One keyquestion I had when researching this project was to learn about how microfinancewas disseminated to the public, as this process is clearly an important factor inthe decision to purchase insurance. Siegel (2001) notes that while clients maybe prepared to take a leap of faith and pay for insurance products, the priceof these products is too high.
Cole (2013) supports this point by stating thatpenetration of the Indian insurance market is quite low, mainly due toliquidity constraints and issues like trust. Churchill (2007) notes that someentrepreneurs have endeavored to overcome this issue by bundling microinsurancewith microfinance products. He indicates that the main benefit of thisarrangement is so microinsurers can penetrate the market using well-developed networkspreviously constructed by microfinance companies (Churchill, 2007). Banerjee,Duflo, & Hornbeck (2013) comment that this cooperation also developed fromthe similar risk factors between the two products, with microfinanceinstitutions such as SKS Microfinance wanting to protect their loans fromcatastrophic expenditure and consequent nonpayment. However, in an analysis ofthis package, they found that there was an extreme lack of demand asmicrofinance clients were not interested in also purchasing insurance (Banerjeeet al., 2013). Most of these clients did not want to pay the additional feesand switched to another, cheaper, microfinance platform without insurance(Banerjee, 2013). These points suggest that, while there is a demand formicroinsurance, the industry has been targeting the wrong clients.
Churchill(2007) mentions that successful methods of delivery include “cooperatives,community organizations, small business associations, trade unions, and evenretail companies” (p. 403). Thus, it is very important to understand the needsof prospective buyers so that microinsurance can develop from its small scale.