FINANCE minister Margaret Mwanakatwe says while low income earners face same risks with those encountered by others, the former face a greater financial burden when hit by an unexpected event.
In a speech delivered on her behalf by finance permanent secretary (budget and economic affairs) Dr Emmanuel Mulenga Pamu at the 14th micro-insurance conference at Taj Pamodzi Hotel in Lusaka yesterday, Mwanakatwe said the reality was that when low income households were faced with difficulties, harsh choices were made to endure such ordeals.
This year’s micro-insurance conference theme, ‘Inclusive insurance for emerging markets’, according to Mwanakatwe, came at a time when the insurance industry was targeting the emerging small and medium businesses who were the economic pushers, especially on the African business landscape.
“While the risks faced by low income earners are no different from those encountered by others, this group of people is more vulnerable to such risks due to their very limited resource base. Therefore, they face a greater financial burden when hit by an unexpected event such as the untimely death of a family member, or injury or loss of assets from natural disasters,” Mwanakatwe noted.
“Their subsequent actions may deplete their quality of life; thus, their standard of living declines and more people fall deeper into the poverty trap.”
She added that insurance could be a powerful tool for effective risk management because, “When risk event occurs, it does not only come with a loss but also financial demands to recover from the loss.”
“Indeed, insurance is an intangible financial service that is characterised with a promise that the insurer will pay for covered losses at the occurrence of the insured event. In most developed markets, insurance penetration is high and millions of people rely on insurance for risk management purposes,” said Mwanakatwe, adding that at national level, high insurance penetration translated into economic growth through the contribution of insurance to GDP.