cirm centre for insurance and risk management june 4, 2008 rupalee ruchismita, executive director
TRANSCRIPT
CIRM
Centre for Insurance and Risk Management
June 4, 2008 Rupalee Ruchismita, Executive Director
CIRM
Risks Faced By The Poor• Low Income households are exposed to
– Risks and Income Shocks
• Systemic risks– Vagaries of weather– Natural calamities– Crop failures– Price fluctuations
• Idiosyncratic risk– Sudden unexpected shocks that temporarily disrupt the ability to
generate income• Health events• Life cycle events: Marriage, Death• Enterprise risks
Poverty and Vulnerability
reinforce each other in an escalating
downward spiral
MDGs would be more achievable with greater penetration of social protection
CIRM
Informal Mechanisms of Risk Mitigation
Draw upon savings Distress sale of produce/assets Shift to non-remunerative crops Change of vocation Leads to Credit at higher interest rates
Community insurance schemes best suited for idiosyncratic risks of limited capacity Risk funds
Calamity relief Subsidies Minimum Support Prices
Self Insurance
Community Insurance
Government Support
India has an alarmingly low penetration of insurance at premium being only 2.9%of overall GDP
CIRM
Where is the micro insurance sector in its life cycle?
AN
NU
AL
GR
OW
TH
%
INFANCY ADOLESCENCE MATURITY
2004
2006
???
CURRENT POSITION
CIRM
That’s how microfinance works …
CIRM
CIRM: The Mandate
Product DevelopmentInsurance and risk mitigating
tools for vulnerable households
Training Support
Ensure delivery of Safety Net Products in a cost effective
manner
Advocacy, Documentatio
n and DisseminationBest Practices to
the entire ecosystem
Data Warehouse
Veritable source of contextual
data
CollaborationInsurers, Reinsurers, Research Institutes, CBFIs
and Regulator
OUTREACH
DELIVERY
INSURANCELITERACY
POLICYADVOCACY
CIRM
Innovations and Change makers
• Increasing retention:– OPSC cover for non claimants- Calcutta Kids, Micro Ensure, OIC
• Covering predictable events:– Consultation, transport, lab test (co pay 40%), drugs (co pay 10%), public
hospital referral- CCDA, Bangladesh (1200 families)– DRG based settlement, transportation, post hospitalisation – Healing
Fields, Foundation– Inpatient and outpatient cover, drugs, scale (100,000 clients, health crads
and IT Platform- Microcare, Uganda
• One size does not fit all: – Access through multi point-of-transaction and ‘varying amounts’
leveraging technology- Max New York life
• Covering top of the pyramid:– Surgical (no co-pay), very high cover (200,000 max.), High avg.
claims (9762K) - Yeshaswini
CIRM
Health innovations from around the world
Model Microcare KPPS CIDR CHeaP Medi Plus CHF PoACountry Uganda Uganda Uganda Kenya Kenya Tanzania TanzaniaType HMO Hospital NGO MFI HMO Gov't MFIModel Insurer-Partner Provider CBI Insurer-Partner Insurer Provider Insurer-PartnerTax Status Not-for-profit Not-for-profit Not-for-profit Not-for-profit For-profit Not-for-profit Not-for-profitLives Covered 776 1,750 837 100 65,000 600 333,000ContractIn-Patient Yes Yes Yes No Yes as option No Yes as optionOut-Patient Yes Yes No Yes Yes as option Yes Yes as optionDiagnostic Tests Yes Yes In-Patient Only Yes Yes Yes with limits Yes with limitsMedications Yes with limits Yes with limits In-Patient Only Yes Yes Yes YesContract Duration 4, 6, 12 mo. 4, 6, 12 mo. 12 mo. 1 mo. 12 mo. 12 mo. 12 mo.Premium per person per year $US
Adult - $22Child - $11
$5.40 $2.00 $4.50OP: $118-186IP: $132-386
$5.32 per family
OP: $21OP+IP Basic: $64
OP+IP: $213
Collection Method Lump sum Lump sumLump sum withsaving option
Monthly Monthly Lump sum Lump sum
Co-pay In-Patient $1.86 No $1.10-$2.80 NA $1.25 NA NoCo-pay Out-Patient $0.56 No NA No $0.63 No NoLimits In-Patient $195 $44 $44-$56 NA Per selection NA Per selectionLimits Out-Patient No $8 per visit NA $63 Per selection No Per selection
CIRM
Steps to Combat Adverse Selection
• Mandatory enrollment• Community rate premiums• Minimum enrollment as a percentage of total target
population• Enrolment during fixed window periods• Family enrolled as a unit• Waiting periods for pre- existing diseases, maternity
etc. especially where product is not mandatory• Renewals linked to loan renewals or at designated
enrolment periods only
CIRM
Steps to Prevent Moral Hazard
• Product design– Co-pay, deductibles, higher trigger of cover (caution for uptake)
– Inclusion of sub-limits based on unit costs• Supplier Induced
– Use of Diagnostic related groups for provider payments– On-line claims management– Preauthorization of claims (can work both ways!!)
