The social dilemma of microinsurance: A framed field experiment on free-riding and coordination in microcredit groups

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This paper analyses free-riding and coordination problems in microinsurance. Authors model demand for health insurance in microcredit groups that typically share risk through joint liability as a social dilemma. Less risk averse clients are tempted to free-ride and forgo individual insurance while the more risk averse face a coordination problem. Group insurance binds both types to the social optimum. Microinsurance games played with microcredit clients in Tanzania confirm the free-riding hypothesis and demonstrate limited coordination failures under individual insurance. Group insurance increases demand in the games. These findings provide a potential solution for low uptake of microinsurance.

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Author: 

Wendy Janssens, Berber Kramer

Publisher: 

ILO

Number of pages: 

24

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