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The Determinants of Microinsurance Demand

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  • Eling, Martin

    ()

  • Pradhan, Shailee

    ()

  • Schmit, Joan T.

    ()

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    Abstract

    The purpose of this article is to structure the extant knowledge on the determinants of microinsurance demand and to discuss unresolved questions that deserve future research. To achieve this outcome, we review the academic literature on microinsurance demand published between 2000 and early 2013. The review identifies 12 key factors affecting microinsurance demand: price, wealth, risk aversion, non-performance risk, trust and peer effects, religion, financial literacy, informal risk sharing, quality of service, risk exposure, age, and gender. We discuss the evidence of how each of these 12 factors influences demand, both within the microinsurance and the traditional insurance markets. A comparison with traditional markets shows an unexpected (negative) effect of risk aversion on microinsurance demand, with trust perhaps being the intervening factor. Other relevant results include the importance of liquidity (and/or access to credit), informal risk sharing, and peer effects on the decision to buy microinsurance. The influence of trust on insurance take-up and the unanticipated results for risk aversion are fertile areas for future research.

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    File URL: http://www1.vwa.unisg.ch/RePEc/usg/sfwpfi/WPF-1308.pdf
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    Bibliographic Info

    Paper provided by University of St. Gallen, School of Finance in its series Working Papers on Finance with number 1308.

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    Length: 42 pages
    Date of creation: Jun 2013
    Date of revision:
    Handle: RePEc:usg:sfwpfi:2013:08

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    Keywords: Microinsurance; insurance; demand; enrolment; participation; take-up.;

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    Cited by:
    1. Biener, Christian & Eling, Martin & Schmit, Joan T., 2014. "Regulation in Microinsurance Markets: Principles, Practice, and Directions for Future Development," World Development, Elsevier, vol. 58(C), pages 21-40.

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