Actuarial Evaluation of Microinsurance Products for Low-Income Populations in Kaduna State

This study provides an actuarial evaluation of microinsurance product design and financial viability for low-income populations in Kaduna State, North West Nigeria. Microinsurance, which provides simplified and low-cost risk protection to underserved communities, has been identified as a priority tool for extending insurance coverage to Nigeria's large informal sector population. However, product design errors, premium inadequacy, and high administrative cost ratios have undermined the sustainability of several microinsurance initiatives in Nigeria. This study adopts a mixed-method design, analyzing the product terms, premium rates, and claims experience of three active microinsurance schemes in Kaduna State alongside primary survey data from 160 low-income policyholders and scheme administrators. Actuarial sustainability is assessed using loss ratio, expense ratio, and combined ratio analysis. Product adequacy is evaluated against actual claims experience for life, health, and agriculture microinsurance covers. Findings reveal that life microinsurance products are broadly financially sustainable, while health and agriculture products show combined ratios exceeding 120 percent, indicating premium inadequacy. Basis risk in agricultural index products was identified as a major policyholder dissatisfaction driver. The study concludes that microinsurance in Kaduna State requires more rigorous actuarial product development and regular experience monitoring to achieve sustainability. It recommends that insurers engage local actuaries in product design and establish community-based distribution models to reduce administrative costs.

Keywords: microinsurance, low-income populations, Kaduna State, premium adequacy, product design.