Subjective Risk and Participation in Micro Life Insurance in Ghana

Lena Giesbert

No 210, GIGA Working Papers from GIGA German Institute of Global and Area Studies

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.

Keywords: vulnerability; household behavior; life insurance; Ghana (search for similar items in EconPapers)
JEL-codes: D12 G21 O16 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/67514/1/731847075.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:gigawp:210

Access Statistics for this paper

More papers in GIGA Working Papers from GIGA German Institute of Global and Area Studies Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().