Social Capital and Microinsurance - Insights from Field Evidence in India

Abstract

This article examines the linkages between social capital and microinsurance using evidences obtained from a 2005 household survey conducted across several locations in India. The current body of literature suggests that micro health insurance schemes are in fact able to mobilize social capital for the purpose of encouraging voluntary affiliation of resource-poor persons operating within the space of the informal economy. Despite a dearth of field-evidence measuring social capital in relation to microinsurance units (MIUs), it appears that the cohesiveness of such units is made possible through a combination of internal community trust, social networks, and punitive measures related to information flows. To evaluate these linkages in further depth, the preferences of respondents to borrow and seek advice from formal versus informal sources, levels of trust towards community members versus outsiders, and the factors influencing respondents' decision to affiliate voluntarily to a scheme or not were examined. The findings conclude that observed preferences are highly context and location specific. It also found that overall, respondents cite the quality of healthcare as the primary reason for participating in an MIU, with the level of trust present at the time of enrollment, and level of financial protection provided ranking secondary reason depending on location.

Keywords: India, microinsurance, social capital

JEL Classification: D10, D20, G22, I19, O17