Microinsurance Publications
Welcome the Micro Insurance Academy's publications page. Here you'll find a comprehensive collection of our publications on microinsurance stretching back nearly ten years. These articles are available to you at no charge as part of our aim to promote dialogue about the benefits that microinsurance can bring to poor communities.
2009
NEW! Microinsurance: Innovations In Low-Cost Health Insurance , David M. Dror, Ralf Radermacher, Shrikant B. Khadilkar, Petra Schout, François-Xavier Hay, Arbind Singh and Ruth Koren, in Health Affairs, 28, no. 6 (2009): 1788-1798
Abstract:
This paper details the findings of a recent study on the outcomes of different insurance schemes based in India by evaluating their effects on financial protection and equitable access to expensive health care for their members. The study represents important work on the efficacy of microinsurance units in reducing the risk exposure of the poor and indicates that low cap and cost ratio plans may be counterproductive to extending insurance coverage to those in need.
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Incidence of Illness among Resource-Poor Households: Evidence from Five Locations in India. Dror DM, van Putten-Rademaker O, Koren R:, in Indian Journal for Medical Research, forthcoming: September 2009 (New Delhi)
Abstract:
Following a previous paper on costs of healthcare for poor households, this attentive inquiry into incidence of illness completes the key parameters needed to calculate health insurance premiums. A first-in-its-kind two-sided research into micro health insurance confirms that household features, in addition to those of single individuals, have an impact on incidence of illnesses. In this study, like in several previous ones we conducted, we obtained new eviddence that one-size-fits-all solutions are unviable in the field of micro health insurance: only context-specific initiatives can offer relevant data, essential for successful operations.
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Nadja Trhal, Ralf Radermacher: Bad luck vs. self-inflicted neediness - An experimental investigation of gift giving in a solidarity game. In press in Journal of Economic Psychology, doi:10.1016/j.joep.2009.03.004. Also published as: University of Cologne, Working Paper Series in Economics, No. 28, 2006.
Abstract:
We experimentally examine the impact of self-inflicted neediness on the solidarity behavior of subjects. In one treatment in our solidarity experiment all subjects face the same probability of becoming needy, in the other treatment subjects have the choice between a secure payment and a lottery which includes a certain probability of becoming needy. Then all subjects are asked how much they will give to losers in their group to investigate if people are willing to give the same gifts whether or not subjects are responsible for inequality in payoffs. We found evidence for allocative as well as for procedural utility concerns.
2008
Ralf Radermacher: Genossenschaftliche Mikroversicherungen als Mittel zur Bewältigung von Krankheitsrisiken in Entwicklungsländern – Potential und Förderansatz. Zeitschrift für das gesamte Genossenschaftswesen (ZfgG), special edition, pp. 58-70, 2008.
David M. Dror: A Socio-Economic Profile of the Micro (Health) Insurance Target Population Asian Insurance Review, pp. 80-81, December 2008.
Abstract:
A snapshot review of the Pulse of a Silently Transforming India.
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Iddo Dror: Community Based Micro Health Insurance as an Enabler of Solidarity and Self-Help amongst Poor Communities Microfinance Focus, Vol. 2, Iss. 8, September 2008
Abstract:
This article reviews some of the challenges facing micro insurance, such as affordability, trust, acceptance of the product and process, asymmetry of information, and sustainability, and offers solutions by highlighting the various ways in which community based Micro Insurance Units (MIUs) can serve as a tool for empowerment. The article focuses on the holistic approach developed by the Micro Insurance Academy toward improving access of vulnerable communities to micro health insurance services.
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David M. Dror , Olga van Putten-Rademaker and Ruth Koren: Cost of Illness: Evidence from a Study in Five Resource-Poor Locations in India. Indian Journal of Medical Research, April 2008
Abstract:
Background & Objectives: In India, health services are funded largely through out-of-pocket spending (OOPS). The objective of this article is to provide data on the cost of an illness episode and parameters affecting cost.
