What is the difference between the ability to pay and willingness to pay?
When a social protection scheme is financed only through the contributions of the insured (which is the case in many mutual health organizations and commercial insurance schemes), the scope of benefits provided depends upon what the members are prepared to pay (willingness to pay) and what they are able to pay (ability to pay). Willingness to pay depends at once on individuals’ level of income and their perception of risk: the greater a person’s aversion to risk, the more he or she will be willing to pay. An individual’s ability to pay is the maximum amount he or she is capable of paying; it is therefore linked to income. Ability to pay is always greater than or equal to willingness to pay, even for persons with a strong aversion to risk. In a context of poverty, however, the levels of ability to pay and willingness to pay are both very low and tend to be indistinguishable from one another.
