Addressing Vulnerability through Micro Insurance?Stories of impact and viability

BRAC,15th July, 2013

By Rupalee Ruchismita, DirectorCIRM-Design and Research Labs

Improving financial protectionfor Preserving and Productive activities

Focus on:

- Products and Process

- Life, Health, Agriculture and Livestock

- Role of Intermediaries

- Showcasing Innovation

Defining the Microinsurance Space

1. MiM relies on Industry data reported under IRDA regulation (as under MI Act 2005 and under the Rural and Social Obligations)

2. Under the IRDA regulations, reported data includes products served to RED PLUS GREEN3. Hence, Microinsurance Maps also presents data for RED PLUS GREEN 4. Ideally it should report for products offered to GREEN

* LIG: Low Income Groups* IRDA: Insurance Regulatory and Development Authority

1. MiM relies on Industry data reported under IRDA regulation (as under MI Act 2005 and under the Rural and Social Obligations)

2. Under the IRDA regulations, reported data includes products served to RED PLUS GREEN3. Hence, Microinsurance Maps also presents data for RED PLUS GREEN 4. Ideally it should report for products offered to GREEN

* LIG: Low Income Groups* IRDA: Insurance Regulatory and Development Authority

State and Center supported health insurance schemes have contributed to the portfolio increase

Has the insurance industry discovered a sustainable business case for the rural and social sector?

Tracking impact of Rural and Social Sector Targets

• Life Insurers: The rural portfolio has grown steadily exceeding regulatory targets!

• Whereas, the MI portfolio remains insignificant

Need for revisiting MI Act 2005?

Tracking impact of Micro Insurance Act, 2005

• General Insurance: Sudden growth in overall rural and social business from 2008-09 to 2009-10 even though number of insurance companies has remained

• The rural portfolio has grown steadily exceeding regulatory targets!

Tracking impact of Rural and Social Sector Targets

• MI Act,2005: Maximum MI products registered in 2007-08• Sharp fall in Life MI product registration since then!

Tracking impact of Micro Insurance Act, 2005

Facilitative Infrastructure

Microinsurance Map: Product Comparision Table

Microinsurance Map: NAIS vs WBCIS Schemes

Microinsurance Map: NAIS across States

RSBY Scheme: State-wise outreach

Microinsurance Map: Agriculture Insurance Company of India

Market Potential: No. of rain gauges state-wise

Microinsurance Map: MFI Snapshot

Microinsurance Map: MFI (Grameen Koota) across states

Learning from the States

.

Ruchismita and Churchill,, 2012

Mass health insuranceThe Story of scale

Features

Name of the SchemeYeshasvini Co-operative

Farmers Health care Scheme (Karnataka) 2003

Aarogyasri Community Health Insurance scheme

(AP) 2007

Rashtriya Swasthya Bima Yojana (RSBY) 2008

Kalaignar's Insurance Scheme for Life saving Treatments (TN) 2009

Unit of enrolment (families, individuals, etc.) Individuals Families

Sources of FundsContribution: Beneficiary

58% + Government 42% (in 2009-10)

by State

$0.6 by beneficiary +75% by Centre and

25% by State government

by State

Premium Rate in 2009-10 $3.3 per person $6 per family Avg. $12 per family $10 per family

Maximum insurance cover $4444 per person $3333 per family with additional buffer of $1111 $666 per family $2222 over 4 years, per

family

Commonest procedures

Cardiac, ENT, General Surgery, Paediatric,

Obstetric, Ophthalmic procedures.

Oncology, CVS, Polytrauma, Genitourinary surgeries,

General surgeries

Medical Treatment, Ophthalmic

procedures, Neurology, Infectious Diseases, Gynae & Obstetric

procedures.

Orthopaedic, Oncology, urology, ENT, Cardiology,

Hysterectomy and Ophthalmology

Mass health insuranceThe Story of scale

Management

Name of the Scheme

Yeshasvini Co-operative Farmers Scheme Aarogyasri Rashtriya Swasthya Bima

Yogna (RSBY)Kalaignar's for Life saving

Treatments (TN)

IT tools used

Electronic claims submission software in all network

hospitals, linked to TPA's systems.

