A new study has revealed that Africa represents a vast untapped micro-insurance market, with new figures showing only about 2% of the 700 million working poor who can afford cover have it.

Assuming potential insurance expenditure levels of 5% of GDP, the value of the market is estimated at about $US25 billion ($27.7 billion).

But total written premium in 2008 amounted to about $US257 million ($285 million) –  just 1% of the potential value.

A 2009 study released recently by the Micro-insurance Innovation Facility of the International Labour Organisation (ILO) found the lack of coverage is caused by a poor understanding of what insurance is, difficulties paying premiums, high administrative costs and a lack of information technology and qualified personnel.

Currently, about 12 million of the working poor with insurance cover are from southern and East Africa, with life insurance being the most common type of micro-insurance.

Credit life products cover 9.5% of the market while other life products cover about 3.2%. Health products, widely considered the most in need, cover only about 0.3% of the low-income population.

Property and agriculture insurance cover just 0.2% and 0.1% of their markets.

The report says donors and governments must support micro-insurance efforts to help low-income Africans manage risks and lead safer, more stable lives.