Standard insurance theory predicts that households that anticipate high insurance costs are those that are willing to purchase health insurance (adverse selection). However, there are also several other reasons why households may choose to purchase health insurance. Since insurance is a consumption-smoothing tool, risk-averse households may be more willing to purchase insurance. Households that can self-insure may be less likely to purchase insurance. Newer theories have hypothesized that budget constraints, present bias, or having little understanding of insurance may decrease the likelihood of buying insurance even for sick households. Age or gender bias may play into the decision, as may trust of Western medicine. These and other less-traditional type of selection factors may be particularly relevant in developing countries.
This paper presents evidence collected during the expansion of the SKY Health Microinsurance program in rural Cambodia. Health insurance is a newer product in developing countries, and this type of evidence has rarely been explored. A companion paper explores the extent of adverse selection into this program (Polimeni and Levine, 2011), while this paper studies other influences on take-up. Contrary to informational models, we find no evidence that risk-averse households are more likely to purchase SKY, and instead find evidence of the opposite. Budget constraints, quality of health facilities, and age and gender of ill household members are all found to influence the decision to purchase insurance.