Microinsurance Product Design: Consumer Preferences in Kenya
This paper discusses the results of a study on preferences for microinsurance products in rural Kenya. It focuses on demand for deductibles and rebates.
The paper reviews literature on customer demand for microinsurance. Based on a survey of potential clients of a recently introduced microinsurance product in rural Kenya, it identifies factors affecting customer demand and preferences for microinsurance. These include risk aversion, mathematical and financial literacy, health shocks, prior experience with insurance, trust in insurance providers, entrepreneurial activities and perception of need for insurance. Findings include:
- Strong preference among potential clients for policies with no deductibles that offer rebates;
- Need for ongoing financial education programs, highlighted by irrational preference patterns;
- Stronger preference for no-deductible/rebate programs among families with recent hospitalization history;
- Willingness to pay higher premium for no-deductible policies;
- Strong negative impact of absence of no-claim bonus on customer satisfaction.
The paper states that insurance companies may achieve higher uptake of health microinsurance in rural Kenya by offering no-deductible policies with rebates. It concludes by suggesting areas for future research.
