Estimating capital requirements to scale health microinsurance serving rural poor populations
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Estimating capital requirements to scale health microinsurance serving rural poor populations David M. Dror1 · Atanu Majumdar2 · Nihar Jangle3 Received: 13 June 2018 / Accepted: 30 January 2019 / Published online: 21 March 2019 © The Geneva Association 2019, corrected publication 2019
Abstract Our objective is to estimate the capital required to launch, scale and sustain the operation of health microinsurance plans. We develop algorithms to estimate operating costs, capital or loan requirements, interest earned, repayments, and scaling projections. We check the plausibility of assumptions using the data of two CBHI plans. A prototype plan covering 40,000 persons in India requires USD 62,477 to offset deficits in the initial years if its long-term operating costs are not to exceed 20% of the premium and the claims ratio is to stabilise at around 70%. Capital requirements drop significantly when confidence levels are lower than 99.9. Fifteen years are required (after a five-year moratorium) to repay the loan in full plus interest at 5% p.a. in USD (10.96% in Indian rupees). It is possible to attain sustainability of health microinsurance schemes by providing the necessary initial capital as a loan and being very attentive to five parameters: enrolments, premiums, operating costs, renewal rates, and claims ratio. Keywords Health insurance · Capital requirements · Sustainability · Business case
The original version of this article was revised:“In the first published version of this article the abstract contained an error. The sentence ‘Probability of bankruptcy is fixed at 99.9%.’ was replaced with the sentence ‘Capital requirements drop significantly when confidence levels are lower than 99.9.’ The original article has been corrected.” * Atanu Majumdar [email protected] David M. Dror [email protected] Nihar Jangle [email protected] 1
Social Re Consultancy Pvt. Ltd, New Delhi, India
2
Social Re Consultancy Pvt. Ltd./Micro Insurance Academy, A‑157, Ground Floor, DDA Double Storey Flats, Garhi, East of Kailash, New Delhi 110065, India
3
Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH, Bonn, Germany
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Introduction One of the pain points of the world’s development goals is achieving affordable and equitable financing of health insurance. This global issue has particularly critical ramifications for informal sector populations and rural poor in low- and middle-income countries (LMIC). A recent systematic review (Asante et al. 2016) concluded that ‘…healthcare financing in LMICs benefits the rich more than the poor …there are impediments to making healthcare more accessible to the poor…’. According to the World Bank and the World Health Organization ‘800 million people spend at least 10% of their household budgets on health expenses for themselves, a sick child or another family member. For almost 100 million people these expenses are high enough to push them into extreme poverty’ (The World Bank 201
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