The Determinants of Microinsurance Demand

Eling, Martin; Pradhan, Shailee; Schmit, Joan T.

doi:10.1057/gpp.2014.5

Cited by 83 publications

(22 citation statements)

References 100 publications

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“…Why households decide to insure is currently a highly explored topic. Next to purely economic aspects, social and cultural influences such as risk aversion and influence from peers or personal and demographic factors such as age and gender are also considered being important [4,42]. Explicitly including reasons behind the decision to insure is therefore out of the scope of this paper.…”

Section: Model Descriptionmentioning

confidence: 99%

“…In particular, if households had different financial resources, the decision to insure and potential changes in transfer behavior could be included into the model in more detail. When limited economic means alone inhibit some households from purchasing insurance [4,42], uninsured households would on average have lower assets at their disposal which might increase their dependence on informal support. Given the different characteristics of the shock events this could have various consequences.…”

Section: Plos Onementioning

confidence: 99%

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Informal risk-sharing between smallholders may be threatened by formal insurance: Lessons from a stylized agent-based model

et al. 2021

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Microinsurance is promoted as a valuable instrument for low-income households to buffer financial losses due to health or climate-related risks. However, apart from direct positive effects, such formal insurance schemes can have unintended side effects when insured households lower their contribution to traditional informal arrangements where risk is shared through private monetary support. Using a stylized agent-based model, we assess impacts of microinsurance on the resilience of those smallholders in a social network who cannot afford this financial instrument. We explicitly include the decision behavior regarding informal transfers. We find that the introduction of formal insurance can have negative side effects even if insured households are willing to contribute to informal risk arrangements. However, when many households are simultaneously affected by a shock, e.g. by droughts or floods, formal insurance is a valuable addition to informal risk-sharing. By explicitly taking into account long-term effects of short-term transfer decisions, our study allows to complement existing empirical research. The model results underline that new insurance programs have to be developed in close alignment with established risk-coping instruments. Only then can they be effective without weakening functioning aspects of informal risk management, which could lead to increased poverty.

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Section: Model Descriptionmentioning

confidence: 99%

Section: Plos Onementioning

confidence: 99%

Informal risk-sharing between smallholders may be threatened by formal insurance: Lessons from a stylized agent-based model

et al. 2021

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“…It has therefore been suggested that to determine the demand for crop insurance including weather index-based insurance (WII), it is important to assess the frequency and impact of key weather-related perils and the mitigation strategies used by affected farmers (Barnett and Mahul, 2007;McCord, 2011), and the willingness of farmers to participate and pay for such insurance products (Barnett and Mahul, 2007). Other studies have also emphasised that the demand for micro-insurance products including WII depends on a combination of farmers' economic (price, wealth and income), social (risk, trust and financial literacy), structural (informal risk sharing, risk exposure) and personal (age, gender) factors (Eling et al, 2014;Fiala, 2017). Besides these, institutional factors such as a farmer's access to extension services have been reported to influence the uptake of agricultural insurance (Ali, 2013;Wairimu et al, 2016).…”

Section: Introductionmentioning

confidence: 99%

Willingness to participate and pay for index-based crop insurance in Ghana

Adjabui¹,

Tozer

Gray

2019

AFR

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Purpose The purpose of this paper is to assess farmers’ willingness to participate and pay for weather-based index insurance in the Upper East Region of Ghana, and what factors influence the participation and purchase of crop insurance schemes. Design/methodology/approach A survey of 200 farmers in the region was carried out in 2018 to measure demographic information, farm characteristics, risks and risk-management practices and attitudes to crop insurance programs. The survey also captured maximum willingness to pay (WTP) for crop insurance. The double-bounded contingent valuation technique was used to estimate the WTP for crop insurance and the variables that affected WTP. Findings Farmers, in general, had an indifferent attitude to crop insurance in the region, but were willing to participate in the crop insurance programme, and were willing to pay between 7.5 and 12.5 per cent of the cost of growing maize as a premium for crop insurance. Demographic and economic variables did not impact WTP, but attitude towards crop insurance, farm diversification and frequency of drought negatively impacted on the WTP for crop insurance. Practical implications Education programs could be undertaken to improve the attitude and understanding towards crop insurance, as some farmers perceived the programme as not trustworthy, and others did not truly understand the operation of the programme. Social implications Drought can have a significant impact on household welfare, particularly in food insecure countries or regions. Crop insurance can provide a method of securing income for farmers allowing them to purchase food rather than other choices, such as removing children from education to reduce household expenses, improving the long-term welfare of the farm household. Originality/value This paper considers willingness to participate and WTP for a crop insurance programme in Ghana, it is one of a small number of papers that consider attitude to, and willingness to participate and WTP for crop insurance in developing countries. The value of the research is the expanded understanding of farmer attitude to crop insurance and their lack of knowledge of crop insurance operations.

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“…What early research on participation in micro-insurance shows is that households appear to not purchase enough of it (Eling, Pradhan, and Schmit, 2014;Bock and Gelade, 2012). The research, which is mostly in the form of randomised control trials, finds that insurance purchase is constrained by price, trust, liquidity constraints and limited salience (Giné, Townsend, and Vickery, 2008;Cole, Giné, et al, 2013).…”

Section: The Research Settingmentioning

confidence: 99%

“…Despite the importance that policy has given micro-insurance in improving financial access for low income households, studies show that households are yet to sufficiently adopt these products (Eling, Pradhan, and Schmit, 2014;Bock and Gelade, 2012). In this paper, we address a natural follow-up question: when households do purchase insurance, do they return to renew it?…”

Section: Introductionmentioning

confidence: 99%

From Participation To Repurchase: Low Income Households And Micro‐insurance

Sane

Thomas

2019

J of Risk & Insurance

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The paper asks what drives insurance coverage in low income households by analysing repurchase patterns of micro-insurance policies. We use data on customers of a financial services provider from three states in India and find that the probability of repurchase is highest in the first two months after the contract expires, and steadily declines after. This suggests a window of opportunity for financial firms and governments to target customers to ensure continuous insurance purchase. Non-membership of micro-finance groups and poor rainfall in the month of expiry affect the chance of repurchase adversely. Customers who take longer to repurchase tend to increase the amount of insurance cover.

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The Determinants of Microinsurance Demand

Cited by 83 publications

References 100 publications

Informal risk-sharing between smallholders may be threatened by formal insurance: Lessons from a stylized agent-based model

Informal risk-sharing between smallholders may be threatened by formal insurance: Lessons from a stylized agent-based model

Willingness to participate and pay for index-based crop insurance in Ghana

From Participation To Repurchase: Low Income Households And Micro‐insurance

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