Insurance Innovations for the Poor

• Applicant: Professor Dr. Andreas Landmann
• Subject Area: Statistics and Econometrics
• Term: from 2016 to 2018
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 315456934

The project Insurance Innovations for the Poor aims at establishing the scientific basis for real improvements in financial protection of vulnerable households. In developing countries, shocks such as illness and natural catastrophes constitute substantial economic threats. Especially for poor and vulnerable households this may have long-term negative consequences. Research on ways to insure the poor against financial risks is therefore of high importance and should aim at developing improved products. This research project will explore innovative insurance schemes for low-income markets, focussing on adverse selection, moral hazard and social impact. The difference to the analysis of classical insurance products is that so-called microinsurance needs to maintain low coverage and premiums need to be affordable to the target group. This prohibits expensive screening and monitoring activities, as they are used in developed insurance markets. The project will thus analyse the efficiency of simple measures against adverse selection and moral hazard in order to maximize social and economic impact. It builds on a series of evaluation studies on health insurance innovations in Pakistan and heavily employs randomized control trials. By doing so, the action brings advanced experimental methods to the topic of insurance economics, where usually only observational data is available. Another innovative aspect is that I will develop and test group insurance innovations which exploit prosocial behaviour to mitigate the effects of moral hazard. To increase understanding of such mechanisms, the research strategy also involves non-standard theoretical modelling and behavioural experiments. Given that our field experiments test insurance innovations under realistic conditions, the results will be of high policy relevance, in particular for low-income insurance markets which are estimated to feature up to 4 billion potential clients.

• DFG Programme: Research Fellowships
• International Connection: France
• Host: Professor Marc Gurgand, Ph.D.