A Behavioral Economic Analysis of Demand for Health Insurance in Nigeria

Health insurance coverage remains critically low in developing economies, with Nigerias National Health Insurance Scheme covering only 5% of the population. Understanding consumer demand patterns is essential for designing effective insurance policies, yet limited research has applied behavioral economic frameworks to health insurance decision-making in developing contexts. This mixed-methods study investigated factors influencing health insurance demand in Nigeria using behavioral economic principles, examining the effects of market structure (open vs. closed economy), demographic characteristics, and price sensitivity patterns on insurance purchasing decisions. Study 1 employed a hypothetical purchase task with 76 Nigerian participants randomly assigned to open- or closed-economy conditions, measuring willingness to purchase health insurance at 15 price points (5-560000). Exponential demand curves were fitted using a modified exponential demand model to assess demand intensity (Q0) and price sensitivity (). Study 2 involved focus group discussions with 5 participants who completed the purchase task, exploring decision-making processes through thematic analysis. The exponential demand model demonstrated strong predictive validity (median R2 = 0.87, IQR = 0.81-0.92) across demographic subgroups. Contrary to theoretical expectations, no significant differences emerged between open and closed economy conditions (p > 0.05). Age, income, gender, and current insurance status were significantly associated with demand parameters. Younger participants showed higher demand intensity but greater price sensitivity, while low-income participants demonstrated higher demand intensity (Q0 = 91.37) than high-income participants (Q0 = 74.29). Qualitative findings revealed "reverse price sensitivity," where participants rejected very low-priced options due to quality concerns, and identified a potential pricing corridor of 3,000-17,500 ($2-$12 USD) balancing affordability with quality signaling. Behavioral economic models may effectively characterize health insurance demand patterns in Nigeria, revealing complex price-quality relationships that challenge traditional economic assumptions. The null finding for market structure effects suggests that existing healthcare alternatives and institutional distrust may override theoretical market distinctions. Results support targeted subsidies for younger and lower-income populations and highlight the importance of pricing strategies that signal quality while maintaining affordability.