THE DETERMINANTS OF INSURANCE DEMAND FOR SMALL AND MEDIUM ENTERPRISES IN MBEYA CITY, TANZANIA

Abstract

This study examined the determinants of insurance demand for SME owners in Mbeya city, Tanzania. Specifically, the study assessed the influence of education, level of income and insurance charges on insurance demand. The study involved 92 randomly selected respondents and the descriptive design was applied. Overall, the results showed that only 44.6% of SME owners insured their businesses. The study also revealed that 30.5% of SME owners who insured their businesses terminated their insurance contracts because of bureaucracies in processing compensation claims, low payment and high insurance charges. The logistic regression analysis shows that the education and income level of SME owners positively and significantly influenced the insurance demand while the influence of insurance charges was not significant. This study recommends that the insurance companies should provide enough education to SME owners on the role of insurance and they should avoid bureaucracies when processing the insurance claims. The policy makers should set policies to guide the timely insurance processing, training on insurance matters and charging of affordable insurance rates. The study implies that the education of buyers and the customer care service are essential components of the demand theory.

Keywords: Determinants, Insurance Demand, SMEs, Logistic regression