Bundling Health Insurance and Microfinance in India: There Cannot be Adverse Selection if There Is No Demand
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Banerjee_Bundling health.pdf
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Author(s)
Banerjee, Abhijit
Duflo, Esther
Hornbeck, Richard
Date Issued
May 2014
Journal
American Economic Review
Publisher
American Economic Association
Citation
Banerjee, Abhijit, Esther Duflo, and Richard Hornbeck. “ Bundling Health Insurance and Microfinance in India: There Cannot Be Adverse Selection If There Is No Demand.” American Economic Review 104, no. 5 (May 2014): 291–297.
Version
Final published version
Abstract
Microfinance institutions have started to bundle their basic loans with other financial services, such as health insurance. Using a randomized control trial in Karnataka, India, we evaluate the impact on loan renewal from mandating the purchase of actuarially-fair health insurance covering hospitalization and maternity expenses. Bundling loans with insurance led to a 16 percentage points (23 percent) increase in drop-out from microfinance, as many clients preferred to give up microfinance than pay higher interest rates and receive insurance. In a Pyrrhic victory, the total absence of demand for health insurance led to there being no adverse selection in insurance enrollment.
MIT Department
Massachusetts Institute of Technology. Department of Economics
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Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.
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DOI of Published Version
https://doi.org/10.1257/aer.104.5.291
