An impact evaluation of the provision of health insurance through microfinance networks in rural India

Principal Researchers: Prof. Esther Duflo, Prof.Abhijit Banerjee (MIT) and Prof. Richard Hornbeck (Harvard)
Partner Organization: Swayam Krishi Sangam (SKS), Andhra Pradesh

Health shocks are among the biggest and the least predictable forms of uncertainty that a poor family faces. Yet access to health insurance is essentially non-existent among the poor. This in turn reflects the familiar concerns of all health insurance agencies – how to deal with both fraudulent claims and the possibility of ending up with an adversely selected pool of clients. Combining health insurance with micro-credit can partly address these issues by taking advantage of the organization's intimate knowledge of the area; its ability to collect premiums through its networks; and, its capability to reduce adverse selection by making the product mandatory for all its members.

Moreover, providing health insurance would be attractive to an MFI as catastrophic health shocks to its members are an important source of risk. CMF and SKS, an MFI based in Andhra Pradesh, are experimenting with this idea and using a randomized design to evaluate the impact of a new micro-health insurance product covering hospitalization costs for SKS clients and their families. During the pilot phases, CMF and SKS randomized the phased roll-out of a mandatory health insurance product across villages in the districts of Gulbarga and Bidar in Karnataka. The evaluation examines the impact of the product on income, assets, health, usage of medical services, households' ability to smooth consumption, loan arrears, and default rates of SKS clients. The baseline survey of 6,000 households across 201 villages was conducted between December 2006 and April 2007.

Currently, during the period of the insurance cover, a continuous health survey is being conducted to monitor health events and the subsequent actions taken by households to cope with these health shocks in the study village. In addition to characterizing the medical nature of health shocks experienced and treatment sought, the survey evaluates patterns of health insurance usage.

An endline survey has begun in May 2009 and is scheduled to last till August 2010.

CMF Research Associates: KB Prathap
Download Progress Brief 4

See some related documents:

Eye on Micro Finance Issue #11 - The Effects of Health Insurance on New Mothers and Babies February 2010
Implementing Health Insurance through Micro-credit - SKS Case Study - 11 Sept 2008 [459KB, pdf]
Concept Note - RBI conference - 18 Jan 2008
IFPRI - Innovations in Insuring the Poor Series- Microfinance and Unexpected Consumption Expenditures December 2009