Examples of conventional microinsurance schemes
The most common type of conventional microinsurance offered is Health insurance, however property and accident insurance is also offered by some providers.
Yeshavini Trust, India: Health Insurance
An established cooperative, the Yeshavini Trust decided to offer health insurance in 2003 in response to the inability of many in the communities where it operated to pay for healthcare. Due to its large and established cooperative network it could reach a large number of clients very quickly, recording 1.6m members in its first year and 2.2m in its second year. Premiums were initially 60Rs ($1.40) for a year’s coverage, but were doubled in 2005 to 120RS in an attempt to achieve a more sustainable business. The increase in premium cost the trust many members, but it was still servicing 1.45m people in 2005-2006.
In return for the premium, members can receive treatment worth up to Rs 200,000 ($4545) in a year, from any of the 150 hospitals which are signed up as part of the scheme. The service is cashless for the member as the Trust pays the hospital directly, however this does mean that surgery must be pre-autorised and so can lead to delays in treatment. The scheme has proved that high quality healthcare can be offered to people who would otherwise not be able to afford it and would so would not receive treatment.
Pros and Cons
The cooperative structure of the trust meant that it was easy to reach large numbers of people quickly, and this helped the Trust to offer high quality healthcare. Working through local cooperatives also makes it easier to deal with premiums, as this can be done at the same time that people see their local cooperative anyway. Despite working through cooperatives though, it appears that the communication of how to receive the benefits of the scheme need to be better communicated to members, as many are remain confused about how to claim. Initial problems with adverse selection, where only the sickest members of a family or community get signed up to the scheme could be avoided by offering discounted premiums if whole communities or family units join up.
It is clear that the microinsurance scheme has been able to provide vital healthcare to those who would not otherwise have been able to afford it, and that the potential to reach even larger numbers of people is great if some initial problems can be ironed out.
Vimo SEWA, India
The self-employed women’s association (SEWA) was formed as a union in 1972, and Vimo SEWA is the insurance off-shoot that was started in 1992. It is a voluntary scheme and offers life, health, asset and accident insurance. Initially Vimo SEWA partnered with commercial insurance companies, but found that the adminstraion of claims was too slow to respond to the needs of its clientele, so it began providing the insurance itself.
The 2001 Gujarat showed the risk to the business from a large covariate risk and led to the formation of a business plan and connection to reinsurance. Numbers on the scheme tripled from 30,000 to 92,000 after the earthquake but the target numbers to ensure the viability of scheme have not yet been and it is estimated that it is around 7 years away from being independently viable and sustainable. Problems have included the need for a better understanding of the insurance problems on offer by the members and the development of easy ways to pay the premiums.
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