– Audit at hospitals, Vets, weather stations (cost!!)
• Beneficiary Induced– Beneficiary Education– Waiting time to join– Co-payments
• Field/ Intermediary Induced– Financial deterrents (risk layering of first loss)
– Monitoring
CIRM
Learning’s- Distribution and Fraud Control
• Optimal use of technology (MicroCare,Uganda)• Channels need to be credible (BASIX+ Royal Sun (India),
Finca+AIG(Uganda)• Predefined groups minimize anti-selection• Family/ all cattle should be enrolled as a unit (GK, IFMR Trust)• Awareness building and Education the key• Online administration of claims help controls in scaled up
scenarios• Audits at local levels to prevent provider induced Moral Hazard
(SKDRDP, own panel of doctors)• Model should include local community in the management (Uplift,
MIA)• Processes to control ‘under the table’ or informal payments
• Optimal use of technology (MicroCare,Uganda)• Channels need to be credible (BASIX+ Royal Sun (India),
Finca+AIG(Uganda)• Predefined groups minimize anti-selection• Family/ all cattle should be enrolled as a unit (GK, IFMR Trust)• Awareness building and Education the key• Online administration of claims help controls in scaled up
scenarios• Audits at local levels to prevent provider induced Moral Hazard
(SKDRDP, own panel of doctors)• Model should include local community in the management (Uplift,
MIA)• Processes to control ‘under the table’ or informal payments
CIRM
Performance Standards/ Values for Change Makers in Micro Insurance
• Client Focus:– Welfare impacts– Change in risk management behavior
• Consumer education– Content, channel, models
• Product features– Pricing: Technical Ability and Ability to pay, options (covers)– Distribution
• Incentives, sales, collections– Servicing
• Claims management (management and monitoring)• Data Management Systems
– Archiving, reliability, segregation, reporting, trasnsparency• Risk Sharing and Re-insurance
– Claims projection, reserve
CIRM
Performance Standards/ Values for Change Makers in Micro Insurance
• The risk:– Should tend to be random (an Act of god, vs. people want to
pay for predictable events)
• The loss:- Definite (Timing and amount, vs. value of asset (cattle type, age productivity, investment in ‘health stock’ varies)
– Significant
– Rate of Loss calculable
• A single event should not be catastrophic to the risk carrier
CIRM
Performance Standards/ Values for Change Makers in Micro Insurance
• The Data Separation:– Separate data per activity and per product – Risk Management through information– Relevant and accurate data:
- Limits: Costs
– Important management tools (balancesheet, Cash flow, Income Statement)
• Claims Calculation– Premium set– Claims reserves
• Unearned Premium reserve, Incurred but not reported reserve, Claims in course of settlement
CIRM
Top of the pyramid cover
• Yeshasvini– No co-payment or deductible, Surgery only Maximum
Rs 200,000– June 2006 to May 2007– Incidence rate = 2.11% – Average claim Rs 9,762– Cost of claims Rs 206 (.021 X 9762) per person
Cardiac Obstetrics and Gynecology
Incidence 0.474% 0.552%Average claim Rs 22, 150 Rs 4,170Claims cost Rs 105 Rs 23
CIRM
Covering the predictable
• Healing Fields Foundation– Co-payment of 25%– DRG plus transport benefit and post hospitalization,
max Rs 20,000– Jan 2007 to Sept 2007– Incidence rate = 2.21% – Average claim Rs 1,806– Cost of claims Rs 40 (.0221 X 1806) per person
CIRM
Performance Standards/ Values for Change Makers in Micro Insurance
• The Trends:– Claims monitoring and trend capture – Client Data
• Incurred date, reported date, payment date, cause, who made the claim, limitations to claim time reduction
• Asset diversification– Short term, long term– Investment portfolio
• Technical Capacity– Staff– MIS
• Good Product, good value, servicing- Claims rejection ratio, promptness of claims settlement, renewal ratio, solvency ratio
CIRM
De-risking Rural Credit
• Ring fencing of rural portfolio of banking and financial institutions that has a weather risk component
• Effective risk hedging through weather derivatives will free up blocked capital
• Increased risk appetite coupled with weather derivatives will allow aggressive growth in rural portfolio extending credit to the vulnerable populations
Portfolio Portfolio
Weather Hedging
CIRM
Where is the micro insurance sector in its life cycle?
AN
NU
AL
GR
OW
TH
%
INFANCY ADOLESCENCE MATURITY
2004
2007
???
CURRENT POSITIONNeed for Catalytic Infrastructure
CIRM
For the jump start…
• Data, Data, and more Data!!– Health Exchange, Weather Exchange
– Morbidity, weather, livestock • Insurance Census• Training and Education
– Building trained professionals for the sector– Insurance Literacy material for
– Insurers– Intermediaries (CBOs, Co-ops, MFIs)– Beneficiaries
Enabling Infrastructure to get safety nets for all
