Paper
Assessing the Demand for Microinsurance in Kenya
Does micro insurance help the poor in coping with risks?
This study identifies the most common risks faced by low-income households and their coping strategies to assess the potential demand for microinsurance in the rural and urban areas of Kenya. It aims to:
- Serve as a guide for designing microinsurance products;
- Suggest the most appropriate microinsurance products to mitigate risks effectively.
The study finds that low income households:
- Are prone to several risks that directly affect the level and/or sources of income and their productive assets;
- Are more vulnerable to risks due to small asset base;
- Have limited support from the formal insurance sector to manage such risks;
- Have several strategies to manage risks and crises in their households;
- Have some recognition of the need and importance of forward planning that could assist them in mitigating the effects of risks;
- Lack a sound understanding of microinsurance concepts or its advantages.
Finally, the study lists the challenges in designing appropriate microinsurance products:
- Intangibility of insurance products for clients;
- Difficulty in understanding the terms, conditions, and limitations of insurance products;
- Lack of good customer service by insurance providers;
- Need to fix the cost of premium in a way that balances affordability (to low-income clients) and profitability (for the insurer);
- Need to match premium outflows with seasonality of incomes;
- Need to create a niche for microinsurance institutions.
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