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Adverse Selection And Private Health Insurance Coverage In India: A Rational Behaviour Model Of Insurance Agents Under Asymmetric Information

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Executive Summary

In the backdrop of the low level of health insurance coverage in India, this paper examines the determinants of the scaling-up process of health insurance by analyzing the rational behaviour of an insurance agent facing a trade-off between selling 'Health insurance' and 'Other forms of insurance' subject to his limited time and efforts, and the implications of such behaviour on adverse selection and equity. The paper presents various pre-conditions affecting the rational behaviour of insurance agents and also discusses two new concepts - 'Insurance habit' and 'Asymmetric information on health insurance schemes'. Further, the paper examines various strategies followed by insurance agents for maximizing their net incomes.

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