The Determinants of Microinsurance Demand

43 Pages Posted: 15 Jun 2013

See all articles by Martin Eling

Martin Eling

University of St. Gallen - Institute of Insurance Economics; University of Saint Gallen - School of Finance (SoF)

Shailee Pradhan

University of Saint Gallen - School of Finance (SoF)

Joan T. Schmit

University of Wisconsin - Madison - Department of Actuarial Science, Risk Management and Insurance

Date Written: June 14, 2013

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.

Keywords: microinsurance, insurance, demand, enrolment, participation, take-up

JEL Classification: O10, O12, G21, G22

Suggested Citation

Eling, Martin and Pradhan, Shailee and Schmit, Joan T., The Determinants of Microinsurance Demand (June 14, 2013). University of St.Gallen, School of Finance Research Paper No. 2013/8. Available at SSRN: https://ssrn.com/abstract=2279355 or http://dx.doi.org/10.2139/ssrn.2279355

Martin Eling

University of St. Gallen - Institute of Insurance Economics ( email )

Kirchlistrasse 2
St. Gallen, 9010
Switzerland

University of Saint Gallen - School of Finance (SoF) ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

Shailee Pradhan

University of Saint Gallen - School of Finance (SoF) ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

Joan T. Schmit (Contact Author)

University of Wisconsin - Madison - Department of Actuarial Science, Risk Management and Insurance ( email )

Madison, WI
United States
608-262-4240 (Phone)

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