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Colombia: For the poor, a new way to protect against disaster

Microfinance was going to be the answer to poverty. Is microinsurance now the new panacea?

So far, about 150 million people worldwide are now covered by microinsurance, twice the number of five years ago, according to McCord. China and India are the biggest markets but sales are also booming in Brazil, Mexico and Colombia.

Health insurance is one of the biggest sellers because many countries offer universal health care only in theory. In run-down public hospitals, poor people often end up paying for everything from meals to antibiotics. Perea, of RSA, said her teams in Colombia are selling 60,000 microinsurance policies a month, mostly for health coverage.

She said insurance companies hope to turn profits by selling these policies on a mass scale. So far, they have largely avoided the backlash faced by some microfinance companies, which have come under fire in India and elsewhere for charging high interest rates and pursuing overly aggressive loan-recovery tactics.

Microinsurance promotors say if their clients are unable to pay, their policies will simply be canceled.

Poor people find this risk-free arrangement attractive, which is why the Liberty Mutual sellers in Barranquilla often close the deal.

Sales are even brisker after families receive big settlements. One Liberty salesmen recalled making a $6,000 payout after a policyholder was killed in a knife fight. He said people formed a line in the street to sign up for microinsurance.

“I immediately sold 20 policies,” he said.