Understanding Demand for Microinsurance: A Crucial Step to Develop Market-led Products

This paper analyzes the various factors that contribute to the demand for micro insurance and attempts to enlist products that would be useful to the various analyzed groups.

The paper observes that:

• To understand demand, it is important to understand the preferences and attitudes, capacities and financial literacy of the people, as well as the competition and the strategies in use;
• Demand depends upon:
  • Household life cycle and emergency financial needs;
  • Risks faced by households and risk response strategies;
  • Coverage, accessibility, timeliness, affordability and trust.
• The poor respond to risks through self-insurance or informal group insurance;
• The poor have limited resources to pay and their capacities are seasonal; however, they are willing to pay if the product is reasonably priced and succeeds in meeting their needs.

The paper concludes that:

• The data available for market research into demand is speculative;
• The poor use reactive, inefficient risk response strategies;
• There is no formal competition in the area of micro insurance;
• Some of the threats are high frequency of risks and limited capacities, limited understanding of insurance and a negative attitude towards it.

The paper recommends that:

• The development of micro finance products must be demand-led;
• There should be more market research and studies of satisfaction from the current schemes.