Methods: The data was obtained through a household survey carried out in 2005 in five locations among resource-poor persons in rural or slum India. The analysis is based on self-reported illness episodes and their costs. The study is based on 3,531 households (representing 17,323 persons) and 4,316 illness episodes.
Results: The median cost of one illness episode was INR 340. When costs were calculated as % of monthly income per person, the median value was 73% of that monthly income, and could reach as much as 780% among the 10% most exposed households. The estimated median per-capita cost of illness was 6% of annual per-capita income. The ratio of direct costs to indirect costs was 67:30. The cost of illness was lower among females in all age groups, due to lower indirect costs. 61% of total illnesses, costing 37.4% of total OOPS, were due to acute illnesses; chronic diseases represented 17.7% of illnesses but 32% of costs. Our study shows that hospitalizations were the single most costly component on average, yet they accounted for only 11% of total on an aggregated basis, compared to drugs that accounted for 49% of total aggregated costs. Locations differ from each other in the absolute cost of care, in distribution of items composing the total cost of care, and in supply.
Interpretation & Conclusion: Interventions to reduce the cost of illness should be context-specific, as there is no one-size-fits-all model to establish the cost of healthcare for the entire sub-continent. Aggregated expenses, rather than only hospitalizations, can cause catastrophic consequences of illness.
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David M. Dror: Micro Health Insurance: The Quest for a Balance between Different Interests of Healthcare Providers, Clients and Insurers. Health Action, Vol. 28, No. 5, pp. 10-12, April 2008
Abstract:
The three partners in the equation of health insurance are the clients, the providers of care and the insurers. Each of the stakeholders aims at different objectives: providers of healthcare seek to deliver health services, and each provider focuses on those services that it has capacity to deliver. The objective of insurers is to ensure that expenditure levels will not exceed the income. And the objective of clients is to obtain affordable and good quality services that are relevant in their context, through a process that they consider as fair. In the face of potential conflicts of interest between insurers, providers and clients, micro health insurance units that enjoyed sufficient autonomy to adapt the insurance solution to the specific conditions of the client-group served (mostly organized as community-based mutual schemes) have demonstrated coherent capacity to find a balance between the three sets of interests. This is the unique strength of micro health insurance units in the rapidly changing conditions that prevail in low-income India.
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2007
Iddo Dror: Social capital and microinsurance - Insights from field evidence in
Abstract:
This article examines the linkages between social capital and microinsurance using evidences obtained from a 2005 household survey conducted across several locations in India. The current body of literature suggests that micro health insurance schemes are in fact able to mobilize social capital for the purpose of encouraging voluntary affiliation of resource-poor persons operating within the space of the informal economy. Despite a dearth of field-evidence measuring social capital in relation to microinsurance units (MIUs), it appears that the cohesiveness of such units is made possible through a combination of internal community trust, social networks, and punitive measures related to information flows. To evaluate these linkages in further depth, the preferences of respondents to borrow and seek advice from formal versus informal sources, levels of trust towards community members versus outsiders, and the factors influencing respondents’ decision to affiliate voluntarily to a scheme or not were examined. The findings conclude that observed preferences are highly context and location specific. It also found that overall, respondents cite the quality of healthcare as the primary reason for participating in an MIU, with the level of trust present at the time of enrollment, and level of financial protection provided ranking secondary reason depending on location.
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David M. Dror: Micro Health Insurance in India: Pointers for Progress. IRDA Journal, Vol. 5, No. 12, pp. 7-11, November 2007.
Abstract:
We examine the effectiveness of a low-cost health insurance product that suits the Micro-insurance Regulations (Jan Arogya Bima) in protecting clients against high expenses. The analysis is done by reference to compensation that would be due in a dataset including information on utilization and cost of health care of 4,317 illness episodes obtained through a household survey conducted among low-income persons living in rural and slum locations in India. This simulation illustrates that the Micro health insurance product would provide protection only to about 12% of the cases and about half the cases with hospitalization; but about 14% of the most expensive hospitalizations exceed the insurance cap. In addition, insurers are allowed to select preferred risks (“cherry picking”) or discontinue insuring bad risks (“lemon dropping”). We suggest that this leads to a vicious cycle, which would not be remedied only by modifying the premium. Remedying the vicious cycle begins at its weak point: Improving the value-proposition and variety of micro-insurance products.
