Abstract
This paper provides a comprehensive analysis of the insurability of risks in microinsurance markets. Our aim is to enhance the understanding of impediments to and facilitators of microinsurance from an economic perspective and outline potential solutions. The motivation for conducting this analysis arises from two important aspects. (1) Despite strong growth of microinsurance markets in recent years, more than 90 per cent of the poor population in developing countries have limited or no access to insurance. (2) Industry practitioners frequently highlight problems in the insurability of risks that hinder the development of microinsurance. We review 131 papers and find that the most severe problems stem from insufficient resources for risk evaluation, small size of insurance groups, information asymmetries and the size of the insurance premium. On the basis of the analysis, we discuss a number of potential solutions such as, for example, a cooperative microinsurance architecture.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Acharya, A. and Ranson, M.K. (2005) ‘Health care financing for the poor: Community-based health insurance schemes in Gujarat’, Economic and Political Weekly 40(38): 4141–4150.
Arena, M. (2008) ‘Does insurance market activity promote economic growth? A cross-country study for industrialized and developing countries’, Journal of Risk and Insurance 75(4): 921–946.
Asfaw, A. and Jutting, J.P. (2007) ‘The role of health insurance in poverty reduction: Empirical evidence from Senegal’, International Journal of Public Administration 30(8): 835–858.
Atim, C. (1999) ‘Social movements and health insurance: A critical evaluation of voluntary, non-profit insurance schemes with case studies from Ghana and Cameroon’, Social Science & Medicine 48(7): 881–896.
Auray, J.P. and Fonteneau, R. (2002) ‘Local consensus and estimates of medical risk’, in D.M. Dror and A.S. Preker (eds.) Social Reinsurance: A New Approach to Sustainable Community Health Financing, Washington, DC: World Bank, pp. 187–201.
Ayorinde, R.O. (2001) ‘Insurance-fund investment regulation in Nigeria’, Journal of Insurance Regulation 20(2): 195–206.
Barnett, B.J., Barrett, C.B. and Skees, J.R. (2008) ‘Poverty traps and index-based risk transfer products’, World Development 36(10): 1766–1785.
Barnett, B.J. and Mahul, O. (2007) ‘Weather index insurance for agriculture and rural areas in lower-income countries’, American Journal of Agricultural Economics 89(5): 1241–1247.
Bennett, S. (2004) ‘The role of community-based health insurance within the health care financing system: A framework for analysis’, Health Policy and Planning 19(3): 147–158.
Berliner, B. (1982) Limits of Insurability of Risks, Englewood Cliffs, NJ: Prentice-Hall.
Biener, C. and Eling, M. (2011) ‘The performance of microinsurance programs: A data envelopment analysis’, Journal of Risk and Insurance 78(1): 83–115.
Bonnevay, S., Dror, D.M., Duru, G. and Lamure, M. (2002) ‘A model of microin-surance and reinsurance’, in D.M. Dror and A.S. Preker (eds.) Social Reinsurance: A New Approach to Sustainable Community Health Financing, Washington, DC: World Bank, pp. 153–186.
Bryant, J. and Prohmmo, A. (2002) ‘Equal contributions and unequal risks in a North-East Thai village funeral society’, Journal of Development Studies 38(3): 63–75.
Carrin, G. (2002) ‘Social health insurance in developing countries: A continuing challenge’, International Social Security Review 55(2): 57–69.
Carrin, G., Waelkens, M.-P. and Criel, B. (2005) ‘Community-based health insurance in developing countries: A study of its contribution to the performance of health financing systems’, Tropical Medicine & International Health 10(8): 799–811.
Chankova, S., Sulzbach, S. and Diop, F. (2008) ‘Impact of mutual health organizations: Evidence from West Africa’, Health Policy and Planning 23(4): 264–276.
Chantarat, S., Barrett, C.B., Mude, A.G. and Turvey, C.G. (2007) ‘Using weather index insurance to improve drought response for famine prevention’, American Journal of Agricultural Economics 89(5): 1262–1268.
Charpentier, A. (2008) ‘Insurability of climate risks’, The Geneva Papers on Risk and Insurance—Issues and Practice 33(1): 91–109.
Churchill, C. (2002) ‘Trying to understand the demand for microinsurance’, Journal of International Development 14(3): 381–387.
