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Estimating capital requirements to scale health microinsurance serving rural poor populations

Author

Listed:
  • David M. Dror

    (Social Re Consultancy Pvt. Ltd)

  • Atanu Majumdar

    (Social Re Consultancy Pvt. Ltd./Micro Insurance Academy)

  • Nihar Jangle

    (Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH)

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.

Suggested Citation

  • David M. Dror & Atanu Majumdar & Nihar Jangle, 2019. "Estimating capital requirements to scale health microinsurance serving rural poor populations," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 44(3), pages 410-444, July.
    • Handle: RePEc:pal:gpprii:v:44:y:2019:i:3:d:10.1057_s41288-019-00126-w
    DOI: 10.1057/s41288-019-00126-w
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    References listed on IDEAS

    as
    1. Martin Eling & Shailee Pradhan & Joan T Schmit, 2014. "The Determinants of Microinsurance Demand," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 39(2), pages 224-263, April.
    2. David Mark Dror, 2018. "Estimating Willingness-to-Pay for Health Insurance Among Rural Poor in India by Reference to Engel’s Law," World Scientific Book Chapters, in: Financing Micro Health Insurance Theory, Methods and Evidence, chapter 7, pages 139-149, World Scientific Publishing Co. Pte. Ltd..
    3. David Mark Dror, 2018. "What Factors Affect Voluntary Uptake of Community-based Health Insurance Schemes in Lowand Middle-Income Countries? A Systematic Review and Meta-Analysis," World Scientific Book Chapters, in: Financing Micro Health Insurance Theory, Methods and Evidence, chapter 14, pages 271-306, World Scientific Publishing Co. Pte. Ltd..
    4. David Mark Dror, 2018. "Systematic Review of Willingness to Pay for Health Insurance in Low and Middle Income Countries," World Scientific Book Chapters, in: Financing Micro Health Insurance Theory, Methods and Evidence, chapter 8, pages 151-168, World Scientific Publishing Co. Pte. Ltd..
    5. David Mark Dror, 2018. "The Demand for (Micro) Health Insurance in the Informal Sector," World Scientific Book Chapters, in: Financing Micro Health Insurance Theory, Methods and Evidence, chapter 2, pages 43-66, World Scientific Publishing Co. Pte. Ltd..
    6. Augustine Asante & Jennifer Price & Andrew Hayen & Stephen Jan & Virginia Wiseman, 2016. "Equity in Health Care Financing in Low- and Middle-Income Countries: A Systematic Review of Evidence from Studies Using Benefit and Financing Incidence Analyses," PLOS ONE, Public Library of Science, vol. 11(4), pages 1-20, April.
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