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Iddo Dror: Demystifying Micro Health Insurance Package Design - Choosing Healthplans All Together (CHAT). Microfinance Insights. Vol. 4, September 2007
This article examines the utilization of a simulation exercise known as Choosing All Health Insurance (CHAT). As a decision tool, this exercise allows variably educated resource-poor populations who are inexperienced with health insurance to select health benefits that they perceive to be relevant. CHAT was adapted to developmental context of India through the project “Strengthening Micro Health Insurance Units for the Poor” (2005-2006). The primary beneficiaries of this exercise were poor communities at the “bottom of the pyramid” given that such populations previously lacked an accessible mechanism to engage in the rationing of health benefits. The need for such a mechanism arose from the gap between benefit packages available on the market (from both private and public insurers) and those reflecting the priorities of the poor. Using a sample population of some 200,000 persons, the aforementioned study proposed a premium of INR 500 (? €10) per household per year, derived from actuarial calculations of local prices and willingness to pay. Group decisions were reached by consensus, reflecting the Indian cultural setting. A subsequent survey of participants indicated high levels of satisfaction with the overall CHAT process and resultant health insurance packages.
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Marion Danis, Erika Binnendijk, Sukumar Vellakkal, Alexander Ost, Ruth Koren and David M. Dror: Eliciting Health Insurance Benefit Choices of Low Income Groups. Economic and Political Weekly, VOL 42 No. 32 August 11 - August 17, 2007.
Abstract:
An appropriate scheme of health insurance must respond to clients' priorities, yet cover a finite and affordable benefit package. A variety of methods have been developed so far to engage the public in prioritising services. This paper deals with a plan that allows variably educated populations who are inexperienced with health insurance to pick health benefits. The decision exercise reported here enhances popular understanding (1) that even within a limited premium there is a choice of different package compositions; and (2) that the level of the premium determines the expectation of coverage by health insurance.
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David M. Dror, Ralf Radermacher and Ruth Koren: Willingness to Pay for Health Insurance Among Rural and Poor Persons: Field Evidence from Seven Micro Health Insurance Units in India. Health Policy, Vol. 82, No. 1, 2007.
Abstract:
This study, conducted in India in 2005, provides evidence on Willingness to pay (WTP), gathered through a unidirectional (descending) bidding game among 3024 households (HH) in seven locations where micro health insurance units are in operation. Insured persons reported slightly higher WTP values than uninsured. About two-thirds of the sample agreed to pay at least 1%; about half the sample was willing to pay at least 1.35%; 30% was willing to pay about 2.0% of annual HH income as health insurance premium. Nominal WTP correlates positively with income but relative WTP (expressed as percent of HH income) correlates negatively. The correlation between WTP and education is secondary to that of WTP with HH income. Household composition did not affect WTP. However, HHs that experienced a high-cost health event and male respondents reported slightly higher WTP. The observed nominal levels of WTP are higher than has been estimated hitherto.
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David M. Dror: Why 'One-Size-Fits-All' Health Insurance Products are Unsuitable for Low-Income Persons in the Informal Economy in India. Asian Economic Review, Vol. 49, No. 1, 2007.
Abstract:
Limited funding dictates that health insurance for low-income persons would compensate only part of healthcare needs. Existing health insurance products in India are too restrictive to be attractive to low-income & rural populations. We hypothesize that attractive health insurance must represent an optimum match between clients' needs for health care, demand for health insurance, and available supply of health care. Based on data from a household survey among rural poor and urban slum dwellers in seven locations in India collected in 2005, we provide evidence of marked differences across locations in all three parameters: solvent demand for health insurance (proxy: willingness to pay), medical needs (proxy: frequency of illness episodes and the number of days of illness per HH), and the supply of healthcare (proxy: type of healthcare provider and out-of-pocket expenditure on health care). We also show that aggregated expenses of consultations and drugs exceed those of hospitalizations in all locations. We conclude that because the variations in clients' needs, cost of healthcare, availability of services and clients' demand for health insurance across locations cannot be optimized in a single partial benefit package, a context-specific solution is needed to be relevant in each location.