Churchill, C. (2007) ‘Insuring the low-income market: Challenges and solutions for commercial insurers’, The Geneva Papers on Risk and Insurance—Issues and Practice 32(3): 401–412.
Churchill, C., Liber, D., McCord, M.J. and Roth, J. (2003) Making Insurance Work for Microfinance Institutions: A Technical Guide to Developing and Delivering Microinsurance, Geneva: International Labour Organization.
Cohen, M., McCord, M.J. and Sebstad, J. (2005) ‘Reducing vulnerability: Demand for and supply of microinsurance in East Africa’, Journal of International Development 17(3): 319–325.
Cohen, M. and Sebstad, J. (2005) ‘Reducing vulnerability: The demand for microinsurance’, Journal of International Development 17(3): 397–474.
Criel, B., van der Stuyft, P. and van Lerberghe, W. (1999) ‘The Bwamanda hospital insurance scheme: Effective for whom? A study of its impact on hospital utilization patterns’, Social Science & Medicine 48(7): 897–911.
Criel, B. and Waelkens, M.P. (2003) ‘Declining subscriptions to the Maliando mutual health organisation in Guinea-Conakry (West Africa): What is going wrong?’ Social Science & Medicine 57(7): 1205–1219.
de Allegri, M., Sanon, M., Bridges, J. and Sauerborn, R. (2006) ‘Understanding consumers’ preferences and decision to enrol in community-based health insurance in rural West Africa’, Health Policy 76(1): 58–71.
Dekker, M. and Wilms, A. (2010) ‘Health insurance and other risk-coping strategies in Uganda: The case of Microcare Insurance Ltd’, World Development 38(3): 369–378.
Dercon, S., Weerdt, J.de, Bold, T. and Pankhurst, A. (2006) ‘Group-based funeral insurance in Ethiopia and Tanzania’, World Development 34(4): 685–703.
Desmet, M., Chowdhury, A.Q. and Islam, M.K. (1999) ‘The potential for social mobilisation in Bangladesh: The organisation and functioning of two health insurance schemes’, Social Science & Medicine 48(7): 925–938.
Devadasan, N., Criel, B., van Damme, W., Ranson, K. and van der Stuyft, P. (2007) ‘Indian community health insurance schemes provide partial protection against catastrophic health expenditure’, BMC Health Services Research 7(43): 1–11.
Devadasan, N., Manoharan, S., Menon, N., Menon, S., Thekaekara, M. and Thekaekara, S. (2004a) ‘ACCORD community health insurance: Increasing access to hospital care’, Economic and Political Weekly 39(28): 3189–3194.
Devadasan, N., Ranson, K., van Damme, W., Acharya, A. and Criel, B. (2006) ‘The landscape of community health insurance in India: An overview based on 10 case studies’, Health Policy 78(2–3): 224–234.
Devadasan, N., Ranson, K., van Damme, W. and Criel, B. (2004b) ‘Community health insurance in India: An overview’, Economic and Political Weekly 39(28): 3179–3183.
Dlugolecki, A. (2008) ‘Climate change and the insurance sector’, The Geneva Papers on Risk and Insurance—Issues and Practice 33(1): 71–90.
Doherty, N.A. (1991) ‘The design of insurance contracts when liability rules are unstable’, Journal of Risk and Insurance 58(2): 227–246.
Dong, H., Bogg, L., Wang, K., Rehnberg, C. and Diwan, V. (1999) ‘A description of outpatient drug use in rural China: Evidence of differences due to insurance coverage’, International Journal of Health Planning and Management 14(1): 41–56.
Dong, H., Mugisha, F., Gbangou, A., Kouyate, B. and Sauerborn, R. (2004) ‘The feasibility of community-based health insurance in Burkina Faso’, Health Policy 69(1): 45–53.
Drechsler, D. and Jutting, J.P. (2007) ‘Different countries, different needs: The role of private health insurance in developing countries’, Journal of Health Politics, Policy and Law 32(3): 497–534.
Dror, D.M. (2001) ‘Reinsurance of health insurance for the informal sector’, Bulletin of the World Health Organization 79(7): 672–678.
