Microinsurance
Learning and
Comprehensive vs. “sliced” health microinsurance:
The value of subsidy
BBL FOMIN
June 2014
Barbara Magnoni
Client Value Project Manager
MILK Project

3-year project of the MicroInsurance Centre supported by the Bill & Melinda Gates
Foundation
Objective is to understand:
1. Does microinsurance offer value to low-income policyholders and their families, and if so, under what conditions?
2. Is there a business case for microinsurance among insurers and delivery channels, and if so, under what conditions?
Studied microinsurance programs, insurers, and delivery channels around the world, including work in 6 countries on health microinsurance

Microinsurance is the protection of low-income people against specific perils in exchange for regular premium payment proportionate to the likelihood and cost of the risks involved
Does not necessarily imply small policies or low coverage, but low capacity to pay typically limits premium size
“Traditional” health insurance
US health plan USD 4,250
Microinsurance
Kenya micro health USD 6.18
India micro health USD 3.21
0.07% - 0.14% of the US premium

Value can be:
1. Expected (incentives, peace of mind)
Reduce spending
Reduce investment
No response
2. Service (access to services)
Insurance Savings
3. Financial (cost savings, cash flow, financial burden)
Friends and family
Asset sales
Formal & informal credit

Are you happy with insurance?
 Group client satisfaction studies are not enough

Need more rigorous sampling & measurement
 Client Math:
YES!
YES!
How much did you spend on each component of the funeral? How did you pay?


What is the added value of insurance vis-à-vis other common coping strateges?
Measures the full cost of a shock & financial responses

Compare insured vs.
YES!
YES!
YES!
YES!
YES!
Food
Seating
Ceremony
Burial
Etc…
Loans
Help from family
Savings,
Etc…

Location Shock Cost in Months of Income
Kenya
(Afya Yetu)
High-cost hospitalization $ $ $ $
Kenya
(Majani)
High-cost hospitalization $ $ $
India
(MicroEnsure)
Medium-cost hospitalization $ $
India
(Grameen
Koota)
Nigeria
(PharmAccess)
Tanzania
(MicroEnsure)
Medium-cost hospitalization
Management of hypertension for a 3-month period
Acute illness
$
Guatemala Routine women’s
(Banrural) health care
*Costs shown for uninsured respondents
Samples of approx. 30 insured and 30 uninsured in each study

Consider different levels of access and burden

Choices in product design
Indirect costs
Hospital cash
Inpatient
Hospitalization coverage
Medicines
Pharmacy
Outpatient - curative
Outpatient (curative)
Outpatient - preventive
Outpatient (preventive)
……. Chronic ….. Acute …. Pediatric ….. Gynecological ..…………

“Doing the math”: Cost of hypertension in Nigeria
40
30
20
10
0
USD
70
60
50
Insured Uninsured
Other costs
Dietary changes
Lost income
Transport cost
Treatment & services

“Doing the math”: Cost of routine care in Guatemala
100 USD
90
80
70
60
50
40
30
20
10
0
Insured Uninsured
Annual insurance premium
Lost income
Transportation
Medicine
Labs
Appointment

“Doing the math”: Financing a
Hospitalization in Kenya
500 USD
450
400
350
300
250
200
150
100
50
0
USD107
Insured
USD440
Uninsured
Formal Loans
Informal Loans
Reduced Spending
Savings/Asset sales
Income
Gifts

Financial Value of Health Microinsurance
• Complementary to other tools
• Reduces need for difficult financing mechanisms
• Can reduce cash flow pressure
• Some behavioral incentives = lower costs

Behavioral incentives from insurance
• Can increase access to quality healthcare
• But people use mostly what is covered
• Can also create a “use it or lose it”
incentive – seek care sooner, more often, and more regularly
• Regular care in turn leads to other
positive behavior change = financial value

Value of different types of coverage
Hospitalization
Lowers
Direct
Costs
+++
Lowers
Difficult
Financing
+++
Postitive
Behavioral
Incentives
+
Drugs +++ +++ ++
Curative- Outpatient + ++ ++
Preventative- Outpatient -/+ + +++

Can Subsidy Help Improve this Balance?
• Clients are thinking about financial value- not behavior!
• Subsidy can help include coverage that encourages behavioral outcomes
• Subsidy can help “sell” a product in the short-term
• In the long term, subsidy can be
reduced with
– Greater familiarity from clients
– Improved quality improves
– Broader risk pool
• Can subsidy be sustainable?
– Cross subsidy
– Government engagement
Behavioral
Incentives
Financial
Value

“Developing partnerships to insure the world’s poor”
Microinsurance
Learning and
www .
Micro Insurance Centre .
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