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David M. Dror, Ruth Koren, Alexander Ost, Erika Binnendijk, Sukumar Vellakkal and Marion Danis: Health Insurance Benefit Packages Prioritized by Low-Income Clients in India: Three Criteria to Estimate Effectiveness of Choice. Social Science & Medicine, Vol. 64, No. 4, 2007.
Abstract:
We applied a decision tool for rationing choices, with a predetermined budget of about US$11 per household per year, to identify priorities of poor people regarding health insurance benefits in India in late 2005. A total of 302 individuals, organized in 24 groups, participated from a number of villages and neighborhoods of towns in Karnataka and Maharashtra. Many individuals were illiterate, innumerate and without insurance experience. Involving clients in insurance package design is based on an implied assumption that people can make judicious rationing decisions. Judiciousness was assessed by examining the association between the frequency of choosing a package and its perceived effectiveness. Perceived effectiveness was evaluated by comparing respondents' choices to the costs registered in 2049 illness episodes among a comparable cohort, using three criteria: 'reimbursement' (reimbursement regardless of the absolute level of expenditure), 'fairness' (higher reimbursement rate for higher expenses) and 'catastrophic coverage' (insurance for catastrophic exposure). The most frequently chosen packages scored highly on all three criteria; thus, rationing choices were confirmed as judicious. Fully 88.4% of the respondents selected at least three of the following benefits: outpatient, inpatient, drugs and tests, with a clear preference to cover high aggregate costs regardless of their probability. The results show that involving prospective clients in benefit package design can be done without compromising the judiciousness of rationing choices, even with people who have low education, low-income and no previous experience in similar exercises.
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2006
David M. Dror: Reinsurance and Other Facilities for the Indian Micro Health Insurance System. FORTE Insurance Journal, Special Issue on Micro Insurance, 2006.
Abstract:
It is increasingly recognized that the economic cost of a risk is greater to the insured than to the insurer, and therefore the transfer of risk can create value for the insured poor. But is there is sufficient opportunity for the poor to transfer risks to insurers? This article identifies some components that could contribute in making this possible. The article discusses the importance of ensuring a fair premium; the cost of reserve capital (“capital loading”); the cost of administration (“administrative loading”); capacity building for MIUs; reinsurance serving the MIUs; underwriting assistance of MIUs; and financial support to the MIUs to defray part of the cost of the insurance premium. The paper concludes with policy recommendations (24 references cited).
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David M. Dror, Ruth Koren and D.M. Steinberg: The Impact of Filipino Micro Health Insurance Units on Income-Related Equality of Access to Healthcare. Health Policy, Vol. 77, No. 3, 2006.
Abstract:
BACKGROUND: This study aims to assess the impact of being insured by micro-health insurance units (MIUs) on equality of access to health care among groups with inequitable income distribution. We measure equality by relating income with access to healthcare. The analysis is based on a household survey conducted in five regions in the Philippines in 2002.
METHODS: We generated concentration curves and indices (CI) for insured and uninsured households (150 for each cohort in each region). We also elaborated a method to retain the relative income rank of households when data were aggregated across regions, as the regions had quite different nominal income levels.
RESULTS: We found a significant effect of household income on access to hospitalizations among the uninsured households (a positive CI), but no such effect among the insured households (CI close to zero). As regards professionally attended deliveries, an increased tendency of poorer households to deliver at home (CI slightly negative) and a lower rate of deliveries in hospital (CI slightly positive and statistically significant) were reported by both uninsured and insured households. Access to consultations was unrelated to income among the insured (CI close to 0), but negatively correlated with income among the uninsured (a positive and significant CI).