Comprehensive MIS,, electronic operation and

payments, Digital signature for all users, electronic claims

process including requirement for patient

photographs pre and post procedure et

Photos and biometric data of families collected on

smart chip at enrolment, Smart cards enable offline authorization and batch

transfer of data

Web based pre authorization and claim submission Digital

smart card to identify the beneficiary. Web cams for co-ordination and monitoring of

Liaison Officers in network hospitals

Cost containment measures

Scrutiny and second opinion are obtained before giving

Preauthorization. Verification of High-end

surgeries, Scrutiny by TPA as well CA of Trust

Prior authorization, package rates, MIS, monitoring

Surveillance and medical vigilance teams,

Aarogyamithras in hospitals

Smart card for identity verification and prior

authorisation closed ended package rates for common

procedures. In-depth analysis of claim

experience

Pre-authorization, screening through health camps,

package cost, In-depth analysis of claims, discharge planning

with LO's

Utilization rate Avg Claims ration is 157%

Claims frequency is about 1.6% perfamily, claim ratio is

between 69.6% to 128.3% (89%)

Avg Claim ratio was about 80% in 2009-10 80% Claims Ratio

Mass health insuranceThe Story of scale

Performance

Name of the SchemeYeshasvini Co-

operative Farmers Scheme

Aarogyasri Rashtriya Swasthya Bima Yogna (RSBY)

Kalaignar's for Life saving Treatments (TN)

Avg. Cost per Hospitalization 8240 27848 4262 33720

Number of Hospitalization per

1000 person22 5 25 4

Utilization rate Avg Claims ratio is 157%

Claims frequency is about 1.6% perfamily, claim ratio

is between 69.6% to 128.3% (89%)

Avg Claim ratio was about 80% in 2009-10 80% Claims Ratio

RSBYKey characteristics

• RSBY is the Indian Central Government’s in-patient health insurance scheme that covers secondary care for Below Poverty Line families launched in 2008

• Premiums range from USD 7-15 for a sum assured of USD 666 per family

• Enrolment occurs in camps, where beneficiaries are issued a smart card and a policy. Customers pay Rs30 for the policy

• Premium of USD 222 million has been paid by the Government, with insurers paying out close to USD 200 million for 1.5 Million hospitalization cases

• Phased roll out of RSBY's impact on KPIs • Conversion ratio, Hospitalisation ratio,Total Expense Ratio • Followed it with a out-of pocket health expenditure with difference in

difference approach with matching-Used NSSO data.

3

RSBYKey characteristics: Outreach

• As of May 2011, RSBY has reached• 18 million smart cards covering approximately 47 million individuals• Since inception in 2008,

• The scheme has been launched in 229 districts in 22 states, • With 47 districts having completed two years of operation

• Average amount claimed per year the hospitalized: USD 100

• By Feb , 2012,RSBY reached

27 million households in 24 states (396 districts) and 32 million

Spreading the risk through partnership : Multiple insurance and TPA partners

• Insurers: • Eight insurers bid on year 1,

with three public insurers. • Out of 8 insurers operating,

ICICI Lombard, New India and Oriental account for over 75% of the districts covered.

• TPAs:• Sixteen TPAs with FINO

having the largest followed by E-Meditek and MD India.

1 17

91

58

31

310

18

Apollo MunichCholamandalam MS GIC

ICICI Lombard

New India Assurance Co. Ltd.

Oriental Insurance Company Ltd.

Royal Sundaram

Tata AIG

United India Insurance

Localised pricing: District specific premiums through bidding

• Insurers: • Eight insurers bid in Year

1, with three public insurers.

• Out of 8 insurers operating, ICICI Lombard, New India and Oriental account for over 75% of the districts covered.

• TPAs:• Sixteen TPAs with FINO

having the largest followed by E-Meditek and MD India.

517

579

516

623

554

626

596

537

0 200 400 600Premium (Rs.)

