Title: Financial sustainability of a health micro-insurance scheme: a theoretical investigation

Authors: Souvik Dasgupta; Amit Kundu

Addresses: Department of Economics, Sidho-Kanho-Birsha University, Purulia, West Bengal, India ' Department of Economics, Jadavpur University, Kolkata, West Bengal, India

Abstract: The article attempts to outline a business model of a for-profit insurance firm initiating a health micro-insurance (MHI) scheme and investigates whether it can sustain financially in that endeavour. We show that when a firm cannot observe and monitor the effort taken by beneficiaries in prevention, the presence of a nodal agency (any voluntary local organisation like NGO) is very crucial in maintaining the financial sustainability of the scheme. If the individual claims are independent and identically distributed, under certain conditions the level of expected claims is decreasing in NGO's effort level. The firm can set a lower risk-loading with the higher monitoring effort of the NGO.

Keywords: micro-insurance of health; moral hazard; nodal agency; risk loading; financial sustainability; monitoring; compensation.

DOI: 10.1504/IJEPEE.2023.132531

International Journal of Economic Policy in Emerging Economies, 2023 Vol.17 No.4, pp.490 - 504

Received: 23 Dec 2019
Accepted: 18 Jul 2020
Published online: 27 Jul 2023 *

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