pd24 firozali hirji - actuaries.ca firozali hirji.pdf · • tata-aig has recently started this...

2007 Annual Meeting ● Assemblée annuelle 2007Vancouver

2007 Annual Meeting ● Assemblée annuelle 2007Vancouver

Canadian Institute

of Actuaries

Canadian Institute

of Actuaries

L’Institutcanadiendesactuaires

L’Institutcanadiendesactuaires

Actuaries without BordersByDenis Garand and Firozali Hirji

2007

Ann

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2007

2007

Ann

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2007

“Micro credit has helped millions of poor people in developing countries, but they remain at the mercy of a death or serious injury of a family member, the loss of a crop or livestock, or a natural disaster such as the recent tsunami. The assets of borrowers, accumulated through great effort over many years, can be destroyed overnight. Families are then forced to make the same difficult climb out of poverty a second or even a third time. By creating a wider range of better targeted products such as micro-insurance, the poor will have the ability to protect their assets."

His Highness the Aga Khan, Geneva, 22 February 2005

Actuaries without Borders

• Micro Health Insurance -- a primer

• Micro Health Insurance – an example

4 Models of Micro health insurance

Full Service or Insurer Model

Partner Agent Model

Provider Model

Community Model


Full Service or Insurer Model• In the full service model, a single entity, usually

an insurer, assumes all the risk and is responsible for all aspects of the insurance product –including market research, product design, marketing and selling and administration

• Tata-AIG has recently started this model in India. They have developed their own network of ‘micro-agents’ to sell health and life micro insurance directly instead of through an MFI or other agent

References for models and their benefits and limitations are from:CGAP. MicroInsurance: Improving Risk Management for the Poor. Newsletter No. 8. Nov 2005

Full Service or Insurer Model

Benefits• Insurer is centrally managed and responsible for all aspects of insurance

(costs, profits, losses, etc.);• Insurer has an interest in disease prevention and health promotion services

and early treatment.

Limitations• Neither insured nor providers have an incentive to keep costs low. • Waiting periods for claims may be long (i.e., from submitting the claim to

receiving payment);• It is not community-based or participatory; the insurer is centrally managed; • Generally insurers don’t have access to in depth health information to make

good risk assessments;• Insurer needs to build distribution structures which add to product cost.


Partner Agent Model

In this model, the insurer takes on the risk of developing the insurance product but utilizes the agent’s distribution network. The agent can be a micro finance network, a health services provider or any other organization that has experience in social mobilization.

It is the agent that sells the insurance, collects, the premiumsand even processes the claims. TPA? TPA? TPA?

Example: FINCA Uganda (agent) with AIG (insurer)

Partner Agent ModelBenefits• The insurer benefits by gaining access to the MFI client base and

distribution network; • The MFI benefits with the objective to improve borrower retention

and portfolio quality through better health (and with no risk and limited administrative burden);

• The MFI benefits by having an additional revenue stream and additional products it can provide to its customers;

Limitations• The community is not very involved in the insurance structure

(unless the community assumes responsibility for collecting premiums and depositing them to the Bank);

• The service provider wants more visits and therefore may discourage health prevention, promotion and early treatment of illness;

• Adverse selection and moral hazard are quite common as neither the insured nor the providers have an incentive to keep costs low;

• Generally this works well for life micro insurance and tertiary care health micro insurance, but does not work well for coverage of primary care..


Provider Model

Health services provider and insurer are the samethe provider assumes all the risk and takes care of management and administration responsibilities.

The provider may use its staff or dedicated micro agents to sell its insurance package.Examples: Grameen-Kalyan and BRAC-MHIB in Bangladesh

Provider Model

Benefits:• The scheme is centralized to the provider; • Service provider (as insurer) wants fewer visits and therefore encourages

health prevention, promotion and early treatment;• Provider has an interest in quality assured services to increase its target

population base.

Limitations: • The provider can respond to the needs of the community only up to and

covering the services available by the provider (unless partnership arrangements are made with other service providers);

• The provider may not be in a position to take on the additional financial risk;• The provider may be put into a conflict of interest position as it tries to keep

its costs down yet provide good care.


Community Based ModelIn this model the community organizes itself as ahealth services purchaser. The community elects a group of volunteer managers and directs all aspectsof the micro insurance, including negotiating with theexternal health services provider and collectingpremiums from members of the community.

Example: Cooperative Health Care for the InformalSector of Dar es Salaam, Tanzania (UMASIDA)

Community Based Model

Benefits: • The community is actively involved and ensures the maximum number of

people participate –to maximize risk pooling and minimize adverse selection;

• The volunteer managers negotiate insurance coverage based on the needs of the population;

• There is a lot of capacity building that can benefit the community in other domains.

Limitations:• The model requires significant investments in capacity building and training

for volunteer managers to learn the various aspects of risk pooling and coverage and to promote it accordingly;

• The managers may engage in fraud and abuse of premiums collected in the community if accountability structures are limited to community structures;

• The external health services provider may not provide quality-assured services;

• There may not be an adequate emphasis on awareness-raising about prevention practices (the service provider benefits with a greater number of visits and therefore may discourage prevention and promotion visits).

Questions, Questions, Questions……………

• Had they heard of insurance in particular health insurance

• What are the needs of the people with respect to insurance protection

• Would they buy health insurance if it had the benefits they were looking for

• How much would they pay for these benefits• How would they pay for it –monthly or annually –

when during the year

Questions, Questions, Questions……• Who would take the risk• How would the insurance regulator treat this

scheme• How would the scheme be sold• Who would collect the premiums.• Who would adjudicate the claims and how would

the claims be paid• Who would provide the health services• Where i.e. which villages/towns will the health

scheme be sold.

Sahet Hifazat -Health Protection

Scheme Benefits:

• Hospitalization as inpatient with annual maximum of 25,000PKR

• Maternity coverage

• C-Section coverage

• Death benefit of 25,000PKR for the designated bread winner between age 18 and 60


• Risk control – all household members must sign up

• Risk control – at least 50% of the village must sign up

• Risk control – use of smart card for insured identity


• Preferred provider –Aga Khan Health Services Pakistan

• Cashless claims if insured uses AKHSP

• No out of area coverage


• Claims on reimbursement basis if preferred provider not used

• Using chip based smart card technology to store medical information


Latest Developments:

Management structure in place

Enrolment forms designed

Policy document completed


Next Steps:

-Finalization of treatment protocols-MOU between parties to be signed-Marketing to households in Jul/Aug 07-Premium collection in September-Coverage commences Oct 1, 2007


What is the model used?

INSURER-

PARTNER AGENT

-PROVIDER

-COMMUNITY

THE OF PRESENTATION

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