Be Happy, Be Loyal? Exploring Drivers for Renewal of Mobile-Delivered Index Insurance

Abstract

Agricultural microinsurance is a promising risk management tool for smallholder farmers. However, adoption rates remain low and only a small share of farmers renew their policy after the first period. With the increasing availability of cell phones, mobile-delivered insurance is gaining importance on the market. As for any agricultural microinsurance, it is essential for the longevity of a mobile-delivered insurance scheme to retain a solid customer base. To date, it is unknown what drives the decision to renew a mobile-delivered agricultural microinsurance policy. We address this question by performing mean comparisons and logistic regressions based on primary data collected from 479 smallholder farmers in Mali who purchased a mobile-delivered weather index-based insurance in 2020. Results show that the level of satisfaction with the insurance product was considerably higher among farmers who renewed. We found low levels of understanding of the product among all clients, but especially among those who did not renew. Both factors were confirmed as drivers for renewal. Consistent with previous findings, receiving a payout had the strongest effect on the decision to renew. We conclude that additional measures to foster client satisfaction as well as to promote understanding of agricultural insurance among smallholder farmers are highly recommended.