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Micro Health Insurance is Blossoming in India

26/10/09October 26, 2009

The Indian Nobel laureate Amartya Sen has argued that health should be a human right. A quarter of Indians who are hospitalised end up falling below the poverty line because of the high treatment costs. Micro health insurance schemes have developed over the last decade as an alternative model for the poor.

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Micro health insurance can help sick people access medicine
Micro health insurance can help sick people access medicineImage: DAHW/Jochen Hövekenmeier

Health insurance is usually a luxury. But micro health insurance, where the basic idea is that limited medical treatment is provided for a small premium, makes it accessible to people on low incomes.

“A person who is living on two dollars per day normally does not have access to any kind of medical insurance service,” said Michael Anthony from the Germany-based Allianz insurance company. “The world of health insurance is something that is unattainable for the low-income client.”

Like all insurance systems, micro health insurance schemes also need to have enough members to balance the risks involved.

The risks are shared

Srilakshmi Divakar from the Public Health Institute of Bangalore offers advice on micro-health insurance schemes. She explained that when there is “a very large base of consumers the amount of premium that each person pays comes down because the risks are held by a whole lot of people.”

There are different micro health insurance models. In the partner-agent model, a local NGO collaborates with a big insurance company. The NGO unionises a local community, promotes micro-insurance, collects premiums, processes claims and provides services, whereas the insurance company acts as a silent partner, bearing the risks.

With small premiums ranging from two to five dollars per year per family, insurance companies cannot expect to make much profit in the short-term.

A good long-term investment

However, basing his opinion on two years’ experience insuring 10,000 people in southern India, Michael Anthony from Allianz thinks it is worth taking the risk.

“Of course, it is a much lower profit margin than Allianz would do in other business lines of the company but it is financially sustainable and viable. It will become even more relevant or profitable once the clients migrate out of the poverty situation they are in now.”

Moreover, he added, the insurance companies will benefit from the fact that their customers keep them on when they “develop economically”.

Community health insurance has other aims

When it comes to community health insurance, it is another story. “We are not actually talking about profits," said Srilakshmi Divakar. " What we are saying is: ‘What gets collected, sort of gets rotated, and then the cycle continues.’”

“Community-based health insurance schemes are member-based systems that are self-managed and carry the risk themselves. The biggest advantage is that it is very consumer-friendly and personalised. People have a good idea of what they are getting into and what they get from insurance,” she said.

In India, around 80 percent of ill people pay for their treatment in cash at the point of service. This underlines the fact that the health insurance market needs to be developed.

Whether the micro-health insurance market is profit-making or not, having access to affordable treatment will help bring the poor one step closer to escaping the vicious circle of poverty.

Author: Verena Degens
Editor: Ana Lehmann