Aggregate Demand for Micro-insurance among Rural Household Non-farm Enterprises in Nigeria

Abstract

Although, rural based enterprises are subject to a myriad of risks and economic shocks, insurance uptake has been found to be abysmally low. The aim of this study was to examine the determinants of demand for insurance from the standpoint of the rural based household non-farm enterprises (RHNFE). This study made use of the household non-farm enterprise data from the LSMS- General Household Survey of 2010/2011. Demand for insurance was measured as the monthly expenditure on insurance by the RHNFE. The empirical findings indicate that RHNFE were mainly informal in nature with low level investment, and low labour requirement. Consequently, there is relatively high production/transactions costs relative to revenue. Premium paid for insurance was found to be very low and determined by the value placed on the system, access to market for operation as well as the scope of operation of the businesses. Access to market infrastructure and opportunities for standardizing products area recommended in order for the RNFE to take advantage of insurance targeted towards them.

Keywords: Microinsurance, Demand, Rural, Non-farm enterprises, Nigeria