The Social Dilemma of Microinsurance: A Framed Field Experiment on Free-Riding and Coordination

Wendy Janssens and Berber Kramer

No 12-145/V, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: Health shocks are among the most important unprotected risks for microfinance clients, but the take-up of micro health insurance typically remains limited. This paper attributes low enrolment rates to a social dilemma. Our theory is that in jointly liable groups, insurance is a public good. Clients can rely on contributions from group members to cope with shocks. Less risk averse clients have a private incentive to free-ride and forgo individual insurance even when insurance optimises group welfare. The binding nature of group insurance eliminates such free-riding. A framed public goods experiment with microcredit groups in Tanzania, eliciting demand for group versus individual microinsurance, yields substantial support for this hypothesis. This provides a potential explanation for low take-up rates.

Keywords: Health insurance; microfinance; risk-sharing; public goods experiment (search for similar items in EconPapers)
JEL-codes: D71 G21 I13 (search for similar items in EconPapers)
Date: 2012-12-18, Revised 2014-01-23
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20120145

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