Offering low-premium health insurance to poor people is one of the biggest challenges for an insurance provider – and of the most important tools to prop up rural development. Shreejrai Deshpande of Bajaj Allianz explains how this was done in Tamil Nadu, India.
 | Shreeraj Deshpande, Head- Health Insurance, Bajaj Allianz, India"We had to work backwards taking into consideration what the community could pay, while creating a long-term, self-sustaining scheme." (Photo: Bajaj Allianz) |
How important is health microinsurance in rural India?
India has a very large population living in rural areas. This rural population can be divided into high, middle, and low-income segments, many of which are daily wage laborers. These poor people have a very low capacity to pay insurance premiums, yet their need for insurance is very high. Microinsurance for them would greatly help to develop the rural economy.
Bajaj Allianz has developed its own micro health insurance. How can you provide such coverage while keeping premiums low?
The scheme is structured in such a way that, with the involvement of the community, frauds and moral hazard are eliminated. We provided the technical know how like training the community members to allow them to process enrolments and claims, or use the software provided. Because the scheme is managed by the community the cost of management is drastically reduced.
After an initial demand study for health insurance by CARE India, our project manager also visited the area and made a study of the various hospitals and providers in the Tamil Nadu area. This study investigated the price of treatment, the types of facilities available, and the quality of healthcare available in those areas.
The scheme was devised on the basis of this study. The biggest challenge was that we had to work backwards taking into consideration what the community could pay, while creating a long-term, self-sustaining scheme. So we correlated our own data about incident rates with the data on expenses and costs collected through the initial case study and then defined premiums.
 | An Indian woman has her mouth examined by a doctor in a health clinic in Calcutta, India. Health coverage is still a problem in many rural areas (Photo: Reuters) |
How much does a policy cost and how many people have taken out policies?
It costs less than 400 rupees (about 8 dollars) per year, just over a rupee a day, to cover a family of four to be covered under the scheme. Around 65 percent of this payment is retained in self-help funds created by the community and 35 percent is paid to Bajaj Allianz. We initiated this as a pilot in one district where in the first year around 1600 families and 5800 members were covered.
The scheme is being extended into a second year and replicated in two other districts where we expect to cover around 5000 to 6000 families, which would mean a total of around 25,000 members.
You cooperate with local partners. How does this work?
The insurance is distributed through NGOs who are already engaged in development activities. NGOs have made a great impact in rural India. The creation of self-help groups and microfinance institutions has really resulted in concrete development.
People trust these NGOs and they have a large membership so it is easier to distribute our products through them. The NGOS then receives an intermediary commissions.
Finally, the population that we are targeting belongs to the less educated low-income segment of society. Before we market products of insurance to these people we need to market the idea of insurance and NGOs have a lot of experience with this as well.
editor: Thilo Kunzemann
publishing date: June 16, 2009
Do you have something interesting to add? Write a comment and discuss this topic with other readers. Comments should be on-topic, non-commercial, and not contain abuse of any kind.
Comment Policy