Dror, D.M. and Armstrong, J. (2006) ‘Do micro health insurance units need capital or reinsurance? A simulated exercise to examine different alternatives’, The Geneva Papers on Risk and Insurance—Issues and Practice 31(4): 739–761.
Dror, D.M. and Jacquier, C. (1999) ‘Micro-insurance: Extending health insurance to the excluded’, International Social Security Review 52(1): 71–97.
Dror, D.M., Koren, R., Ost, A., Binnendijk, E., Vellakkal, S. and Danis, M. (2007) ‘Health insurance benefit packages prioritized by low-income clients in India: Three criteria to estimate effectiveness of choice’, Social Science & Medicine 64(4): 884–896.
Dror, D.M., Radermacher, R., Khadilkar, S.B., Schout, P., Hay, F.X., Singh, A. and Koren, R. (2009a) ‘Microinsurance: Innovations in low-cost health insurance’, Health Affairs 28(6): 1788–1798.
Dror, D.M., Soriano, E.S., Lorenzo, M.E., Sarol, J.J.N., Azcuna, R.S. and Koren, R. (2005) ‘Field based evidence of enhanced healthcare utilization among persons insured by micro health insurance units in Philippines’, Health Policy 73(3): 263–271.
Dror, D.M., van Putten-Rademaker, O. and Koren, R. (2008) ‘Cost of illness: Evidence from a study in five resource-poor locations in India’, Indian Journal of Medical Research 127(4): 347–361.
Dror, D.M., van Putten-Rademaker, O. and Koren, R. (2009b) ‘Incidence of illness among resource-poor households: Evidence from five locations in India’, Indian Journal of Medical Research 130(2): 146–154.
Ekman, B. (2004) ‘Community-based health insurance in low-income countries: A systematic review of the evidence’, Health Policy and Planning 19(5): 249–270.
Ekman, B. (2007) ‘Catastrophic health payments and health insurance: Some counterintuitive evidence from one low-income country’, Health Policy 83(2–3): 304–313.
Ensor, T. (1999) ‘Developing health insurance in transitional Asia’, Social Science & Medicine 48: 871–879.
Faure, M.G. (2006) ‘Economic criteria for compulsory insurance’, The Geneva Papers on Risk and Insurance—Issues and Practice 31(1): 149–168.
Francisco, H.A. (2008) ‘Adaptation to climate change: Needs and opportunities in Southeast Asia’, ASEAN Economic Bulletin 25(1): 7–19.
Giesbert, L., Steiner, S. and Bendig, M. (2011) ‘Participation in micro life insurance and the use of other financial services in Ghana’, Journal of Risk and Insurance 78(1): 7–35.
Giné, X., Townsend, R. and Vickery, J. (2007) ‘Statistical analysis of rainfall insurance payouts in Southern India’, American Journal of Agricultural Economics 89(5): 1248–1254.
Hamid, S.A., Roberts, J. and Mosley, P. (2011) ‘Can micro health insurance reduce poverty? Evidence from Bangladesh’, Journal of Risk and Insurance 78(1): 57–82.
Herweijer, C., Ranger, N. and Ward, R.E.T. (2009) ‘Adaptation to climate change: Threats and opportunities for the insurance industry’, The Geneva Papers on Risk and Insurance—Issues and Practice 34(3): 360–380.
Ito, S. and Kono, H. (2010) ‘Why is the take-up of microinsurance so low? Evidence from a health insurance scheme in India’, Developing Economies 48(1): 74–101.
Jaffee, D.M. and Russell, T. (1997) ‘Catastrophe insurance, capital markets, and uninsurable risks’, Journal of Risk and Insurance 64(2): 205–230.
Janssen, J. (2000) ‘Implementing the Kyoto mechanisms: Potential contributions by banks and insurance companies’, The Geneva Papers on Risk and Insurance—Issues and Practice 25(4): 602–618.
Jowett, M., Contoyannis, P. and Vinh, N.D. (2003) ‘The impact of public voluntary health insurance on private health expenditures in Vietnam’, Social Science & Medicine 56(2): 333–342.
Jowett, M., Deolalikar, A. and Martinsson, P. (2004) ‘Health insurance and treatment seeking behaviour: Evidence from a low-income country’, Health Economics 13(9): 845–857.
