How financial intermediation affects information asymmetry and the uptake of life insurance in marginalized communities in South Africa

Nwadeyi, Prince

How financial intermediation affects information asymmetry and the uptake of life insurance in marginalized communities in South Africa

Thesis / Dissertation

2023

Abstract

The study explores the impact of information asymmetry and intermediation on the uptake of life insurance in low-income communities in South Africa. The study was motivated by the significantly high penetration of funeral cover in low-income communities with a relatively low adoption of life insurance in these same communities. The literature highlights, in particular, the importance of intermediary incentives, intentions and motives, and how these contribute to the advancement of institutional work in dualistically structured markets. The main research question was, “How do intermediaries engage in institutional work to address information asymmetries in the uptake of life insurance in the South African low-income market?” The theoretical lens applied in this study is that of institutional work. To answer the research question, the researcher adopted a single instrumental case study methodology, specifically focusing on a medium-sized insurance company with a long history in South Africa. Semi-structured interviews based on a questionnaire were used to engage with relevant insurance personnel, intermediaries and consumers. The findings showed that information asymmetry persists because of intermediation and other consumer-specific dynamics which remain, owing to the absence of financial knowledge in low-income communities. The contribution of this thesis is the introduction of a model that has the potential to drive disintermediation and enable innovative access to life insurance in low-income communities in South Africa. The theoretical contribution of this study is to create awareness about the voids in dualistically structured markets, which result in information asymmetry partly as a result of the actions of intermediating actors who are dominant players in the insurance industry.

Keywords

Inclusive Innovation

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