Effect of partner–agent model practice on microinsurance client value: Insight from microfinance institutions in Tanzania

Abstract

In absence of formal microinsurance to protect low-income people against natural and man-made disasters, the partnership between insurance companies and microfinance institutions (MFIs), also known as the Partner–Agent Model (PAM), is gaining global recognition from governments, practitioners, and donors for its potential role to deliver microinsurance. Although the model is still nascent in Tanzania, it has significantly increased microinsurance outreach. However, while the microinsurance landscape has been extensively studied, the effect of PAM practice on mandatory microinsurance client value has not received much attention. Therefore, this study examines how the PAM practice affects microinsurance client value dimensions. Surveys were used to collect quantitative data from 229 managers of MFIs involved in PAM, randomly selected from 10 regions in Tanzania. The study applies structural equation modeling, particularly the regression analysis, to examine the effect of PAM practice on the appropriateness, accessibility, affordability, and responsiveness of PAM microinsurance services. Study findings indicate that though the PAM practice has a statistically significant positive effect on microinsurance client value, the client value does not score well on its four dimensions. Improvement and regulation of PAM practice is recommended to foster microinsurance client value.

Keywords:

• partner–agent model
• appropriateness
• accessibility
• affordability
• responsiveness
• microinsurance
• client value

JEL classifications:

• G21
• G22

Public Interest Statement

The partnership between insurance companies and MFIs, also known as the Partner–Agent Model (PAM), is gaining growing recognition from governments, practitioners, and researchers for its potential role to expand microinsurance services to low-income people. However, for decades, several pertinent questions remained unanswered: Does microinsurance offer client value? Specifically, does it match low-income people who experience the most risk exposure? Are microinsurance services easily and conveniently accessible at costs that low-income people can afford? The purpose of this study was to address these questions. The findings offer new insight regarding insuring low-income people against natural and man-made disaster risks. It found that the Partner–Agent microinsurance delivery model practice is positively related to the design of microinsurance products that are affordable, convenient, easily accessible, which also match clients’ risk exposure. MFIs are therefore encouraged to partner with insurance companies to offer microinsurance services with value to their clients.

Additional information

Notes on contributors

Isidore Minani

Isidore Minani is a PhD candidate at the University of Dar es Salaam Business school, Tanzania. He is also a lecturer at Ruaha Catholic University in microfinance, management accounting, and management information systems. This paper is part of his PhD research project on Partner–Agent Model-based microinsurance.

Esther K. Ishengoma

Esther K Ishengoma (PhD) is a senior lecturer at the University of Dar es Salaam Business School. Her published works in local and international peer-reviewed journals are in the areas of microfinance, linkages between formal and informal financial institutions, enterprise development and formalization, energy demand and mix at the household level.

Neema Mori

Neema Mori (PhD) is a senior lecturer at the University of Dar es Salaam Business School and a research fellow at the School of Business and law, University of Agder, Norway. She has published in local and international peer-reviewed journals in the areas of financial management, entrepreneurial finance, microfinance, and corporate governance.