Jutting, J.P. (2004) ‘Do community-based health insurance schemes improve poor people’s access to health care? Evidence from rural Senegal’, World Development 32(2): 273–288.
Karten, W.T. (1997) ‘How to expand the limits of insurability’, The Geneva Papers on Risk and Insurance—Issues and Practice 22(4): 515–522.
Kiwara, A.D. (2007) ‘Group premiums in micro health insurance experiences from Tanzania’, East African Journal of Public Health 4(1): 28–32.
Kunreuther, H. and Michel-Kerjan, E. (2004) Insurability of (Mega)-Terrorism Risk: Challenges and Perspectives, Report prepared for the OECD Task Force on Terrorism Insurance, Paris.
La Concertation (2010) from: www.social-protection.org /gimi/gess/showtheme.do?tid=2445, accessed 15 October 2010.
Latortue, A. (2006) ‘The role of donors’, in C. Churchill (ed.) Protecting the Poor: A Microinsurance Compendium, Geneva: International Labour Organization, pp. 470–487.
Levin, T. and Reinhard, D. (2007) Microinsurance Aspects in Agriculture, Munich Re Foundation Discussion Paper, Munich.
Linnerooth-Bayer, J. and Amendola, A. (2000) ‘Global change, natural disasters and loss-sharing: Issues of efficiency and equity’, The Geneva Papers on Risk and Insurance—Issues and Practice 25(2): 203–219.
Linnerooth-Bayer, J. and Mechler, R. (2006) ‘Insurance for assisting adaptation to climate change in developing countries: A proposed strategy’, Climate Policy 6(6): 621–636.
Linnerooth-Bayer, J., Mechler, R. and Pflug, G. (2005) ‘Refocusing disaster aid’, Science 309(5737): 1044–1046.
Linnerooth-Bayer, J., Warner, K., Bals, C., Hoppe, P., Burton, I., Loster, T. and Haas, A. (2009) ‘Insurance, developing countries and climate change’, The Geneva Papers on Risk and Insurance—Issues and Practice 34(3): 381–400.
Llanto, G.M. (2007) ‘Policy and regulatory issues and challenges in microinsurance: A Philippine case’, Philippine Journal of Development 34(1): 61–86.
Lloyd’s and Microinsurance Centre (2009) Insurance in Developing Countries: Exploring Opportunities in Microinsurance, 360° Risk Insight Report, London.
Mariti, P. and Smiley, R.H. (1983) ‘Co-operative agreements and the organization of industry’, Journal of Industrial Economics 31(4): 437–451.
McCord, M.J. (2001) ‘Health care microinsurance—Case studies from Uganda, Tanzania, India and Cambodia’, Small Enterprise Development 12(1): 25–38.
McCord, M.J. (2007) ‘Supplying health microinsurance: Lessons from East Africa’, International Journal of Public Administration 30(8–9): 737–764.
McCord, M.J. and Osinde, S. (2005) ‘Reducing vulnerability: The supply of health microinsurance in East Africa’, Journal of International Development 17(3): 327–381.
Meze-Hausken, E., Patt, A. and Fritz, S. (2009) ‘Reducing climate risk for micro-insurance providers in Africa: A case study of Ethiopia’, Global Environmental Change 19(1): 66–73.
Mills, E. (2005) ‘Insurance in a climate of change’, Science 309(5737): 1040–1044.
Miranda, M.J. and Glauber, J.W. (1997) ‘Systematic risk, reinsurance, and the failure of crop insurance markets’, American Journal of Agricultural Economics 79(1): 206–215.
Mladovsky, P. and Mossialos, E. (2008) ‘A conceptual framework for community-based health insurance in low-income countries: Social capital and economic development’, World Development 36(4): 590–607.
Morduch, J. (2006) ‘Microinsurance: The next revolution?’, in A.V. Banerjee, R. Bénabou and D. Mookherjee (eds.) Understanding Poverty, New York: Oxford University Press, pp. 337–355.
Msuya, J.M., Jutting, J.P. and Asfaw, A. (2007) ‘Impact of community health funds on the access to health care: Empirical evidence from rural Tanzania’, International Journal of Public Administration 30(8): 813–833.