CONCLUSION: We conclude that MIUs in Philippines improve income-related equality of access to hospitalization and medical consultation in cases of illness. The findings of this study strengthen a claim for government support for the operation of MIUs as successful (albeit micro) suppliers of health insurance.
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Ralf Radermacher , Iddo Dror and Gerry Noble: ‘Challenges and Strategies to Extend Health Insurance to the Poor’ Protecting the Poor ‘A Microinsurance Compendium.’ Churchill C., Munich Re Foundation/ILO, 2006
Abstract:
Health insurance has several peculiarities that distinguish it from other types of coverage, such as life and property. This chapter reviews the specific characteristics of health microinsurance, paying special attention to the different points of view of insurance providers and the insured. The chapter structures its arguements along the business-process of health microinsurance and discusses implications of different features.
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Ralf Radermacher and Iddo Dror: ‘Institutional Options for Delivering Health Microinsurance’ Protecting the Poor – A Micro Insurance Compendium, Churchill C., ed., Munich Re Foundation/ILO, 2006
Abstract:
Health insurance entails the transfer of health risks in return for a premium payable in advance. This succinct description suggests that the arrangement entails flows of funds and information in two directions: from the client to the insurer and from the insurer to the client. The party with the most control of these flows of funds and information can influence the business process to its advantage.
This notion that one party would seek an advantage over another implies that conflicts of interest can occur between insurers and insured. But is this the case in health microinsurance provision? And if so, does the institutional option (model) for delivering health microinsurance have an influence on such conflicts of interests and efficiency in the provision of insurance? This chapter looks at these questions by offering a basic typology of the different business process options identified in health microinsurance provision. Such a typology will help identify conflicts of interest and remedy inefficiencies in the smooth bi-directional flow of funds and information.
This chapter first summarizes the main types of health microinsurance providers and then analyses their relative effectiveness in meeting the needs of the low-income market over the long term.
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David M. Dror: Health Insurance for the Poor: Myths and Realities. Economic and Political Weekly (Mumbai), Vol. 41, No. 43-44, 2006.
Abstract:
Based on a survey in seven locations, this article finds that most Indians are willing to pay 1.35 per cent of income or more for health insurance and most people prefer a holistic benefit package at basic coverage over high coverage of only rare events. The needs of the poor, and their demand for health insurance, depend on local conditions.
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David M. Dror and John Armstrong: Do Micro Health Insurance Units Need Capital or Reinsurance? A Simulated Exercise to Examine Different Alternatives. The Geneva Papers on Risk and Insurance - Issues and Practice, Vol. 31, No. 4, 2006.
Abstract:
The purpose of this article is to provide a technical discussion of capital loading that "micro health insurance units" (MIUs) must add to the premium to maintain financial sustainability. MIUs offer benefit packages and require prepayment, that is, they create a rudimentary community-based health insurance for poor people in low-income countries. We broke up the 2001 data set of a health insurer containing upward of 1.3 million insureds into 535 "virtual MIUs"; and running 1,005 iterations, we got a data yield of 537,675 virtual MIUs. Capital loading levels increased steeply with decreasing group size and higher confidence levels. The impact of group size remains strong even with groups of 25,000 plus, and is stronger than the impact of changes in confidence levels. We discuss options to correct size-related premium bias through government subsidies, and conclude that reinsurance is cheaper than capital loading and a preferable solution for governments compared to other alternatives.
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David M. Dror: Reinsurance and Other Facilities for the Indian Micro Health Insurance System. FORTE Insurance Journal, Special Issue on Micro Insurance, 2006.
Abstract:
It is increasingly recognized that the economic cost of a risk is greater to the insured than to the insurer, and therefore the transfer of risk can create value for the insured poor. But is there is sufficient opportunity for the poor to transfer risks to insurers? This article identifies some components that could contribute in making this possible. The article discusses the importance of ensuring a fair premium; the cost of reserve capital (“capital loading”); the cost of administration (“administrative loading”); capacity building for MIUs; reinsurance serving the MIUs; underwriting assistance of MIUs; and financial support to the MIUs to defray part of the cost of the insurance premium. The paper concludes with policy recommendations (24 references cited).
