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

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  • Souvik Dasgupta
  • Amit Kundu

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.

Suggested Citation

  • Souvik Dasgupta & Amit Kundu, 2023. "Financial sustainability of a health micro-insurance scheme: a theoretical investigation," International Journal of Economic Policy in Emerging Economies, Inderscience Enterprises Ltd, vol. 17(4), pages 490-504.
    • Handle: RePEc:ids:ijepee:v:17:y:2023:i:4:p:490-504
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