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The Demand for (Micro) Health Insurance in the Informal Sector

Dror; David M, Lucy A Firth, The Geneva Paper on Risk and Insurance, July 16, 2014

This article identifies the need for a theory of demand for health insurance suited to the informal sector in low and middle income countries (LMIC) where some 3 billion people lack health cover. Excluded from formal governance structures, they rely on informal arrangements by which rules-in-use shape choices, behaviours and decisions. In the analysis, the fundamental assumptions of standard economic theories of demand for health insurance are explored in the light of arguments from the literature and field evidence. It is underlined that the assumptions are largely inconsistent with the context of poverty and informality. A new theory based on assumptions is better suited to the context of informality and poverty. This publication concludes that in order to grow the demand for health insurance in the informal sector in LMIC, it is first necessary to strengthen ground-up governance consistent with group-based decision-making under local conditions.

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