Take-up of formal microinsurance products remain low around the world, typically ranging from 0 to 30-40 percent depending on the type of product and the conditions of the offer. A growing literature is testing various determinants of take-up, although little has been done to step back and consider what we have learned as a whole.
That’s a problem because the issues are complicated and multi-layered. There’s a high probability of being misled by any particular finding from the research when designing new products.
Michal Matul, Aparna Dalal, Ombeline De Bock and Wouter Gelade have done a huge service to the sector, then, in a new paper presented at the Third European Research Conference on Microfinance, held June 10-12 in Norway. Their paper is a must-read for anybody interested in microinsurance, particularly in understanding and overcoming the puzzle of low take-up for both first sales and renewals of purchases. The latter has been little considered, yet renewal rates tend to be even lower than first-sale rates.
The authors distinguish 6 broad determinants of the take-up of various microinsurance products: lack of understanding, low client value, liquidity constraints, lack of trust, behavioral factors, and the availability of other risk-coping mechanisms. In each category, the authors classify and organize various specific determinants of demand, and synthesize the evidence supporting them. As an example, they identify three dimensions of trust: trust in the product, trust in the institution, and trust in the community. Evidence is reviewed and examples are given for each dimension.
In an effort to be practically useful to practitioners, Matul and his co-authors go beyond a simple review of the literature, and consider the practical feasibility and cost-effectiveness of various strategies to increase take-up. They acknowledge that there is no silver bullet, but a need to adapt strategies to fit budgets and specific contexts.
If you’re new to the space, or even if you’ve been thinking about microinsurance for long time, this paper is a great piece to review.
Editor’s Note: I’m going to assume that you are seeing plenty of AI content (news and papers, not AI slop, though I’m sure you’re getting plenty of that too) from other sources, so I’m trying to think hard about the marginal value that the faiV can provide. As far as I’ve gotten so far: a) make sure that directly AI-related content does not take up more than 2 of the 5 items, and b) try to focus specifically on the cybersecurity issue for financial inclusion. Beyond that, I’m open to feedback on the value you get from the faiV in relation to AI to help guide us in the future. On a different note, I’ll be making a brief cameo appearance at the e-MFP Inclusive Finance Conference to moderate the opening plenary. If you haven’t registered, do so and I hope to see you there! - Tim Ogden