Murgai, R., Winters, P., Sadoulet, E. and Janvry, A.de (2002) ‘Localized and incomplete mutual insurance’, Journal of Development Economics 67(2): 245–274.
Nierhaus, F. (1986) ‘A strategic approach to insurability of risks’, The Geneva Papers on Risk and Insurance—Issues and Practice 11(2): 83–90.
Nyman, J.A. (1999) ‘The value of health insurance: The access motive’, Journal of Health Economics 18(2): 141–152.
Obermann, K., Jowett, M.R., Alcantara, M.O.O., Banzon, E.P. and Bodart, C. (2006) ‘Social health insurance in a developing country: The case of the Philippines’, Social Science & Medicine 62(12): 3177–3185.
Pannarunothai, S., Patmasiriwat, D. and Srithamrongsawat, S. (2004) ‘Universal health coverage in Thailand: Ideas for reform and policy struggling’, Health Policy 68(1): 17–30.
Pannarunothai, S., Srithamrongsawat, S., Kongpan, M. and Patchanee, T. (2000) ‘Financing reforms for the Thai health card scheme’, Health Policy and Planning 15(3): 303–311.
Patt, A., Suarez, P. and Hess, U. (2010) ‘How do small-holder farmers understand insurance, and how much do they want it? Evidence from Africa’, Global Environmental Change 20(1): 153–161.
Pauly, M.V. (2008) ‘The evolution of health insurance in India and China’, Health Affairs 11(4): 1016–1019.
Pauly, M.V., Zweifel, P., Scheffler, R.M., Preker, A.S. and Bassett, M. (2006) ‘Private health insurance in developing countries’, Health Affairs 25(2): 369–379.
Poletti, T., Balabanova, D., Ghazaryan, O., Kocharyan, H., Hakobyan, M., Arakelyan, K. and Normand, C. (2007) ‘The desirability and feasibility of scaling up community health insurance in low-income settings—Lessons from Armenia’, Social Science & Medicine 64(3): 509–520.
Polonsky, J., Balabanova, D., McPake, B., Poletti, T., Vyas, S., Ghazaryan, O. and Yanni, M.K. (2009) ‘Equity in community health insurance schemes: Evidence and lessons from Armenia’, Health Policy and Planning 24(3): 209–216.
Radermacher, R., Ashok, S., Zabel, K. and Dror, I. (2009) What do we know about the impact of microinsurance, paper presented at the Microinsurance Conference 2009, New Delhi.
Ranson, M.K. and John, K.R. (2002) ‘Quality of hysterectomy care in rural Gujarat: The role of community-based health insurance’, Reproductive Health Matters 10(20): 70–81.
Ranson, M.K., Sinha, T., Chatterjee, M., Acharya, A., Bhavsar, A., Morris, S.S. and Mills, A.J. (2006) ‘Making health insurance work for the poor: Learning from the self-employed women’s association’s (SEWA) community-based health insurance scheme in India’, Social Science & Medicine 62(3): 707–720.
Ranson, M.K., Sinha, T., Chatterjee, M., Gandhi, F., Jayswal, R., Patel, F., Morris, S.S. and Mills, A.J. (2007) ‘Equitable utilisation of Indian community based health insurance scheme among its rural membership: Cluster randomised controlled trial’, British Medical Journal 334(7607): 1–9.
Roth, J., McCord, M.J. and Liber, D. (2007) The Landscape of Microinsurance in the World’s 100 Poorest Countries, Report of the Microinsurance Centre, Appleton.
Sapelli, C. and Vial, B. (2003) ‘Self-selection and moral hazard in Chilean health insurance’, Journal of Health Economics 22(3): 459–476.
Schmit, J.T. (1986) ‘A new view of the requisites of insurability’, The Journal of Risk and Insurance 53(2): 320–329.
Schneider, P. (2005) ‘Trust in micro-health insurance: An exploratory study in Rwanda’, Social Science & Medicine 61(7): 1430–1438.
Schneider, P. and Hanson, K. (2006) ‘Horizontal equity in utilisation of care and fairness of health financing: A comparison of micro-health insurance and user fees in Rwanda’, Health Economics 15(1): 19–31.
Schneider, P. and Hanson, K. (2007) ‘The impact of micro health insurance on Rwandan health centre costs’, Health Policy and Planning 22(1): 40–48.
