Factoring Affecting the Demand for Health Insurance in a Microinsurance Scheme

This paper analyzes factors determining the demand for private health insurance in a microinsurance scheme setting.

The study uses a two-stage model that determines the factors that influence:

• Insurance purchase decisions,
• The amount of insurance purchasing.

The data of this study is based on the survey and collection of primary data from the health insurance scheme of ‘Charotar Arogya Mandal’ in Anand district in Gujarat, India.

The paper presents the following study findings:

• Income and health care expenditure are significant determinants of health insurance purchase,
• Age, coverage of illness and knowledge about insurance also affect health insurance purchase decisions positively,
• Income has a significant but non-linear relationship with decisions regarding the amount of health insurance purchase,
• Also significant are the number of children in the family, age and perception regarding future healthcare expenditure.

The paper concludes by discussing the following policy implications of the study:

• Health insurance companies need to educate people about health insurance and its benefits,
• Policy makers and regulators with a development role should involve themselves in building awareness about microinsurance products,
• There is a need for interventions that ensure the participation of poor people in microinsurance schemes,
• Microinsurance schemes need to tackle adverse selection by segmenting customers into risk categories,
• Microinsurance schemes need professional financial management,
• There is a need to promote the private insurance sector, with special attention to microinsurance and community based health insurance schemes.