Microinsurance : a complicated demand

Despite an increase in micro-insurance products in the world in the past few years, a question remains: what are the barriers to the demand for microinsurance?

It is often said that the lack of understanding of the products and services in microinsurance are the cause of low demand in this sector, however, many other factors can influence the final decision of an household to subscribe to such products.

Indeed, new studies have put forward the most important determinants of the demand in microinsurance : trust, liquidity constraints, the value of the proposal and behavioral constraints.

For example, why the people that believe in the product do not buy it? According to studies, it would be the difficulty to go to a concrete purchase act.
Other constraints can also be added to this such as the lack of knowledge of the location of office insurers or the unability to get there to complete the formalities.

Studies have also shown that the value of the customer and demand are linked: insurers should focus on how clients access and experience the product and associated services.
For example, in the case of micro-health insurance , the equation of quality extends beyond the costs and benefits of the product itself. It is difficult to separate the services related to the product and the ability / ease of access to health services. The lack of quality health centers is often considered one of the strongest barriers to resort to micro-health insurance .

Microinsurance should be developed in relation to other practices of risk management. Bundling insurance with other financial products could increase demand for the products if they are considered as complementary solutions.

Insurers must understand the puzzle of demand in their context, identify the most important determinants and develop specific products, pricing, promotion and distribution strategies.

Source : CGAP

Tags : micro-assurance, heath, insurers, demand, MicroWorld, insurance products