Understanding and Information Failures: Lessons from a Health Microinsurance Program in India
This paper is an attempt to understand the factors underlying the low take up and contract renewal rates frequently observed in insurance programs in poor countries. This is done on the basis of the experience of a microinsurance health program in India. We show that deficient information about the insurance product and the functioning of the scheme, poor understanding of the insurance concept, and the resulting low use of the insurance products by eligible households are the major causes of the low contract renewal rate among the households which has previously enrolled into the program. A particularly interesting finding is that, when a household has received a negative payout during the preceding year (the cost of the premium has exceeded the insurance benefits), it is more inclined to renew its participation if it has a better understanding of what insurance exactly means (a redistribution between lucky and unlucky individuals). Such a finding strongly suggests that the understanding failure is a key problem in attempts to provide insurance to poor people, and this problem is obviously more difficult to overcome than the largely supply-driven information failure. That economists have neglected the role of the understanding failure is apparent from the lack of attention to this aspect in recent theories aimed at improving our knowledge of human behavior toward risk. Another central, policy-relevant finding of the study is that participation in previously constituted self-help groups has the effect of enhancing both the insurance take up and contract renewal rates. This points to the essential role of non-governmental organizations that operate at the grassroots level.
|Date of creation:||Jan 2013|
|Date of revision:|
|Contact details of provider:|| Postal: Rempart de la Vierge 8, B-5000 Namur|
Web page: http://www.fundp.ac.be/en/eco
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dong, Hengjin & De Allegri, Manuela & Gnawali, Devendra & Souares, Aurélia & Sauerborn, Rainer, 2009. "Drop-out analysis of community-based health insurance membership at Nouna, Burkina Faso," Health Policy, Elsevier, vol. 92(2-3), pages 174-179, October.
- Amos Tversky & Daniel Kahneman, 1979.
"Prospect Theory: An Analysis of Decision under Risk,"
Levine's Working Paper Archive
7656, David K. Levine.
- Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
- repec:taf:jnlbes:v:30:y:2012:i:1:p:67-80 is not listed on IDEAS
- Loomes, Graham & Sugden, Robert, 1982. "Regret Theory: An Alternative Theory of Rational Choice under Uncertainty," Economic Journal, Royal Economic Society, vol. 92(368), pages 805-24, December.
- Gabler, Siegfried & Laisney, Francois & Lechner, Michael, 1993. "Seminonparametric Estimation of Binary-Choice Models with an Application to Labor-Force Participation," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(1), pages 61-80, January.
- Jean-Philippe Platteau, 1997. "Mutual insurance as an elusive concept in traditional rural communities," Journal of Development Studies, Taylor & Francis Journals, vol. 33(6), pages 764-796.
- Basaza, Robert & Criel, Bart & Van der Stuyft, Patrick, 2008. "Community health insurance in Uganda: Why does enrolment remain low? A view from beneath," Health Policy, Elsevier, vol. 87(2), pages 172-184, August.
- Daniel Ellsberg, 2000. "Risk, Ambiguity and the Savage Axioms," Levine's Working Paper Archive 7605, David K. Levine.
When requesting a correction, please mention this item's handle: RePEc:nam:wpaper:1301. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marie-Helene Mathieu)
If references are entirely missing, you can add them using this form.