FACTORS INFLUENCING THE UPTAKE OF MICROINSURANCE PRODUCTS

Abstract

Purpose: The majority of people in developing countries have never been formally insured against such hazards as illness, unemployment, harvest failure and natural catastrophes. Over the years, microinsurance has been offered by different commercial insurance companies targeting low-income people. However, uptake of microinsurance generally falls short of projections, which has recently made stakeholders focus on the factors influencing the uptake of microinsurance products. The purpose of this study is to evaluate the factors influencing the uptake of micro insurance products.

Methodology: A desktop methodology was employed in the investigation. Unlike fieldwork, desk studies do not need travel to the field site(s). Desk research is less expensive than field research because the executive's time, phone charges, and directories are the key costs. These findings were drawn from previously published studies. This secondary material was easily accessible thanks to online journals and the library.

Findings: There are several factors that influence the uptake of microinsurance products. These factors include risk exposure, culture, personal characteristics (i.e. gender, age and education level), wealth and quality of the product. Cultural beliefs, attitudes and taboos negatively affect the demand of microinsurance. Moreover, uptake of micro insurance is directly influenced by income level, household size and knowledge about micro insurance and suitability of micro insurance products for the customers. The factors that affect the microinsurance uptake is the low level of income among the target market, perception that insurance process is generally complex by the target market and limited distribution channels and branch networks of the microinsurance providers.

Unique contribution of theory, practice and policy: The study recommends that, the insurance companies should embrace continuous awareness and education on microinsurance services which can assist in alleviating poverty. Insurers should offer flexible and convenience payment options of insurance premium to the low-income earners so as to attract and retain customers. Individual should be able to access credit in other forms, such as insurance premium finance tailored to the suit the low-income cadre. The government needs to come up and subsidize the insurance providers so that there is adequate extension of micro insurance services to the low-income individuals. The study also recommends collaboration by the various stakeholders in ensuring implementation of strategies that will address the various factors identified as causing low insurance penetration.