United India Insurance

Tata AIG

Royal Sundaram

Oriental Insurance Company Ltd.

New India Assurance Co. Ltd.

ICICI Lombard

Cholamandalam MS General Ins. Co. Ltd.

Apollo Munich

5

Examining RSBYKey Performance Indicators against Social Demographic realities

as on May 2011

CIRM uses:•RSBY: Year 1 and Year 2 (as of May, 2011)

• District level administrative data • Client level utilisation data

•Secondary Socio Demographic:• National Sample Survey and • District Level Household Survey

25

Examining RSBYConversion Ratio:

Households enrolled into RSBY against total BPL families per district

• Modest Conversion ratio at 51.2% in Year 1

• Significant variation across states and districts• Ranges from over 80% in

Tripura and Himachal Pradesh to less than 35% in Assam, Jharkhand, and Tamil Nadu

Factors like poor habitation to road ratio in rural regions and high commuter and seasonal migrants could be the cause in urban regions

6846

5387

3339

5679

5447

4447

3560

8356

5053

6856

11

0 20 40 60 80Average Conversion Ratio (%)

West BengalUttarakhand

U.P.Tripura

Tamil NaduPunjab

Orissa

NagalandMeghalaya

MaharashtraKerala

KarnatakaJharkhand

Haryana

HPGujarat

GoaChhattisgarh

ChandigarhBihar

Assam

Examining RSBYConversion Ratio: What affects it

Correlation with socio demographic and programmatic factors

• Higher Conversion correlated to:• Literacy and education rates in the

district: While the ratio is 45% amongst districts in the lower percentile by literacy, this rises to 56% amongst the more educated districts

• More males than females• Year 1 male to female conversion is

169% not correlated to district sex ratio

• Choice of TPA matters more than insurer: Management not capital• Significant variation in conversion rates,

implying “Ability and effort of TPA accounts for part of the variation in conversion ratios”

16

3

7

11

13

4

3

17

2

1

91

1

10

34

1

7

0 20 40 60 80 100TPAs in Round 1

Vipul Med

TTK

Smartchip

Safeway

Medsave

Medicare

Mediassist

MD India

Kyros

Genins India

Fino

Family Health Plan

Eagle

E-Meditek

Dedicated Health Service

Alankit

Examining RSBYIncidence rate: Recommendations

• Conversion Ratios decrease with the size of the district : • May be due to increased difficulty for the TPA to manage a larger district • Wait times may have been higher in more crowded camps • Bigger districts are most often geographically more spread out

There is a case for :• Subdividing larger districts• Allowing more enrolment time and • Greater incentives to TPAs and Insurers to increase conversion rates

Examining RSBYHospitalisation ratio or Incidence rate

• Hospitalization or Incidence rate is 2.4% in Year 1, implying low utilisation:• Opposed to 2.3% historically for all income

groups and without insurance

• Significant variation across states and districts: Ranging from 5.2% in Kerala to less than 0.1% in Assam and Chandigarh

• Variation high between insurers:• Not statistically significant,

Suggesting other socio demographic factors driving variation in Incidence Rate

1.21.4

3.52.72.6

.99.69

2.8.63

1.85.2

.931.1

2.81.4

4.3.11

3.6.92

.0771.4

.094

0 1 2 3 4 5Hospitalization Ratio - Year 1 (%)

West BengalUttarakhand

U.P.Tripura

Tamil NaduPunjabOrissa

NagalandMeghalaya

MaharashtraKerala

KarnatakaJharkhand

HaryanaHP

GujaratGoa

DelhiChhattisgarhChandigarh

BiharAssam

Examining RSBYHospitalisation ratio or Incidence rate: What affects it

Incidence rate is correlated to:• TPAs matter• Higher Literacy levels in a district imply

greater incidence rate• Greater percentage of private hospitals

imply higher Incidence rate: This may be due to:

• The perceived better quality as well as actual availability of doctors and consumables in private facilities

