Vulnerability to risk, a constant factor in the lives of the poor, is a cause of persistent poverty. Microinsurance offers one approach to mitigating risk, yet demand is disappointingly low. This paper aims to improve the understanding of factors that determine the demand for microinsurance products. Based on a review of more than 30 studies, it blends academic findings with practical examples and presents the most important determinants of demand, including understanding of insurance, client value, liquidity constraints, trust, behavioural factors, and use of other risk coping mechanisms. The paper also presents solutions that can be incorporated into an organization's marketing strategy.
Microfinance institutions (MFIs) that offer savings services and/or credit to low-income households and small businesses remain one of the most popular and effective channels for delivering microinsurance. MFIs are evolving beyond basic credit life insurance. However, making the transition to more complex products and business models presents several challenges. This paper outlines 10 key recommendations for MFIs to improve their microinsurance offerings. MFIs need to: 1) understand market needs and preferences; 2) prioritize savings; 3) make mandatory cover valuable; 4) proactively develop the product menu; 5) improve claims processing; 6) apply holistic risk management; 7) create a demonstration effect; 8) build structures for success; 9) build insurance capacity; and 10) monitor their performance. Insurance has the potential to improve the health and welfare of low-income households, and consequently enhance the social and financial performance of the MFI.
Making use of mobile phones can drive the expansion of insurance coverage in low-income markets. It should increase the efficiency of transactions across the entire value chain, improving processes such as enrolment, premium collection, and claims settlement. At first glance, the incentives that drive revenues for mobile network operators (MNOs) and insurers do not seem naturally aligned. MNOs have more customers and more products than insurers and they have fewer difficulties in serving the low-income market. But it is precisely these distinctions that make MNOs such attractive partners for insurers wanting to reach scale and to access the low-income market. MNOs can provide insurers with access to a large, dispersed client base and an established network of distribution points to interact with these clients. It can enable exceptional scale and it can, although not always, improve client value. On the other hand insurance can help MNOs to raise revenues and create adjacent benefits such as reducing churn and increasing average revenue per user (ARPU).