Determinants of Microinsurance Demand in Urban Low-Income Households

Thesis Abstract

The study investigates the determinants of microinsurance demand among urban low-income households in a large metropolitan area, addressing the persistent gap between availability of microinsurance products and uptake in economically vulnerable urban populations. The aim is to identify socio-economic, perceptual, and structural factors driving (or hindering) demand, and to quantify their relative influence to inform targeted product design and policy interventions. Specific objectives examine (i) socio-demographic correlates of microinsurance ownership (income, education, household size, employment status), (ii) risk perception and financial literacy as predictors of willingness to insure, (iii) trust in insurers, perceived product value, and price sensitivity, (iv) the role of social networks and information channels in uptake, (v) accessibility barriers including proximity to providers and administrative complexity, and (vi) the moderating effects of urban poverty conditions and prior experience with shocks on demand. A mixed-methods research design is employed. The quantitative strand adopts a cross-sectional survey of 1,200 urban residents earning below USD 5,000 per annum, selected through stratified random sampling across three informal settlements within a major city to ensure representation by gender, age, and household composition. Data collection uses a structured questionnaire incorporating validated scales for financial literacy, risk aversion, trust, and perceived value of insurance products, supplemented by administrative records where available. The qualitative strand comprises 40 in-depth interviews and 6 focus group discussions with microinsurance holders, non-holders, community leaders, and frontline agents to capture contextual and perceptual nuances. Data analysis proceeds in two integrated phases. Quantitative analysis employs multivariate regression to estimate determinants of microinsurance demand, with logistic models (binary and multinomial) for ownership and product choice, and hierarchical linear modeling to account for household-level clustering. Mediation analyses examine whether financial literacy and trust transmit effects from demographic factors to demand, while interaction terms test moderating influences of information exposure and shock history. The qualitative data are analyzed using thematic analysis, with coding anchored in the extended Technology Acceptance Model and Protection Motivation Theory, enabling triangulation with quantitative findings. Validity and reliability are ensured through pilot testing (n=120), Cronbach’s alpha checks (>0.70 for scales), and triangulation across data sources. The study anticipates that higher financial literacy, greater perceived value, and stronger trust in insurers are positively associated with microinsurance demand, while lower income, higher price sensitivity, and perceived administrative burden deter uptake. Information channels that effectively enhance trust and perceived relevance—such as community agents and peer networks—are expected to amplify demand. A key contribution is the proposed integrated model that combines elements of the Technology Acceptance Model, Protection Motivation Theory, and social network theory to explain microinsurance adoption in urban low-income settings. The research also expects to reveal heterogeneity in determinants across sub-populations defined by gender, household size, and prior exposure to shocks, offering granular insights for product design and microfinance-integrated delivery platforms. The study contributes to knowledge by (i) elucidating the relative weight of cognitive, socio-economic, and institutional factors shaping microinsurance demand in urban poor contexts, (ii) providing empirical evidence on the effectiveness of information intermediaries and trust-building in accelerating uptake, and (iii) delivering policy-relevant guidance for insurers, microfinance institutions, and urban development agencies seeking to expand formal risk-sharing mechanisms for vulnerable urban households. The main conclusion is that demand is driven as much by perceived value and trust as by affordability, with information-rich, simplified processes and trusted intermediaries playing pivotal roles. Recommendations include designing low-cost, modular microinsurance products with transparent pricing, leveraging peer networks for education and enrollment, reducing administrative complexity, and fostering regulatory environments that enhance insurer credibility and consumer protection. Further research should explore longitudinal effects of shocks on demand and evaluate the impact of digital enrollment platforms on uptake in diverse urban contexts.