MICROCAPITAL STORY: Scalable and Sustainable Micro Health Insurance Just Around the Corner?

“Is there a business in micro health insurance?” This was the central question posed by a recent article published in INSEAD Knowledge, a newsletter of international business school INSEAD (Institut Européen D’Administration des Affaires). The World Health Organization (WHO) has stated that beyond inadequate healthcare delivery systems, inadequate healthcare financing mechanisms is one of the biggest obstacles to improving health outcomes of the poor. However, although sustainable micro life insurance products have experienced recent growth in certain parts of the world (see this MicroCapital article on the success of Allianz Life Indonesia), a sustainable and scalable micro health insurance model remains elusive.

Recent initiatives to penetrate low-income markets have involved partnerships between companies in the pharmaceutical or insurance sector and microfinance organizations, in the hope that the financial success of microfinance will help speed up the process. For example, this MicroCapital article describes “Caregiver”, a micro health insurance program established by microfinance network Women’s World Banking (WWB) and Zurich Financial Services Group, a major global insurance provider. The program aims to provide basic coverage to low-income populations in countries across Africa, Asia, and Latin America. Another MicroCapital article reports that insurance company New Jubilee Life, publicly traded on the Karachi Stock Exchange, has collaborated with the Aga Khan Agency for Microfinance to reach low-income clients in Pakistan. A third recent MicroCapital article discusses a partnership between international non-profit PlaNet Finance and pharmaceutical giant, Pfizer, to research methods improve access to healthcare of low-income Chinese.

Pfizer has also collaborated with Grameen Kalyan (Bengali for “Village Health”), one of the most sustainable micro insurance models, in efforts to improve the existing delivery and financing systems and create models that can be brought to a more global scale. Grameen Kalyan, a sister company of Bangladeshi MFI Grameen Bank, is both an insurer and provider of primary health care services. Its micro health insurance plan costs USD 1.73 a year (USD 2.17 for non-Grameen Bank members), and covers up to six members of the family. In 2007, Grameen Kalyan treated 330 thousand patients and, as a whole, was 93 percent financially self-sustainable. Information is not available on the total number insured or on the sustainability of the micro health insurance program alone.

Despite these initiatives, the INSEAD article says that most attempts to target the poor have thus far required subsidies or a focus on limited risks (such as only primary health care, and not hospital care). Matthew Jowett, senior health financing specialist at the WHO, argues that the success of Grameen Kalyan in creating a nearly self-financing micro health insurance scheme is achieved by “covering only small risks, that is, low-cost care in primary clinics, having low operating costs, for example labour, and achieving scale in terms of membership.” He says, “This in itself is a major achievement – generating a profit, however, would be far more problematic.”

Mr. Jowett argues that micro health insurance does not appear to be comparable to microfinance in harnessing the business sector to achieve social missions: “Insurance, in particular health insurance, is a complex product to deliver, involving the assessment of individual health risks, and delivery of services either through the scheme’s own network of facilities or through contracts with a third party.”

Mayte Oosterveld, director at PharmAccess Foundation, corroborates this view that the challenges of microfinance and micro health insurance are different: “We can give someone a one dollar loan, but we can’t give very small, restricted healthcare insurance.”

In 2006, PharmAccess Foundation received USD 134.8 million in funding from the Dutch government to finance pilot micro health insurance projects in four sub-Saharan African countries. Currently, they subsidize 90 to 95 percent of the programs.

Ms. Oosterveld argues that one of the difficulties of micro health insurance is that it is a new and unappealing concept for low-income individuals, who ask, ‘Do I have to pay in advance with the risk that if I need treatment in nine months’ time that the clinic is still going to be there? Or do I keep the money in my pocket so that when a family member falls ill, then I have money to pay for treatment?’ She says, “We need to address a basic package and determine what it is that people will buy.”

“Is there a business in micro health insurance?” The expert consensus – Possibly, but not yet.

By Ryan Hogarth, Research Assistant

Additional Resources:

Aga Khan Agency for Microfinance: Home

Grameen Kalyan: Home

INSEAD Knowledge: Home

INSEAD Knowledge: “Is there a business in micro health insurance?”, by Grace Segran

MicroCapital article, March 27, 2008: “First Dedicated Microinsurance Agency in Pakistan Launched with $483k Investment from Aga Khan Agency for Microfinance (AKAM)”

MicroCapital article, February 3, 2009: “Zurich Financial Services Group Collaborates with Women’s World Banking (WWB) to Offer Microinsurance Services to Female Caregivers”

MicroCapital article, March 12, 2009: “Microinsurance Client Base of Allianz Life Indonesia Grows Four-fold in 2008”

MicroCapital article, March 23, 2009: “PlaNet Finance teams with Pfizer to Research Healthcare Needs of Low-Income Chinese in pursuit of Effective Microinsurance and Microfinance Plus Services”

New Jubilee Life: Home