The desirability of micro health insurance is usually beyond doubt but the sustainable provision is a different matter. Even traditional insurance economics have issues which complicate the adequate coverage of risks but the problems in the microinsurance environment are even more dicult to handle. When looking for an approach on how to analyse risks in micro health insurance and how to insure them one will fail to find one. So far, data is very rare. Usually it is only possible to find a small amount of data extracted out of small scale studies/ evaluations. The microinsurance database of the World Bank is an attempt to collect all kinds of relevant data concerning microinsurance but so far, there is only some basic data for six countries.
Recently there has been the attempt to start an analytical framework on how to assess insurability of risk in microinsurance. Biener and Eling provide a starting point by adjusting the insurability criteria of Berliner to a microinsurance environment. This paper will continue the work in the area of micro health insurance and suggests a further criterion to be used when assessing the insurability of risk.
Contents
1 Relevance of Micro Health Insurance
2 Health Insurance Economics
2.1 The principles of Insurance
2.2 Adverse Selection
2.3 Moral Hazard
2.4 Micro Health Insurance
3 Risk and Insurability
3.1 The Concept of Risk
3.2 The Concept of Insurability
4 Insurability in Micro Health Insurance
4.1 Adaptation of Berliner’s Criteria
4.2 Actuarial Criteria
4.3 Market Criteria
4.4 Societal Criteria
5 Discussion and the way forward
6 References
7 Appendix
Objectives & Research Topics
The primary objective of this thesis is to develop a comprehensive framework to assess the insurability of risk within the micro health insurance market. By critically evaluating existing insurance economics and the insurability criteria defined by Berliner, the research aims to address specific challenges, such as information asymmetry and the impact of local cultural conditions, that complicate the provision of sustainable micro health insurance.
- Analysis of health insurance economics and market failures.
- Investigation of the concepts of risk, perceived risk, and insurability.
- Application and adaptation of Berliner’s criteria to the microinsurance environment.
- Exploration of the significance of "culture" as a novel criterion for assessing insurability.
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Perceived Risk
As mentioned before it is not sufficient to provide an analytical definition of risk, since no risk will be insured unless it is perceived to be a one. The crux is that every individual perceives risk differently. Subjective perception depends on the communication of the risk source, mental ability to deal with uncertainty as well as former experiences with danger. Perceived risk is a result of these processes and can be defined as ”a collection of notions from which people form their own risk sources relative to the information available to them and their basic common sense” (Jaeger et al. in Renn 2004: 104).
Several perception models have been established such as risk as fate, as a fatal threat, as a test of strength, as a game of chance, as well as risk as an early warning indicator. In the area of micro health insurance the second one is especially interesting. The risk of a fatal illness is for a human being difficult to grasp due to the fact that the probability of it happening to oneself is tiny but still it could happen at any time. Interesting enough, in the case of rare random events it is the randomness which poses the threat. The exact probability does not matter. As seen before, people can handle small but frequently occurring risk. They establish a behaviour that helps to handle these events (e.g. purchasing insurance). Thus, people prefer frequently occurring but less severe events to major events that are highly unlikely to happen at all. The feeling of vulnerability is immense in the case of highly unlikely events since it takes a huge cognitive effort to embrace this state of insecurity. To sum up, the perceived risk depends on ”the random nature of the event, the expected maximum impact, and the time-span for risk-control measures” (Renn 2004: 104 & 105).
Summary of Chapters
Relevance of Micro Health Insurance: This chapter introduces the context of microfinance and outlines why micro health insurance is a necessary tool to combat the "medical poverty trap" in developing countries.
Health Insurance Economics: This section provides a theoretical background on insurance, covering risk preferences, the basic models of insurance, adverse selection, and moral hazard.
Risk and Insurability: The author defines risk from both analytical and perceptual perspectives and introduces the concept of insurability as developed by Berliner.
Insurability in Micro Health Insurance: This chapter adapts Berliner’s criteria for the microinsurance context, categorizing them into actuarial, market, and societal factors, and proposes 'culture' as a new criterion.
Discussion and the way forward: The final chapter summarizes the findings and emphasizes that assessing insurability in microinsurance is an interdisciplinary challenge focused on subjective insurability.
Keywords
Micro health insurance, Insurability, Berliner's criteria, Risk assessment, Moral hazard, Adverse selection, Microfinance, Health insurance economics, Perceived risk, Actuarial criteria, Market criteria, Societal criteria, Culture, Developing countries, Risk pooling.
Frequently Asked Questions
What is the core focus of this bachelor thesis?
The work focuses on establishing a framework to evaluate the insurability of risks in the specific context of the micro health insurance market, building upon existing economic theories.
What are the central thematic fields covered?
The central themes include health insurance economics, the concepts of risk and its perception, the theory of insurability, and the specific application of these concepts to low-income populations in developing countries.
What is the primary research goal?
The goal is to improve the assessment of risk insurability in micro health insurance, identifying why traditional frameworks struggle and suggesting how they can be adapted to be more practical and effective.
Which scientific methodology is utilized?
The thesis utilizes a literature-based theoretical approach, analyzing established economic models (e.g., Rothschild-Stiglitz, Berliner’s criteria) and adapting them to the unique characteristics of microinsurance.
What is addressed in the main part of the thesis?
The main part analyzes health insurance economics (adverse selection, moral hazard), reviews the concept of risk and insurability, and systematically adapts Berliner’s nine criteria into a new framework comprising actuarial, market, and societal categories.
Which keywords characterize this work?
Key terms include micro health insurance, insurability, Berliner's criteria, moral hazard, adverse selection, and risk assessment.
How does the author define "Perceived Risk" in this context?
The author defines it as a collection of notions formed by individuals based on available information, common sense, and personal experiences, which significantly influences whether they choose to purchase insurance.
Why does the author argue that "culture" is a critical criterion?
The author argues that because microinsurance operates in societies with limited familiarity with formal insurance concepts, success depends on integrating local cultural practices, such as community-based safety nets, into the product design.
- Citation du texte
- B.A., B.Sc. Esther Schuch (Auteur), 2013, The Insurability of Risk in the Micro Health Insurance Market, Munich, GRIN Verlag, https://www.grin.com/document/215920
