MICROFINANCE PAPER WRAP-UP: “Perceptions of (Micro)Insurance in Southern Ghana: The Role of Information and Peer Effects;” by Lena Giesbert and Susan Steiner, published by DIW Berlin

By Lena Giesbert and Susan Steiner, published by Deutsches Institut fur Wirtschaftsforschung (DIW Berlin), 2012, 33 pages, available at: http://www.diw.de/documents/publikationen/73/diw_01.c.394251.de/dp1194.pdf

This paper analyzes the content of four focus groups to determine the perceptions of microinsurance amongst the low-income population in southern Ghana. The focus groups that were examined included participants with and without microinsurance. Those who were insured had purchased their insurance from the Ghanaian Gemini Life Insurance Company (GLICO). To put microinsurance into the context of a broader risk management framework, the authors also used evidence from household survey data on the shocks households experienced and the coping strategies that they applied in response to shocks.

According to the authors, microinsurance in the capital Accra has grown rapidly over the past decade and includes commercial insurers and public insurance schemes. Outside of the capital, microinsurance growth has been limited to policies offered by the Microinsurance Agency, which offers life insurance, and GLICO, which offers a life microinsurance policy called Anidaso. Most of the population outside of Accra does not subscribe to any insurance apart from the public health insurance offered by the National Health Insurance Scheme (NHIS). However, the risk among this population is very high – one third of households in the study had experienced serious illness, and almost one quarter had had a death of one or more family members in the previous five years. Additionally, approximately one in ten households had experienced other shocks including destruction of property, natural disasters and job. The authors argue that given the high risk and cost of medical treatment and funerals, it would be expected that more households would use microinsurance products. However, the study found that the main coping strategies for all shocks were self-help and self-insurance; less than ten percent of households used market-based mechanisms, namely loans from formal financial institutions. Of those who used market-based mechanisms, only 13 percent of households made a claim to an insurance provider to cope with a shock. Thus, the authors find that microinsurance is more important as a risk management strategy for illness than any other shock, due to the free, public insurance from NHIS.

The focus group discussions were conducted in the districts of Brakwa and Nyakrom in the Central Region of Southern Ghana. Groups consisted of eight members, either all male or all female, and were segmented into two groups: groups that already existed and whose members were thus more likely to be comfortable sharing experiences with each other and deliberately composed groups only established for the focus group discussion. Half of the participants in each group were insured, while the remaining half were uninsured. In three of the discussion groups, participants regarded Anidaso positively, while the fourth group, the male group in Brakwa, had negative reactions based on one participant’s poor experience with GLICO staff. Other forms of insurance, such as that provided by NHIS, property insurance or regular life insurance, received positive reactions from all groups. However, insurance in general received mixed reactions from all groups. After analyzing the comments made by participants, the authors found that most positive comments were very vague and lacked details about what insurance should do. The negative comments generally expressed participants’ concerns about the insurance provider and insurance in general. Ultimately, the study indicated that the participants had a low level of education about finance, which the authors claim influences perceptions of insurance. The study also found that participants’ perceptions were strongly influenced by their peers, both positively and negatively.

The authors conclude that, based on the results of the study, the target population for microinsurance had positive perceptions about insurance, but demonstrate a lack of knowledge about what insurance can do. Many participants’ impressions were based on incorrect or incomplete information about both insurance in general and also about specific providers and products. Additionally, perceptions of microinsurance are largely influenced by the experiences and ideas of community members and peers. The authors recommend that microinsurance providers maintain close customer contact and relations to improve perceptions of microinsurance in the long term.

By Charlotte Newman, Research Associate

Sources and Additional Resources:

MicroCapital.org story, March 8, 2012, “MICROCAPITAL BRIEF: MicroEnsure Ghana to Launch Credit Health Insurance for Microfinance Clients,” https://www.microcapital.org/microcapital-brief-microensure-ghana-to-launch-credit-health-insurance-for-microfinance-clients/

MicroCapital.org story, April 25, 2012, “MICROCAPITAL BRIEF: National Insurance Commission (NIC) of Ghana Anticipates New Microinsurance Law,” https://www.microcapital.org/microcapital-brief-national-insurance-commission-nic-of-ghana-anticipates-new-microinsurance-law/

MicroCapital.org story, May 23, 2012, “MICROCAPITAL BRIEF: National Insurance Commission (NIC) of Ghana Targets 10% Microinsurance Penetration in Three Years,” https://www.microcapital.org/microcapital-brief-national-insurance-commission-nic-of-ghana-targets-10-microinsurance-penetration-in-three-years/

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