor, it is pertinent to point to the following.

1. In the US, 44% of households have wealth of less than $400 and will struggle to sustain themselves after retirement. Do we hear any one offering micro-pensions in the US? 

2. We have been implementing about crop-insurance in developing countries for decades. Why is it that there is not even one example of a commercially sustainable crop-insurance anywhere in a developing country? How is it that US, Europe and Japan prefers direct payments over crop insurance? 

3. Why is there not even one example of a developed country which has managed the health-insurance route to realising universal health coverage (UHC), rather than supplementing with insurance after good quality UHC has been achieved? Why is there not even one developing country (even a province within a country) which has managed to realise UHC through insurance? 

4. Finally, did any of these developed countries of today used insurance to mitigate the basic risks faced by the most vulnerable sections of their population at any stage in their development trajectory (though both health, property insurance for the broader population segment have been commonplace for decades)?

I have written earlier on micro-pensions, fintech, and financial engineering for the poor, highlighting their obvious limitations.

Certain narratives just endure no matter what. 

Consider any of these big problems - lack of savings among the poor, weather risk protection for farmers and small businesses, and protection against catastrophic medical episodes. If we take any geographical unit - country or province or city - and make an assessment of the average cost of damage suffered from the risk materialising each year, and the average premiums of a prospective plan to cover the same risk, we will realise that the former is far bigger, often multiples, of the latter. 

So developed countries address this by direct income transfers instead of crop insurance, social security instead of micro-pensions, and means-tested health insurance like Medicaid/NHS instead of  micro-health insurance. 

Just work backwards from the total money spent annually on direct income transfers to farmers, social security, and Medicaid/NHS and see how much it would translate into in terms of individual premiums on each if it were delivered as insurance. You will realise they are orders of magnitude off. 

Also remember that the risk-pools in all the three are among the riskiest among all insurable pools, thereby making their payout likelihood even more, thereby necessitating even more unaffordable premiums. Farmers completely vulnerable to the vagaries of weather whose incidence appears ever increasing, poor people who have very bad primary health care which in turn amplifies the likelihood of disease episodes.

Asking poor people who can barely eat three times a day to skimp on a quarter of their meal to save for a rainy day for a micro-pension (which in any case is most likely to be grossly insufficient at old age, given, among other things the high inflation rates) is not economically inefficient but plain unethical. 

In fact, instead of spending money on crop insurance, aid money could be more effectively used to help support drones and other technologies which help with making cheaper and faster assessments of crop-damages - this will help both governments (in their inevitable direct payments) and the broader insurance market itself.