One key
question I had when researching this project was to learn about how microfinance
was disseminated to the public, as this process is clearly an important factor in
the decision to purchase insurance. Siegel (2001) notes that while clients may
be prepared to take a leap of faith and pay for insurance products, the price
of these products is too high. Cole (2013) supports this point by stating that
penetration of the Indian insurance market is quite low, mainly due to
liquidity constraints and issues like trust. Churchill (2007) notes that some
entrepreneurs have endeavored to overcome this issue by bundling microinsurance
with microfinance products. He indicates that the main benefit of this
arrangement is so microinsurers can penetrate the market using well-developed networks
previously constructed by microfinance companies (Churchill, 2007). Banerjee,
Duflo, & Hornbeck (2013) comment that this cooperation also developed from
the similar risk factors between the two products, with microfinance
institutions such as SKS Microfinance wanting to protect their loans from
catastrophic expenditure and consequent nonpayment. However, in an analysis of
this package, they found that there was an extreme lack of demand as
microfinance clients were not interested in also purchasing insurance (Banerjee
et al., 2013). Most of these clients did not want to pay the additional fees
and switched to another, cheaper, microfinance platform without insurance
(Banerjee, 2013). These points suggest that, while there is a demand for
microinsurance, 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 even
retail companies” (p. 403). Thus, it is very important to understand the needs
of prospective buyers so that microinsurance can develop from its small scale.