Adverse Selection and Private Health Insurance Coverage in India : A Rational Behaviour Model of Insurance Agents under Asymmetric Information

In the backdrop of the low level of health insurance coverage in India, this study 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 study examines various strategies followed by insurance agents for maximizing their net incomes. The theoretical proposition is empirically validated by applying a binary Probit model and the primary data collected by the author is used in this context