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.
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30 April 2019
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.
Notes
In India the term scheme is commonplace, while the term plan is unusual. We use scheme to refer to the field evidence and to the prototype.
The term microinsurance used in this article means insurance schemes implemented through a community-based governance structure.
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David M. Dror, Atanu Majumdar and Nihar Jangle were equally involved in providing substantial contributions to the conception and design of this work. David M. Dror took the lead in conceptualising the problem statement and in study design; Atanu Majumdar took the lead in the acquisition and analysis of the data; David M. Dror took the lead in drafting the work; Nihar Jangle took the lead in revising it critically for important intellectual content based on interpretation of data for the work. All three authors were involved in the final approval of the version to be published and all three authors agree to be accountable for all aspects of the work in ensuring that questions related to the accuracy or integrity of any part of the work are appropriately investigated and resolved.
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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.”
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Dror, D.M., Majumdar, A. & Jangle, N. Estimating capital requirements to scale health microinsurance serving rural poor populations. Geneva Pap Risk Insur Issues Pract 44, 410–444 (2019). https://doi.org/10.1057/s41288-019-00126-w
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DOI: https://doi.org/10.1057/s41288-019-00126-w