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Overcoming Barriers to Microinsurance Adoption: Evidence from the Field

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Abstract

This paper provides an overview of the academic literature on microinsurance adoption in emerging markets, with a particular emphasis on randomised control trials. I discuss what we know, what we can reasonably hope to know using the extensive work on microcredit as a comparator, and what the available evidence implies for public policy. Particular attention is paid to the case for a greater role for the government in supporting the development of microinsurance.

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Notes

  1. The special issue examines a range of topics, such as the effect of personal experience of past disasters on demand for insurance (Turner et al., 2014), the feasibility of agricultural insurance (Gehrke, 2014), community-based health insurance (Dror et al., 2014), and the relationship between insurance and asset accumulation (Akotey and Adjasi, 2014).

  2. For example Akerlof (1970).

  3. World Bank (2014).

  4. ILO (2009).

  5. Olaosebikan (2013), which examines the profitability of life insurance in Nigeria, and Yao (2013), which examines the sustainability of health insurance in Pakistan.

  6. Outreville (2013).

  7. Deaton (2010).

  8. Cole et al. (2012).

  9. Groh and McKenzie (2014).

  10. Koven and McCord (2014).

  11. The “revealed preference” view argues that because individuals rationally maximise their own welfare, we can infer from purchase decisions that insurance products improve buyers’ lives.

  12. Banerjee et al. (2014).

  13. Thornton et al. (2010).

  14. Dercon et al. (2012).

  15. See Cole and Tufano (2007) for a history.

  16. Cole et al. (2013).

  17. Gaurav et al. (2011).

  18. Cole et al. (2015).

  19. Mobarak and Rosenzweig (2013).

  20. Karlan et al. (2014).

  21. Cai et al. (2015).

  22. Outreville (2013).

  23. Yunus Centre (1997).

  24. Pitt and Khandker (1998).

  25. As noted above, standard comparisons of borrowers to non-borrowers suffer from selection bias problems: those electing to borrow may be different along many different dimensions. By comparing households who owned just less than 1.5 acres to households who owned just more than 1.5 acres, an evaluation can attempt to sort out the effects of microcredit. This strategy requires (a) that households do not manipulate their land holdings to become eligible for the programme; (b) that the microcredit organisation adheres to the rules (perfect adherence is not necessary, but those above 1.5 acres must be less likely than those below 1.5 acres to receive a loan); and (c) that it is possible to account for any differences between households that have more or less than 1.5 acres of land.

  26. Roodman and Morduch (2014).

  27. Banerjee et al. (2015).

  28. https://www.aeaweb.org/articles.php?doi=10.1257/app.20140287, accessed March 2015.

  29. Roodman (2012).

  30. http://www.theguardian.com/global-development-professionals-network/dai-partner-zone/does-microfinance-work.

  31. Ehrbeck (2014).

  32. Cole et al. (2013); or Banerjee et al. (2014).

  33. Prahalad and Hammond (2002).

  34. Jack and Suri (2014).

  35. Téllez (2012).

  36. Prashad et al. (2014).

  37. GSMA (2014).

  38. GSMA (2014, p. 48).

  39. See GSMA (2014) for more discussion.

  40. Giné et al. (2012).

  41. Bauhoff et al. (2013).

  42. Cole et al. (2011).

  43. Song (2013).

  44. Bernheim et al. (2001).

  45. Bruhn et al. (2013).

  46. Berg and Zia (2013).

  47. Beshears et al. (2009); Agarwal et al. (2014).

  48. Kahneman and Tversky (1979).

  49. Barseghyan et al. (2013).

  50. Stango and Zinman (2009).

  51. Anagol et al. (2013).

  52. For example, Angeletos et al. (2001).

  53. Ashraf et al. (2006).

  54. In case of emergency or hardship, households were allowed access to accounts.

  55. Thaler and Sunstein (2008).

  56. Choi et al. (2004).

  57. It is not clear that the fault for these late payments lies totally with the state-owned insurance company, as the company itself required payments from state governments to make claimants whole, and these payments were often delayed.

  58. Padmavathi (2013).

  59. Karlan and Zinman (2009).

  60. Wang et al. (2006).

  61. Cole and Tufano (2007).

  62. Cole (2013).

  63. http://agricoop.nic.in/mnaiso29910.pdf, accessed April 2015.

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Acknowledgements

I thank Wentao Xiong for comments and Fatima Wagdy for research assistance.

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  1. Harvard Business School, Boston, MA 02163, U.S.A.

    Shawn Cole

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This paper has been granted the 2015 Shin Research Excellence Award—a partnership between The Geneva Association and the International Insurance Society—for its academic quality and relevance, by decision of a panel of judges comprising both business and academic insurance specialists.

Eling et al. (2014).

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Cole, S. Overcoming Barriers to Microinsurance Adoption: Evidence from the Field. Geneva Pap Risk Insur Issues Pract 40, 720–740 (2015). https://doi.org/10.1057/gpp.2015.12

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