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David M. Dror and Thomas Wiechers: The Role of Insurers and Re-insurers in Supporting Insurance to the Poor. Chapter 5.4 in Churchill C. (ed.): “Protecting the Poor: A Microinsurance Compendium”, Geneva, ILO, pp. 524-544, 2006.
Abstract:
In his address to the Micro-insurance Conference sponsored by the Munich Re Foundation in October 2005, Hans-Jürgen Schinzler1 offered his perspective on why commercial insurers and re-insurers were infrequent players in the low-income market: “Premium income is low, administrative costs are relatively high, and infrastructure for insurance is lacking; that's why commercial insurers have not taken more interest in this market.”
This candid statement suggests that if premium income were high and administrative costs were relatively low, and the infrastructure for insurance were improved, commercial insurers and re-insurers would take more interest in this market. This raises two issues: first, what is the value proposition of commercial insurers and re-insurers for micro-insurance schemes and the market of low-income clients? Secondly, as improvements on all three counts are more likely to evolve over time than to occur through a “big bang”, what part(s) of this value proposition can insurers and re-insurers deliver during this evolutionary process? This chapter proposes a few answers to these questions.
The answers might differ according to the business model. This chapter focuses mainly on the role of insurers and re-insurers in supporting community-based insurance schemes that operate the mutual model, namely communities of individuals that bear the insurance risk and operate the scheme. The provision of much-needed reinsurance, training and technical support to these micro-insurers is a key challenge for the development of micro-insurance. This chapter refrains from dealing with micro-insurance arrangements in which NGOs distribute insurance products but do not underwrite the risk (the partner-agent model), because these grassroots organizations are already associated with a specific commercial insurer. That insurer may or may not cede risks to reinsurance depending on ceding decisions that are not specific to the agent. This chapter is inspired by the attitude that commercial insurers and re-insurers can capture viable business opportunities from a wider penetration of insurance in low-income settings, and that these opportunities justify the investment in micro-insurance schemes because of their potential to serve as change agents in low-income communities.
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David M. Dror: Dealing with Adversity Through Diversity. Pravartak Special Issue on Insurance and Disaster Management, December 2006.
Abstract:
This opinion piece offers a review of three kinds of disasters: natural, political and health events. With examples from all three types of disasters, the author submits that even though disasters of all types are increasing in frequency and severity, health risks are those that expose single individuals and households to more adversity and a higher likelihood of catastrophic consequences than other disasters. A short review of measures employed in a number of countries points that the common denominator is that risk management tools deal on the one hand with prevention, and on the other hand with compensation of damages. Insurance deals usually with the latter. Health insurance, more so than other types of insurance, includes both ex-ante prevention and ex-post compensations. And by ceding risks to reinsurance, the insurance industry can enlarge its ability to deal with more types of risks and with most severe damage levels. Governments of some countries have agreed to act as reinsurers of last resort. A facility that would provide reinsurance for health insurance has so far not been created, and is sorely needed.
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David M. Dror: Health Insurance at 2 Euro Per Year? Pravartak Special Issue on Insurance and Disaster Management, December 2006.
Abstract:
Today, after Prof. Yunus debunked the myth that the poor are unbankable, microfinance is on everyone's lips. Yet, most insurers and investors still say that the poor are uninsurable. Is this fact or fable? In this short article we explain the vicious cycle that causes the mismatch between demand for and supply of health insurance in India. We also propose ways to break this vicious cycle, and offer reasons why health insurance at as little as 2 Euro per year should be possible.
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2005
David M. Dror, Elmer S. Soriano, M.E. Lorenzo, J.N. Sarol Jr., R.S. Azcuna and Ruth Koren: Field Based Evidence of Enhanced Healthcare Utilization Among Persons Insured by Micro Health Insurance Units in Philippines. Health Policy, Vol. 73, No. 3, 2005.
