Development and Sustainability of Emerging Health Insurance Markets: Evidence from Microinsurance in Pakistan

Abstract

Despite widespread interest in expanding insurance at the bottom of the economic pyramid, the viability of emerging microinsurance programmes is questioned because of their high loss ratios and doubts about their sustainability. The purpose of this research is to derive implications for the viable provision of products for emerging microinsurers by investigating the degree of sustainability of a micro health insurance programme in its early years of development. Using data from a micro health insurance programme in Pakistan, this paper analyses how claim rates evolve as households renew their policies and finds that households that have larger claims during the policy period are more likely to renew their policies for the next period. Although on the surface that pattern is consistent with adverse selection and decreasing sustainability, it was found instead that when compared with households buying the insurance for the first time, renewed households have significantly lower claim frequency and total claim amounts. Taken together, these results may suggest that there are forces affecting insurance demand for renewed households that may lead to an improved risk portfolio.

BETWEEN‐GROUP ADVERSE SELECTION: EVIDENCE FROM GROUP CRITICAL ILLNESS INSURANCE

“…First, the disappearance of risk–coverage correlation could be driven by risk quality changes or selections of the group. The covered individuals may drop their coverage in the subsequent period when their groups renew, due to death, dismissal from the group, or other reasons (Yao, ). We thus compare the reason for coverage drop‐offs between claimants (individuals filing a claim) and nonclaimants (individuals not filing a claim).…”

Developing of Micro Health Takaful of Affordable Monthly Payment for Poor Community in Malaysia

“…Although insurance covering health risk has been rank as one of the most needed by low-income individuals, in developing countries, the provision of health insurance to low-income individuals is still very limited because of the complexity of delivering healthcare in less developed areas (Yao, 2013). Recently, "microinsurance" products which reflect the efforts of non-profit organisations to find a way to provide insurance in the developing world become renowned.…”

“…However, sustainability matter is one of the main concerns to be observed. Based on data gathered on a micro health insurance programme in Pakistan, Yao (2013) analysed the trend of sustainability by measuring the development of claim experiences in renewal policies as they are only given only coverage option. The result showed that larger claims households during the policy period are more likely to renew their policy for the next period.…”

Through the pyramid: implications of interconnectedness in Africa

“…When presented with the opportunity, the middle-income consumers could have the propensity to take out additional insurance on behalf of low-income ones. Insurance has been notoriously difficult to sell to the poor (Yao, 2013), and generally products are informal and involve micro-insurance. Formal insurers have looked at within group social connections, rather than between groups, when designing products for the poor (see Biener and Eling, 2012 for example).…”