Assessing the Demand for Microinsurance in Kenya

This study identifies the most common risks faced by low-income households and their coping strategies to assess the potential demand for microinsurance in the rural and urban areas of Kenya. It aims to:

• Serve as a guide for designing microinsurance products;
• Suggest the most appropriate microinsurance products to mitigate risks effectively.

The study finds that low income households:

• Are prone to several risks that directly affect the level and/or sources of income and their productive assets;
• Are more vulnerable to risks due to small asset base;
• Have limited support from the formal insurance sector to manage such risks;
• Have several strategies to manage risks and crises in their households;
• Have some recognition of the need and importance of forward planning that could assist them in mitigating the effects of risks;
• Lack a sound understanding of microinsurance concepts or its advantages.

Finally, the study lists the challenges in designing appropriate microinsurance products:

• Intangibility of insurance products for clients;
• Difficulty in understanding the terms, conditions, and limitations of insurance products;
• Lack of good customer service by insurance providers;
• Need to fix the cost of premium in a way that balances affordability (to low-income clients) and profitability (for the insurer);
• Need to match premium outflows with seasonality of incomes;
• Need to create a niche for microinsurance institutions.