Unfortunately, although a range of insurance products is available, very few of them have migrated successfully downmarket to serve the poor, whose need for such protection is arguably more acute. One plausible reason holding back the diffusion of micro-insurance is transaction costs, i.e., the cost of selling and underwriting insurance and evaluation of claims in a timely and efficient manner.
Using traditional channels and processes, insurance companies simply cannot write policies with values below a certain floor without pricing them unrealistically. Moreover, micro-insurance is a low-cost, high-volume business; therefore, scale of economy is crucial for success.