Abstract:
Underutilization of healthcare is common among rural and low-income population segments in countries with lower income or inequitable income distribution. Micro health insurance units (MIUs) are created by informal sector groups because people cannot access health insurance or are dissatisfied with the programmes they can access. The policy choice to support MIUs relies on evidence that affiliation with these schemes increases healthcare utilization. This article examines new evidence of the association between affiliation with MIUs and healthcare utilization. We analyzed field data collected in 6 MIUs in the Philippines in 2002 (through a household survey encompassing 890 insured- and 1063 uninsured households). The two cohorts did not differ in demographic parameters, and differed only marginally in income and education levels, both higher amongst the insured. Insured persons reported higher hospitalization rates, higher rates of professionally-attended deliveries, lower rates of delivery at home, a higher frequency of primary-care physician encounters, a higher rate of diagnosed chronic diseases, and better drug compliance among chronically ill. Increased utilization by the insured is not due to adverse selection, judging by two facts: morbidity of the two cohorts, as assessed by a proxy indicator (the reported number of episodes of illness) did not differ; and rates of deliveries were even slightly higher among the uninsured. We conclude that MIUs in the Philippines can alleviate underutilization of heath care.
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David M. Dror, John Armstrong and Vijay Kalavakonda: Why Micro Health Insurance Schemes Cannot Forego Reinsurance. Journal of Insurance and Risk Management (special issue on micro health insurance), Vol. 4, No. 7, 2005.
Abstract:
Micro health insurance units (MIUs) reduce negative financial consequences of healthcare costs for people who cannot access to formal and affordable health insurance. In order to survive, MIUs need capital to cover their outlier costs (whose probability of occurring is low but not zero). The first purpose of this study is to estimate the capital that MIUs require to secure their financial viability as stand-alone risk carriers. The second objective is to consider the cost/benefit of reinsurance as an alternative solution.
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Ralf Radermacher, Olga van Putten-Rademaker, Verena Müller, Natasha Wig and David M. Dror: Karuna Trust, Karnataka India. CGAP Working Group on Microinsurance: Good and Bad Practices, Case Study No. 19, 2005.
Abstract:
Karuna Trust is an NGO that has been working successfully on health and development issues for nearly two decades. In 2002, Karuna Trust, in a partnership with the United Nations Development Programme (UNDP), decided to implement a pilot health insurance scheme for its target population. The non-governmental organization (NGO) collaborated with the state-owned National Insurance Company (NIC) in designing a health insurance product that complements the public healthcare infrastructure and compensates for some of its weaknesses. Karuna Trust acts as an agent for NIC. The insurance product compensates the insured for the loss of income in case of hospitalization at a public health facility.
Furthermore, a drug fund was set up to supply medicines that are unavailable in public facilities. People with income around the poverty line receive treatment in public health facilities free-of-charge. A tight network between the insurance scheme and the public infrastructure has evolved.
A baseline study conducted before the implementation of the scheme revealed that the target group had low understanding and knowledge of health insurance. It was therefore decided to fully subsidize the premium for the very poor. UNDP provided the funding for two years and NIC still accepts a claim ratio of up to 150% because of the social nature of the scheme. It was assumed that, with time, acceptance of insurance and willingness to join and pay would rise among people experiencing the insurance benefits. Extensive information and education was given during the pilot phase. In 2005, premiums were collected from all insured for the first time. About half the members of the subsidized scheme paid to renew their membership.
“We know we get value for our money” was a common reason for re-enrollment. However, others complained about having to pay for benefits that were free in the previous years.
The experience of Karuna Trust is a very interesting example of creating complementarities between insurance and existing public structures, and how subsidies help familiarize clients with insurance principles. However, this costly awareness building process was affordable only because external funding was available.
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Ralf Radermacher, Natasha Wig, Olga van Putten-Rademaker, Verena Müller and David M. Dror: Yeshasvini Trust, Karnataka India. CGAP Working Group on Microinsurance: Good and Bad Practices, Case Study No. 20, 2005.
