[Guest Post]: Health Microinsurance Models

Editor’s Note: Aparna Dalal works with the Financial Access Initiative, a research consortium between New York University, Harvard, Yale, and Innovations for Poverty Action. FAI is focused on finding answers to how financial services can better meet the needs of poor households. FAI aims to provide rigorous research on the impacts of financial access and on innovative ways to improve access.

In India, it is claimed that 35 million households fall below the poverty line every year because of a health shock – consequently, health (micro)insurance is considered the most important protection mechanism for low income households that are particularly susceptible to health shocks because of their low saving buffer and poor living conditions. Unfortunately, health insurance is also considered the most complex type of insurance to administer because traditional economic problems of moral hazard and adverse selection are compounded by the need for a quality, reliable health service provider. The dominant health microinsurance delivery approach in India (partly due to regulation) is the partner-agent model. The idea is for mainstream insurance companies (like ICICI Lombard) to partner with microfinance institutions (MFIs) and NGOs. The insurance companies design the products and bear the actuarial risks while the NGOs and MFIs act as the delivery channel and earn a commission for their effort.

An alternate approach is community-based insurance. On a recent trip to India, I met two institutions implementing distinct community-based insurance models. Micro Insurance Academy (MIA), a Delhi-based institution, has developed a tool called CHAT (Choosing Healthplans Together) which allows communities to design their own insurance packages by involving them during the product design phase. Through CHAT community members can understand the trade-offs between covering illnesses within the plan and the associated costs. Uplift , a Pune-based association of organizations, involves the community differently. In their model, the insurance product is pre-determined and standardized across communities. Community involvement occurs at the claims settlement stage where community representatives (and not the insurance company) decide on the payout for each claim during a monthly meeting. Both models present interesting (and, thus far, unanswered) questions around transaction costs, client satisfaction, and scalability. But for a sector like health microinsurance, where the need and demand is substantial, diverse approaches should always be welcome.


Midday Newsfeed

Some titillating headlines:


  • Whole Planet Foundation (WPF), a Whole Foods Market nonprofit that “empowers individuals in the global community through entrepreneurship” recently announced the creation of the Whole Planet Foundation Supplier Alliance for Microcredit (WPFSAM), a coalition of natural foods companies that aims to support the financial endeavours of WPF. The WPFSAM Alliance has pledged USD 1.05 million over three years to fund microcredit programs in developing countries, including the Grameen Trust in Costa Rica, Guatemala and India; Fundación Adelante in Honduras; and Pro Mujer in Nicaragua.” (Source: Microcapital.org)
  • Related to an earlier post regarding social capital exchanges, Credit Suisse “will launch in the coming weeks an index that encompasses social responsibility criteria in addition to strong valuation and performance characteristics. The index will be composed of stocks that rank highly on both social responsibility criteria and financial ratios.” (Source: Microcapital.org)

Government regulation/programs:

  • The UP government has placed a ban on the construction of liquor stores in and around areas inhabited by the Dalit population due to the reported connection between alcoholism and illiteracy, both of which have been cited as problems in the Dalit community.
  • The Highways Department is developing a “Road Management System that would include a ‘Road Asset Information Database’ of the core road network and a computerised Pavement Management System (PMS) to enable more efficient planning.”
  • Following recommendations from the National Commission for Enterprises in the Unorganized Sector, the Central government is devising a health insurance scheme that will cover the entire BPL population of 30 crore.

Health Research:

Govt. of India partners with ICICI Lombard for a unique health insurance plan

Sify.com reports that Ministry of Social Justice and Empowerment in partnership with ICICI Lombard General Insurance has launched a health insurance scheme for differently-abled individuals living below the poverty line:

The Ministry of Social Justice and Empowerment has awarded the mandate to ICICI Lombard General Insurance to provide health insurance to a maximum of 1,00,000 specially-abled persons below poverty line in
ten districts. Central Delhi in Delhi, Chandigarh in Haryana, Jabalpur in Madhya Pradesh, Kaimur in Bihar, Agarthala in the North Eastern Region, Raebareily in UP, Erode in Tamil Nadu, Ernakulam in Kerala,
Ahmedabad in Gujarat and Bhageshwar in Uttarakhand.

It’s interesting that the Ministry decided to partner with a private player, instead of a state-run player. However, the partnership does bring out the potential in BOP markets for micro-insurance and as urban markets become competitive, players (private or not) will start heading to rural areas and more niche markets – the above example being the case in point.