A Microinsurance Puzzle: How Do Demand Factors Link to Client Value?

This MILK Brief No. 7 explores linkages between demand for microinsurance and client value. It provides a framework to consider when demand for a microinsurance product may reflect the product's value and when it may not. The gap between need and want creates many challenges for microinsurance providers with insurers often over estimating demand. Insurers implementing a new microinsurance program often find that the target market take-up is much lower than the projected rate. Therefore, they are interested in understanding factors that may influence demand. The brief helps practitioners develop targeted adaptations to products and marketing strategies in order to increase demand by better aligning clients perception of product value with actual value. Conclusions include:

• Microfinance literature shows that consumers place value on benefit according to their perceptions;
• This perceived value includes perceived likelihood that the shock will occur and consumers trust that they will be able to collect claims;
• Clients compare the perceived value of insurance to that of alternative coping mechanisms such as savings and family networks;
• Research in psychology and behavioral economics explores another set of drivers behind peoples decisions which include social pressures and fears.