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The Social Dilemma of Microinsurance: A Framed Field Experiment on Free-Riding and Coordination

Author

Listed:
  • Wendy Janssens

    (VU University Amsterdam)

  • Berber Kramer

    (VU University Amsterdam)

Abstract

Health shocks are among the most important unprotected risks for microfinance clients, but the take-up of micro health insurance typically remains limited. This paper attributes low enrolment rates to a social dilemma. Our theory is that in jointly liable groups, insurance is a public good. Clients can rely on contributions from group members to cope with shocks. Less risk averse clients have a private incentive to free-ride and forgo individual insurance even when insurance optimises group welfare. The binding nature of group insurance eliminates such free-riding. A framed public goods experiment with microcredit groups in Tanzania, eliciting demand for group versus individual microinsurance, yields substantial support for this hypothesis. This provides a potential explanation for low take-up rates.

Suggested Citation

  • Wendy Janssens & Berber Kramer, 2012. "The Social Dilemma of Microinsurance: A Framed Field Experiment on Free-Riding and Coordination," Tinbergen Institute Discussion Papers 12-145/V, Tinbergen Institute, revised 23 Jan 2014.
    • Handle: RePEc:tin:wpaper:20120145
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    Cited by:

    1. Clara Delavallade, 2014. "Quality Healthcare and Health Insurance Retention: Evidence from a Randomized Experiment in the Kolkata Slums," Working Papers id:5916, eSocialSciences.
    2. Czura, Kristina & Dequiedt, Vianney, 2015. "Willingness-to-pay for microinsurance and flexibility: Evidence from an agricultural investment lab-in-the-field experiment in Senegal," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112993, Verein für Socialpolitik / German Economic Association.

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    More about this item

    Keywords

    Health insurance; microfinance; risk-sharing; public goods experiment;
    All these keywords.

    JEL classification:

    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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