MR Microinsurance_2012_03_29.indd - International Labour ...

What is the impact of microinsurance?
Evidence of microinsurance’s impact on the incidence and extent of catastrophic
expenditure is conversely scarce. Of the studies considered here, only
Wagstaff et al. (2009) ascertained that while China’s New Cooperative Medical
Scheme reduced the occurrence of catastrophic spending among its poorest tenth
of subscribers, it increased the incidence amongst members in deciles 3 to 10, an
observation they attributed to supply-side factors like price schedules that incentivized
the provision of costlier high-tech care.
Mobilizing funds
Three of the well-documented ways that low-income people raise funds to afford
the OOP expenses following adverse events are selling assets, depleting savings
and borrowing (Lim and Townsend, 1998). While selling assets, particularly productive
ones, reduces future income and/or consumption, each of these techniques
further slows households’ progress out of poverty and lowers their ability
to absorb future uninsured shocks and can perpetuate these problems across generations
if the loan cannot be repaid easily or quickly. By enabling policyholders
to mitigate the effects of unfortunate events without resorting to these practices,
microinsurance is believed to protect their assets and savings. Schemes that provide
cashless claims arrangements (see Chapter 6) instead of reimbursing the
insured are believed to be more effective in this respect because they eliminate
the need to pay out a lump sum before the insurance reimburses the cost of the
service.
Since just two studies have analysed microinsurance’s impact on raising
funds, it is hard to provide a conclusive answer. Aggarwal’s (2010) investigation
of India’s Yeshasvini scheme found that subscribers borrowed approximately 30
to 36 per cent less to finance surgery than their uninsured counterparts. With
the inclusion of asset sales, Yeshasvini’s lower-income policyholders were additionally
determined to borrow and sell at a statistically significant 61 per cent
less to fund their use of primary health care (see Box 3.2). Similarly, an assessment
of a Filipino typhoon re-housing scheme by Morsink et al. (2012) found
that it mitigated the extent to which policyholders pursued coping strategies
that included selling assets and exhausting savings after typhoons damaged their
homes.
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