A Terrific Reference—or Primer—on Microinsurance Take-up

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.