•Gender:• A greater percentage of enrolled women are

using RSBY services

•Use of good primary care appears to reduce hospitalization rate• There is a 0.02% decrease in hospitalization in a

district if there is a 1% increase in per capita Primary Care usage

2.3

4.9

1.4

1.9

2.5

.93

1.3

3.4

1.6

1

3.2

.63

2

1.3

6.5

2.4

0 2 4 6Hospitalization Ratio - Year 1 (%)

Vipul Med

TTK

Smartchip

Safeway

Medsave

Medicare

Mediassist

MD India

Kyros

Genins India

Fino

Family Health Plan

Eagle

E-Meditek

Dedicated Health Service

Alankit

Examining RSBYIncidence rate: Recommendations

There is an encouraging case for :•Governments to improve primary care facilities as it contributes to longer term sustainability of inpatient insurance programmes•Insurance programme seems to address household level neglect of women health needs•Greater incentives to public hospitals to improve perceived perception among users

Examining RSBYIncentive alignment for insurers

• Year 1 was profitable for insurers:• Average burn-out ratio of 77% (Claims of 49%,

smart card costs of 17%, service tax of 11%)• 23% of the total premium remained with the

insurer

32 7850

8565

4757

37136

3964

10056

6482

78128

28116

4833

7028

0 50 100 150Burn Out Ratio - Year 1 (%)

West BengalUttarakhand

U.P.Tripura

Tamil NaduPunjabOrissa

NagalandMeghalaya

MaharashtraKerala

KarnatakaJharkhand

HaryanaHP

GujaratGoa

DelhiChhattisgarhChandigarh

BiharAssam

• There is however large variations between state and districts and between insurers

• Districts with burn-out ratio of more than 100% have marginally lower premium (USD 12vsUSD 13) but considerably higher hospitalization rates (5.6% compared to 1.6%)

RSBY :

Stakeholder Value: Solutions for Policy Makers

Use • Monitor impact of regulation on providers and products

Benefit• Create industry benchmarks on product, process and

service quality • Identify early trends (sectors trends and also for specific

providers and risk categories) to respond accordingly• Make proactive regulation and policy for underserved

regions and track its impact on the market

Stakeholder Value: Solutions for Insurers

Use • Disaggregated region specific risk data to develop actuarially sound

product pricing• Market insight for development of outreach strategies – competitor

and profitability analysis, exposure to innovative product and processes

Benefit• Public platform to market products, find potential intermediaries, new

relations (IT providers, TPAs)• Plan market entry based on a range of factors- geographical,

distribution models, risk specific and competitor based analysis• Market assessment – Updated about ‘sector news’; Trend analyses

(over years, regions, risk type and market players)• Own portfolio monitoring, analysis and tracking

Stakeholder Value: Solutions for Intermediaries (Co-ops, NGOs, MFI)

Use • Reports to compare pricing and features of own product

by various criteria (region, risk type and insurer, premium and claims)

Benefit• Use sector best practices to measure own and partner’s

(insurer) service quality• Improve own visibility to find partners• Assess insurers based on products and performance

Centre for Insurance and Risk Management

• Established in 2006 as a specialized design and research centre at the Institute of Financial Management and Research (IFMR)

• Committed to undertaking product design and action research to facilitate greater market outreach of risk management solutions among vulnerable households

Focus areas• Product Innovation

Action ResearchProduct Development

• Market MakingData WarehousingTrainingPolicy Advocacy

Verticals• Agriculture• Livestock• Health• Catastrophe• Life• Life term Savings/Annuities

Safety Nets for All

Data Sources Market Data

• Regulator (IRDA)

• Industry Associations

• Insurers - public and private, life and general

• Mutual and intermediaries - MFIs, Cooperatives, NGOs, input and output

suppliers (on going)

Risk data on regional basis

• Indian Meteorological Department, Central Water Commission, Actuaries

Association of India, Govt. Dept. of Agriculture, National Remote Sensing Centre,

Agriculture Universities

• Veterinary Universities

rupalee.ruchismita@cirm.in

Thank You

Next Steps

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Safety Nets for All

Next Steps

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Safety Nets for All

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Pre event

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