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Value-added Services in Health Microinsurance

Pott; John, Jeanna Holtz, Research Paper n°19, International Labour Organization, January 2012

A number of health microinsurance (HMI) practitioners, primarily in the Indian subcontinent, have begun to experiment with offering value-added services (VAS), services provided by HMI schemes to enhance the appeal of a basic health insurance product to low-income families.

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  This research paper explores what value-services can be added to HMI to increase sales and achieve an improved claims experience, adequate enough to offset the incremental costs of the VAS.

The findings of this report are that HMI practitioners, driven by both bottom line and social considerations, offer VAS to enhance a basic product (generally a hospitalisation product) by adding an element of outpatient (OP) care, limited in either scope or access. In several instances, VAS are supported by technology to keep costs down. 

Protection of the Microinsurance Consumer: Confronting the Impact of Poverty on Contractual Relationship

Camargo; Andrea, Research Paper n°27, International Labour Organization, December 2012

This paper provides a legal analysis of the contractual vulnerability of the microinsurance consumer and in so doing, studies mechanisms that effectively protect such a consumer.

The microinsurance consumer is in a particularly vulnerable contractual position as consequence of his or her “poverty”. Owing to “poverty”, the microinsurance consumer typically lacks the essential capabilities required to provide free and informed consent to enter into, to perform and to demand the performance of the insurance contract and to complain and seek remedies in appropriate forums. Accordingly, the microinsurance consumer may not be able to benefit from the insurance contract and microinsurance may have limited utility. Consumer protection is essential to address this discrepancy. Consumer protection should be based on a legal framework and should place obligations on States and insurers, reinsurers and intermediaries who participate in the value chain of microinsurance.

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

Janssens; Wendy, Berber Kramer, December 2012, Tinbergen Institute Discussion Paper 12-145/V 

This paper analyses free-riding and coordination problems in microinsurance. The proposition is that the demand for insurance suffers from a social dilemma when formal insurance is introduced in existing risk-sharing networks. Less risk averse individuals offering welfare-improving insurance are tempted to free-ride on the enrolment of their network members while the more risk averse may fail to coordinate. This results in suboptimal demand. Group insurance binds both types to the social optimum. A framed laboratory experiment in Tanzania elicits demand for group versus individual insurance among microcredit clients who typically share risk through joint liability. The experiment demonstrates substantial free-riding but only limited coordination failures. These findings extend the literature on strategic decisions in the presence of a public good and provide a potential explanation for the low take-up of microinsurance.

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Health Emergencies: How do the Poor Pay?

Bhat; Sunil, Ritika Srivastava, MicroSave, India Focus, Note 93

How do the poor in India deal with medical emergencies? MicroSave’s India Focus Note 93 describes how low-income families in India deal with medical emergencies in the absence of quality public health care facilities. It advocates health insurance as an affordable alternative for low-income families.

Poor people in India cope with medical emergencies by using savings, loans from various sources, and by pawning or selling assets. The expenditure to meet a major health shock often pushes low-income families into distress. In such a scenario, the Note advocates government sponsored health insurance programmes or cooperative health insurance schemes that are affordable alternatives for low income families. It states that such subsidized, gender-neutral programmes:

  • Provide benefits such as claims reimbursement, free hospitalization, free or low cost surgeries, and network hospitals;
  • Are new to the low-income population;
  • Have had poor penetration due to various reasons such as inappropriate products, lack of insurance awareness, and limited trust in insurance agents and companies;
  • Face challenges of sustainability;
  • Must be designed to suit poor people’s needs if they are to reach significant scale.

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