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s we welcome the forthcoming inauguration of president'€“elect Jokowi '€œJoko'€ Widodo, with vice president-elect Jusuf Kalla today, and the announcement of the new Cabinet, a sense of optimism and renewed hope for better and forward-thinking leadership and government is also much anticipated from all strata of Indonesian society, businesses, as well as our friends and neighbors overseas.

Much has been discussed and lamented on, about the state of poverty for the past few decades, but the task of welfare improvement is not confined to state and government alone. The private sector also has a large role to play in reducing poverty. The role to be played is not merely limited to corporate social responsibility (CSR) contributions, which have taken more of the shape of donations rather than purposefully designed CSR programs, which have sustainability in elevating our less fortunate while at the same time increasing the visibility of the business sector.

Micro-insurance by definition of the IAIS (the International Association of Insurance Supervisors) is protection given to the low-income portion of society covering against misfortune by paying a premium proportionate to the probability of occurrences of inherent risk levels.

So in essence, micro-insurance has the same purpose as a product offered to policyholders of traditional insurance, enabling individuals, organizations and business institutions to transfer risk by paying for coverage for the protection against the loss of life, business or property.

When dealing with misfortune, communities with weak economies or low-income expectancies will be far more impacted by low-quality living standards and consumption. They are the most vulnerable group susceptible to high-risk factors, and at the same time the least protected from the consequences of high risks. When faced with financial pressures as a result of misfortune, they are forced to such predicaments as reducing food consumption, taking children out of school or selling assets to pay for expenses incurred following the misfortune.

By extending the reach of insurance to low-income communities, the insurance industry can play a major role in protecting and ensuring financial assistance readily available to the section of the community in need of such coverage when misfortune knocks.

The commercialization of micro-insurance in India, which today ranks one of the most successful nations at alleviating poverty, includes the presence of insurance companies that are willing to serve low-income communities.

Based on a recent Lloyds report, 135 million or 5 percent of low-income people in emerging countries already have a micro-insurance product. However, the potential yield for the lower strata of society is still very large, when potential population growth is measured at around 1.5 billion to 3 billion.

There are several criteria that have allowed insurance companies to successfully play their role in the development of the micro-insurance sector in India. These include among others:

Micro-insurance that generates profitability for insurers.

Micro-insurance that has become a niche market compared to traditional insurance, the market for which has become overcrowded.

Micro-insurance has also become a channel for companies to promote their businesses and product brands. This is important as well-known brands and companies can also help to elevate standards of living from the lower-income to the middle-income bracket. Insurance companies have been able to generate profits from the mid-market segment due to increases in the number of insured clients from higher premiums. Therefore, brand recognition through micro-insurance has become an important aspect, especially for countries like Indonesia where rapid growth is expected.

Commercially, there will be a stimulus for private insurance companies to develop services and products to serve the low-income bracket with micro-insurance, in which profit is the driving force for the development of the micro-insurance business apart from the other more obvious benefits:

Diversification. Developing new business activity in a new market segment that has not been serviced before with new types of risk and new products is important for insurance-portfolio diversification needs. This applies to investment in the micro-insurance market for traditional commercial insurance.

A good micro-insurance strategy can provide future sustainable growth and business diversification with a different demographic segment.

Reputation. Providing micro-insurance also demonstrates a company'€™s commitment to social responsibility. This provides added value for the company'€™s brand value in the market.

Pioneering. Many clients in the micro-insurance market today will move to the middle class eventually, and therefore, will create vast opportunities in the future.