Abstract:
The Yeshasvini Cooperative Farmers Health Scheme is a young but incredibly successful micro-insurance scheme in Karnataka. Having started in 2003 with 1.6 million insured right away, it covered 2.2 million lives in its second year of operation, but in the third year it dropped to 1.45 million members after doubling the premium. This (still) amazing success is possible through a tight partnership with the cooperative sector enabled through the Karnataka Department of Cooperation. The department used its influence to encourage cooperative societies to market the product actively. The marketing strategy applied by the societies' secretaries varies: while most convince their members to join, a few simply enrolled their members.
Yeshasvini Trust decided to design a benefit package focusing on high cost / low frequency events. More than 1,600 surgeries are covered under the scheme. The maximum coverage provided for one person per year amounts to Rs. 200,000 ($4,545). The annual premium per client was recently increased from Rs. 60 ($1.40) to Rs. 120 ($2.70). A person can claim the benefits in one of 150 (mainly) private hospitals aligned with the insurance scheme. A rate for each surgery is fixed. Additionally, free outpatient department (OPD) treatment is provided. The patient does not need to handle money; the insurer pays the health care provider for pre-approved surgeries, so the service is cashless to the policyholder.
Yeshasvini is a self-funded scheme and not linked to any insurance company. It outsources the administration of the scheme to a Third Party Administrator, a profit-oriented company. This company authorizes surgeries, processes claims and maintains a register of the members.
The scheme received government subsidies in all years of operation. With the increased premium in the third year, the scheme is expected to get closer to financial viability.
2002
Social Reinsurance: A New Approach to Sustainable Community Health Financing
Edited by David M. Dror, Alexander S. Preker
Price: $ 40.00 available in bookshops or to order at the World Bank's online shop.
English Paperback 540 pages 6.125 x 9.25
Published September 2002 by International Labor Organization , World Bank ISBN: 0-8213-5041-2 SKU: 15041
Also available in French!
Coordonné par David M. Dror et Alexander S. Preker
Réassurance sociale - Stabiliser les micro-assurances santé dans les pays pauvres
About the book
Traditional sources of health care financing are often inadequate leaving many of the 1.3 billion poor people in low- and middle-income countries without access to the most basic health services. Governments in these countries have tried to reach these excluded populations through public clinics and hospitals. To help pay for these services, governments often use a combination of broad-based general revenues, contributions from the formal labor force, and user fees, similar to the financing mechanisms used by Western industrial countries. However, these mechanisms are not always effective in many developing countries, leaving many of the poor without essential health care or financial protection against the cost of illness.
Social Reinsurance details community-based approaches to insuring people against medical risk not based on individual risk rating as in private insurance, but rather using decentralized social insurance based on the average risk. This book shows how the concept of social insurance can be implemented in countries that do not have the capacity to finance or organize large-scale systems. It also details the strategies and public policies that countries can use to mitigate the shortcomings of community-financing plans designed along the lines of micro-insurance. Reinsurance is stressed as a tool for enlarging the risk pool and spreading risks across larger population groups, which no single micro-insurance scheme can do on its own. Social Reinsurance also discusses other measures to strengthen micro-insurance-based community-financing programs.
This volume provides an important review of health-financing policy for rural and informal-sector workers in low- and middle-income countries
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1999
Dror, David M. and Jacquier, Christian Micro-Insurance: Extending Health Insurance to the Excluded. International Social Security Review, Vol. 52, No. 1, January-March 1999
Abstract:
This paper proposes a way to improve health provision for populations that are usually excluded from access to health services. It starts out with a short description of who the excluded are, and what they are excluded from. The paper then looks at the major policy statements elaborated at the international level, and proceeds to propose the missing dimension. Next, based on field testing and analysis of several tens of pilot cases, the paper proposes a concept for group-based health insurance, or 'micro-insurance', and explains its rationale and its components. Lastly, the paper proposes a strategy to implement this concept.
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