The Role of Pregnancy on Micro Health Insurance: Evidence of Adverse Selection from Pakistan
32 Pages Posted: 16 Apr 2014 Last revised: 31 Mar 2015
Date Written: April 15, 2014
With increasing interest from commercial players in developing insurance markets to meet the needs of low-income people, efforts to find sustainable products have expanded rapidly yet remain elusive. This is particularly true in the domain of health insurance, where the general challenges of offering voluntary private health insurance are often exacerbated by poor underlying health services and a lack of public health programs. In an effort to identify new opportunities, we analyze a rich data set from Pakistan to understand the influence of pregnancy on adverse selection and overall profitability of a micro health insurance product that is similar in design to others micro insurance products. Our results indicate that pregnancy-related benefits account for a significant source of claim counts and loss payments. We also find evidence of extensive adverse selection related to pregnancy claims, indicating significant take up by those who know they are pregnant prior to enrollment. Furthermore, households with only pregnancy claims tend to renew at lower rates than do households with other acute or chronic claims. We estimate that excluding coverage for pregnancy from market-based products, supplemented by government provision of maternity care may offer an avenue towards sustainability.
Keywords: Microinsurance, health insurance, adverse selection
JEL Classification: D82
Suggested Citation: Suggested Citation