On the efficiency of insurance to protect consumption against risk

One of the aims of social protection mechanism is to protect household consumption against the risk of death, diseases and accidents, disability, aging and unemployment. Over the past years there have been studies on whether social insurance is indeed protecting families or are only crowding out private ways of self-insurance, such as savings, selling of assets, transfers from their families or social networks, and or borrowing from local credit markets. The importance of the answer to this question relies in that if families are indeed changing their consumption patterns because an event occurred –so families were unable to self-insure—then social protection mechanism are justified in these terms (it may be other objectives). There is very little research on this for Latin American countries. The few of them indicate that indeed illness is associated to lower levels of consumption, which suggest important welfare gains from public provided health insurance programs. Nevertheless more evidence is welcome on this topic for other risk and for more countries.