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Subjective Risk and Participation in Micro Life Insurance in Ghana

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  • Giesbert, Lena

Abstract

This paper analyzes the determinants of households' decisions to purchase micro life insurance, the most common but least investigated type of microinsurance. It uses household survey data collected in southern Ghana in 2009. Insurance participation and extent of coverage are examined against a standard benchmark model, which argues that life insurance uptake increases with risk aversion, the probability of risk, initial wealth, and the intensity for bequests. Many of these predictions indeed hold in the case of micro life insurance. However, the results of probit and tobit models show that nonstandard factors also explain the participation decision. Unlike the case with other available types of insurance, there is a significant negative association between households' subjective idiosyncratic risk perception and the uptake of micro life insurance. Additionally, households' micro life insurance participation is strongly related to their relationships with formal financial services providers and their membership in social networks. These findings suggest that poorer households view microinsurance as a risky option.

Suggested Citation

  • Giesbert, Lena, 2012. "Subjective Risk and Participation in Micro Life Insurance in Ghana," GIGA Working Papers 210, GIGA German Institute of Global and Area Studies.
    • Handle: RePEc:zbw:gigawp:210
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    Cited by:

    1. Lena Giesbert & Susan Steiner, 2015. "Client Perceptions of the Value of Microinsurance: Evidence from Southern Ghana," Journal of International Development, John Wiley & Sons, Ltd., vol. 27(1), pages 15-35, January.
    2. Rajat Deb & Kanchan Kumar Nath & Mukesh Nepal & Sourav Chakraborty & Kiran Sankar Chakraborty, 2021. "Do People Choose Life Insurance for Protection or for Saving?," Metamorphosis: A Journal of Management Research, , vol. 20(1), pages 35-44, June.

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    More about this item

    Keywords

    vulnerability; household behavior; life insurance; Ghana;
    All these keywords.

    JEL classification:

    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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