Sepehri, A., Sarma, S. and Simpson, W. (2006) ‘Does non-profit health insurance reduce financial burden? Evidence from the Vietnam living standards survey panel’, Health Economics 15(6): 603–616.
Shapira, Z. and Venezia, I. (1999) ‘Experimental tests of self-selection and screening in insurance decisions’, The Geneva Papers on Risk and Insurance Theory 24(2): 139–158.
Sinha, T., Ranson, M.K., Chatterjee, M., Acharya, A. and Mills, A.J. (2006) ‘Barriers to accessing benefits in a community-based insurance scheme: Lessons learnt from SEWA insurance’, Health Policy and Planning 21(2): 132–142.
Sinha, T., Ranson, M.K. and Mills, A.J. (2007) ‘Protecting the poor? The distributional impact of a bundled insurance scheme’, World Development 35(8): 1404–1421.
Smolka, A. (2006) ‘Natural disasters and the challenge of extreme events: Risk management from an insurance perspective’, Philosophical Transactions: Mathematical, Physical and Engineering Sciences 364(1845): 2147–2165.
Supakankunti, S. (2000) ‘Future prospects of voluntary health insurance in Thailand’, Health Policy and Planning 15(1): 85–94.
Torkestani, M.S. and Ahadi, P. (2008) ‘Readiness assessment of Islamic microfinance institution to implement micro-insurance concept (case of Iran)’, International Journal of Islamic and Middle Eastern Finance and Management 1(3): 249–261.
Vate, M. and Dror, D.M. (2002) ‘To insure or not to insure? Reflections on the limits of insurability’, in D.M. Dror and A.S. Preker (eds.) Social Reinsurance: A New Approach to Sustainable Community Health Financing, Washington, DC: World Bank, pp. 125–148.
Vermaat, A.J. (1995) ‘Uninsurability: A growing problem’, The Geneva Papers on Risk and Insurance—Issues and Practice 20(4): 446–453.
Wagstaff, A. and Lindelow, M. (2008) ‘Can insurance increase financial risk? The curious case of health insurance in China’, Journal of Health Economics 27(4): 990–1005.
Wagstaff, A., Lindelow, M., Jun, G., Ling, X. and Juncheng, Q. (2009) ‘Extending health insurance to the rural population: An impact evaluation of China’s new cooperative medical scheme’, Journal of Health Economics 28(1): 1–19.
Wang, H., Zhang, L., Yip, W. and Hsiao, W. (2006) ‘Adverse selection in a voluntary rural mutual health care health insurance scheme in China’, Social Science & Medicine 63(5): 1236–1245.
Wiesmann, D. and Jutting, J.P. (2000) ‘The emerging movement of community based health insurance in Sub-Saharan Africa’, Africa Spectrum 35(2): 193–210.
Wiesmann, D. and Jutting, J.P. (2001) ‘Determinants of viable health insurance schemes in rural Sub-Saharan Africa’, Quarterly Journal of International Agriculture 40(4): 361–378.
Williamson, O.E. (1975) Markets and Hierarchies: Analysis and Antitrust Implications, New York: Free Press.
World Food Programme (2006) ‘World’s First Humanitarian Insurance Policy Issued’, from: http://www.wfp.org /node/598, accessed 11 October 2010.
Yanli, Z. (2009) ‘An introduction to the development and regulation of agricultural insurance in China’, The Geneva Papers on Risk and Insurance—Issues and Practice 34(1): 78–84.
Zhang, L., Wang, H., Wang, L. and Hsiao, W. (2006) ‘Social capital and farmer’s willingness-to-join a newly established community-based health insurance in rural China’, Health Policy 76(2): 233–242.
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Copyright information
© 2016 The International Association for the Study of Insurance Economics
About this chapter
Cite this chapter
Biener, C., Eling, M. (2016). Insurability in Microinsurance Markets: An Analysis of Problems and Potential Solutions. In: Courbage, C. (eds) The Geneva Papers. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-137-57479-4_8
Download citation
DOI: https://doi.org/10.1007/978-1-137-57479-4_8
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-57556-5
Online ISBN: 978-1-137-57479-4
eBook Packages: HistoryHistory (R0)